At Brookings Andre Perry declaims that President Biden’s announced forgiveness of student loans doesn’t address the root cause of the problem but at least it’s a start:
According to the White House, the plan will “provide relief to up to 43 million borrowers, including cancelling the full remaining balance for roughly 20 million borrowers.†But it does not go far enough in addressing the root of the problem: a postsecondary education system that has seen tuition rise three-fold in the last 30 years. That same system will put future borrowers in peril.
The plan does take some admirable steps toward helping overburdened graduates. For example, borrower participation in income-based repayment plans was stunted by confounding complexity, bad management, and predatory practices on the part of loan servicers. The Biden plan lowers the amount borrowers have to pay from 10% to 5% of income and forgives loan balances after 10 years, down from 20. Making payments more affordable helps people whose wages do not keep pace with their cost of living and for those whose pay is throttled by wage discrimination.
Let’s stop right there. So, what’s the “root cause”? Mr. Perry seems to think that it’s that the cost of higher education is rising too fast.
In 1960 the tuition at my admittedly pricey alma mater was $1,800 per year. According to the Census Bureau the median household income then was $5,600. By 1970 tuition at my alma mater had risen to $5,400 per year and the Census Bureau tells me that the median household income was $9,870.
Putting my education (my grade school education) to work that means that in ten years tuitions had tripled while income had not quite doubled. Here’s what the St. Louis Federal Reserve says that college tuitions have risen over the years:
and here for comparison is GDP (I’m pretty sure I could combine those into one graph but I’m too lazy):
Said another way college tuitions were rising far faster than GDP. Note that it took ten years for college tuitions to triple back then. Assuming that Mr. Perry’s figure are correct, tripling over thirty years sounds like a major slowing of the increase in the cost of tuition.
Is the underlying problem, as Mr. Perry avers, that tuition is increasing in cost too fast? Or is it that incomes are not increasing fast enough to keep up?
Extra credit: will forgiving student loans decrease tuitions, increase tuitions, or have no effect?
The tuition increased, on steroids, once the Obama administration injected a government hand in funding student loans. Furthermore, there are so many worthless majors being promoted in our liberal academic institutions – costly degrees that have no chance of being easily paid back by the incomes these college graduates would qualify for in the real working world.
The whole idea of debt forgiveness is a fiasco, that according to the democrat Speaker herself says a president doesn’t have the authority to execute, and is thus unconstitutional. Also, bring it’s purpose is more of a political gambit, in an election year, there is no substantial benefit derived from it’s implementation, except to attract voters with another freebie.
Or did prices rise because student loans/grants etc increased the ability to pay? After all, you get what you subsidize.
That might well have been a factor. However, part of the point of this post is that tuitions have been rising faster than incomes or subsidies.