Economist Richard Vedder: Federal student loans ‘fuel academic arms race’
As combined student loan debts balloon to over $1 trillion, one economist believes enough is enough — the “tremendously explosive” student loan programs offered by the federal government need to go.
Ohio University economist and chair of Center for College Affordability and Productive Richard Vedder recommends that President Barack Obama and Congress work together to dismantle or greatly shrink the student loan programs that let young Americans rack up debt.
“I would go so far as to say that I think the federal government is more the problem rather than the solution,” Vedder told the Carolina Journal Radio during a Friday interview. “A lot of our problems… come from these tremendously explosive student loan programs and grant programs that the federal government provides.” (RELATED: Federal student sharks prey on cancer patients filing for bankruptcy)
Giving 18-year-olds fresh from high school with no financial skills free reign to borrow hundreds of thousands of dollars may not be the best course forward, Vedder said. Colleges flush with easy money spend it on administrative pay and luxury fitness centers, increasing tuition all the while.
“The government is providing fuel for an academics arms race that is going on all over the country by allowing kids to borrow huge amounts of money at very, very low interest rates, and many of these students are really not knowledgeable about finance and so forth,” he continued. “They go out; they borrow a lot of money. The colleges raise their fees more than they otherwise would. This provides extra income for the colleges, which goes for a ton of different things — luxury facilities, more administrators, higher pay for people, and the like — and makes college less affordable.”
Vedder also criticized Obama’s recent tour of speeches focusing on higher education and his claims that the government must “make it easier for kids to pay back their loans.”
“Well, they don’t really need to pay them all back,” he said. “Maybe they just pay part of them back, 10 percent of their income for a few years. So, if anything, that encourages the students to borrow more, by the way.”
Encouraging every high school graduate regardless of interest or ability to take out massive loans and spend four years plugging away at their laptops writing double-spaced term papers has left millions of young Americans with debt bills and no prospects for employment, Vedder continued.
“I think the… ‘college-for-all’ movement has been a very destructive movement in higher education,” he said. “We’ve almost created the notion that if you haven’t gone to college, you’re a failure in life. You are sort of a lower form of humanity… [N]ot everyone has the ability to do what is truly rigorous, high-level academic work. They just don’t have the ability. Moreover, we have 100,000 janitors — 115,000 janitors — in the United States with bachelor’s degrees, a million retail sales clerks with bachelor’s degrees. We don’t have the jobs that college graduates traditionally have filled. We still need people that do jobs that require relatively little skill, relatively little educational training, and we ignore that. And so we have a mismatch between what the labor market is saying and what the college leaders and the guidance counselors in high school and the president of the United States [are] saying. And this is causing a good bit of angst and problems for young people today.”
As Congress drags its feet, however, the market acts. Vedder noted that college enrollment rates have stagnated and “kids are starting to say no.” Colleges and universities less prestigious and wealthy than Ivy League institutions may be forced to cut costs or even close down, pushing them to hound accepted students who never responded with bigger grant offers. In Virginia, Randolph College went so far as to send acceptance letters to student who had never even applied, informing them they had been “selected for admission” and qualified for financial aid. But a growing number students have rejected the offer of federal student loans in favor of getting a real job to earn money rather than owe it to bankers and bureaucrats.
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