Elizabeth Warren’s proposed solutions to the (wildly exaggerated) student loan problem totally miss the mark.
From canceling student loans to socializing higher education in the name of “free” college, the Massachusetts Democratic senator and 2020 presidential candidate’s policy solutions would actually make the problem worse. Maybe the reason Warren is missing the mark on this issue, though, is that she doesn’t understand what’s driving the underlying issue of surging tuition rates and spiking college costs.
The candidate has made this much clear from the language of her proposals to her public statements, such as a tweet Warren put out on Sunday. She directly blamed the rising cost of college on declining state-level government funding for public universities, writing, “The student loan debt crisis didn’t happen by accident. States invested less in public college students and shifted the burden onto them and their families. So while I paid $50 a semester, today’s students are graduating with thousands of dollars of debt.”
Using this narrative, supposedly that a lack of government intervention is what caused college costs to surge. Warren goes on to explain that the only solution is to back her proposed socialization of higher education and make it “free” for all (aka, raise taxes on all of us to pay for the education of a privileged subset of society).
If we want to end this crisis for good, we need universal free public two- and four-year college and technical school. Everyone should have the opportunity to get an affordable higher education—and I’ve got the plan for that. https://t.co/bMZ0RKiT6t
— Elizabeth Warren (@ewarren) January 26, 2020
This is typical big-government, socialist-lite logic: There’s a problem, i.e., high college costs. Let’s blame it on the government not doing enough, and call for more government intervention and spending. But it’s a fundamental misunderstanding of the underlying issue to pretend as if rising tuition rates can all be blamed on declines in state support. Such declines have played a role, but so too has government-driven price inflation and profligate administrative waste.
Actually, federal student aid and intervention caused price inflation, while profligate waste at campuses across the country went unpunished at students’ expense. https://t.co/m8GOKG2mmA
— Brad Polum-skim-milk-lover-bo (@brad_polumbo) January 27, 2020
First, the issue of tuition price inflation. The expansion of federal student loan aid, and in particular, federally subsidized student loans, artificially inflated the ability of students to pay for college. This predictably resulted in universities jacking up the price.
Harvard researchers and the New York Federal Reserve have both documented this effect. The latter found that for every dollar handed out in federally subsidized loans, universities jacked up prices by roughly 60 cents. Meanwhile, the researchers at Harvard found that private colleges that participated in federal student aid programs ended up charging about 78% higher tuition rates than non-participating institutions.
This helps confirm the “Bennett hypothesis,” named after former Education Secretary William J. Bennett. He wrote:
Elizabeth Warren has decades of results to contend with, which show that surging college costs can be traced back to federal student loan intervention in the first place. It’s hard to see how she can square that reality with proposing to have the federal government take over the financing of higher education altogether.
But Warren’s proposals also ignore the fact that seemingly endless waste and administrative bloat is also aiding the spike in college costs. Recently published research from economist Richard Vedder confirms this reality: “If the ratio of campus bureaucrats to faculty had held steady since 1976, there would be 537,317 fewer administrators, saving universities $30.5 billion per year and allowing student tuition to decrease by 20%.”
Warren’s proposals would make this already severe problem worse, by removing the last constraint, namely complaints from students facing tuition hikes, on unlimited administrative spending and waste.
But Warren isn’t actually focused on solving the problem of rising college costs. (If it went away, what would she campaign on?) Rather, it increasingly seems she’s just focused on getting herself elected — and is more than willing to demagogue about an exaggerated crisis to do so.
