The Atlantic recently declared that the 2012
presidential campaign is “no longer about the economy”; that is to say, given
the dire economic straits in which we still find ourselves, it is surprising
how much attention the candidates are giving to peripheral issues such as
Medicare, welfare, and most importantly for our purposes, student loans. The
article’s premise is disingenuous. After all, the health of our economy very
much depends on the efficiency of these programs. However, it raises an
interesting point for readers of Minding
the Campus. Why, in such a pivotal election year, have student loans
garnered so much attention?
The most obvious answer is also the most cynical one. The
candidates need the student vote and feel obligated to demonstrate their
concern for the considerable number of young people struggling under the burden
of high tuition and student loan debt. By all appearances, President Obama fits
this description perfectly. Though his victory in 2008 was greatly supported by
mobilized college students –
according to exit polls, 66 percent of voters
age 18-29 voted for him – he has since struggled to inspire their
passion. Both the poor economic climate and general apathy have taken their
toll on this once-stalwart group of supporters. To that end, his website emphasizes his administration’s
efforts to make college more affordable and his campaign recently began airing
ads attacking Mitt Romney on the subject of student loans. The ads, which will run in Colorado, Iowa,
Nevada, Ohio and Virginia, will be tailored to students in each
state by featuring an image of a college in that state. Romney, who is probably
aware of the Republicans’ recent poor showing among this
demographic, shows no desire to respond in turn. He might reconsider, though,
given recent indications of strong
youth support.
A different, more charitable reason for the focus on
higher education is the candidates’ genuine concern over the prospect of a student loan bubble. However,
neither candidate has indicated that this problem exists. We should rule out
this possibility.
With that said, it’s instructive to look at both
candidates’ platforms to see who offers the better deal for students. As it
turns out, neither delivers.
Any serious proposal for addressing the exploding costs
and massive debts must acknowledge a few points. One, as per the Bennett Hypothesis, the federal subsidy of higher education
has caused tuition growth by providing schools with guaranteed funding. Two,
federal involvement has helped create a student loan bubble, as the government
guarantees loans to students willy-nilly, regardless of their potential to use
these loans productively. Finally, unless the government’s role in the higher
education market is significantly curtailed, these problems will persist, and
likely balloon.
President Obama is no fan of curtailing the role of the
government, so it’s no surprise that his promises for higher education evince
no recognition of the distortions federal support causes. On his website he
touts his expansion of Pell Grants from 6 million to 9 million recipients,
which expands the guarantee to colleges. He also mentions his creation of the American Opportunity Tax Credit
for “tuition costs, fees, and materials” that provides students and families
more money to pay colleges. These policies only exacerbate the tuition and debt
problems. His website also reminds voters that he removed the federal guarantee
for private originators of loans. Though this move was a step in the right
direction, as government no longer insulates these lenders from excessive
risk-taking, it does nothing to address the more substantive problem of the
federal government’s irresponsible lending practices. The website’s additional
references to student loans also fail to do so. We are told that President
Obama signed a law capping loan repayment at 10% of students’ disposable income
starting in 2014; he wants current students to benefit from this provision,
too. The law also forgives all remaining student debt after 20 years of
consistent repayment; for public-service workers, the term is 10 years. Neither
measure eases the student loan bubble. By making it easier for students to
assume debt, President Obama’s plans will likely exacerbate it.
Mitt Romney acknowledges the negative effects
of the federal government’s interventions. He notes that though America’s
higher education is second to none, “a flood of federal dollars is driving up
costs and burdening too many young Americans with too much debt and too few
opportunities.” His diagnosis is correct; his remedy, however, is insufficient.
Romney proposes simplifying the financial aid program by cutting redundant or
poorly-performing programs. As one concrete example, he promises to target Pell
Grants to “students that need them most,” in other words, individuals from the
poorest backgrounds. However, he provides no further details. He recommends
eliminating the Department of Education’s burdensome “data collection
requirements” and outsourcing to private companies the task of creating
comprehensive reports. Romney also asserts that his administration would help
families save for their children’s’ college education, but does not mention
how. He does not officially propose a remedy for student loan bubble. In fact,
his only reported suggestion is
reintroducing private lenders into the federal loan market. Finally, unlike
Obama, Romney alludes to the cost-saving potential of alternative arrangements
like online education and for-profit colleges, He argues that federal policy
must aid these programs; again, however, he provides no specifics.
Voters concerned with this issue therefore face two
inadequate options. One candidate does not recognize the root of the crisis in
higher education and offers policies that would exacerbate our troubles, while
the other has the proper instincts but does not provide a real plan. This
dynamic might change given the entry of Paul Ryan, whose budget contains concrete proposals for reducing
federal aid to colleges. We might see a serious discussion about the ideal role
for government in the higher education. Given the present state of this debate,
it’s more likely that the candidates will choose to continue with their
rhetorical appeals. As a result, the challenges this distorted industry
presents to both our economy and ordinary college students will go unaddressed.
