The Student Loan Debacle

Or is it, in typical political terms, a "crisis"? In any case, the Wall Street Journal examines the situation and provides some enlightening information on how these kinds of disasters occur. 

From the Friday, April 30, 2021 edition:

"One instance of how accounting drove policy came in 2005 with Grad Plus, which removed limits on how much graduate students could borrow. It was part of a law designed to reduce the federal budget deficit. A key motive was to use projected profits to reduce federal deficits, said two congressional aides who helped draft the bill.

Each change was publicly justified as a way to help families pay for college or to save the taxpayer money, said Robert Shireman, who helped draft some of the laws as an aide to Sen. Paul Simon (D., Ill.) and later was deputy under secretary of education the Obama administration."

It turns out that elected officials either don't have the knowledge and expertise to draft legislation or that they're time is being monopolized by the electioneering efforts needed to retain their seats, most of which is either media grandstanding or private conclaves with donors and election advisors. So unelected and generally unknown staffers like Mr. Shireman are the ones who attempt to legislatively keep the promises made by their bosses. Simply having a tenure in such a position is a gateway to bureaucratic advancement, even if their work ultimately results in failure.

The failure in this case is that federal student loan programs could cost taxpayers as much as half a billion dollars as borrowers continue to default, according to the WSJ article, which also states that this fiasco could exceed the dimensions of the S&L melt down of thirty years ago.

There is an even deeper dimension to this problem. Where does the money being borrowed in these programs go? Of course, it goes to the educational institutions themselves, organizations top-heavy with expensive administration that have become gate-keepers to the social/economic futures of modern Americans. Students at exclusive schools like Amherst and Bentley are being subsidized by janitors and truck drivers.

While private universities are at liberty to charge whatever the market will bear, tax-payer subsidized public schools are even more profligate in being homes for over-paid, tenured professors that don't teach many classes because they're devoted to research and writing papers that few ever read.

There's a strong possibility that the Covid-19 pandemic, or actually the government response to it, will provide an impetus for change in an academic environment that has been substantially the same as it was in 18th century Germany, where it was born. We can only hope that this will be the case.