WaPo Editorial: Democrats’ loose talk on student loans
By Editorial Board July 31 at 6:50 PM
DEMOCRATIC PRESIDENTIAL candidate Bernie Sanders electrified crowds with his promise of free state college and university tuition, its 10-year, $750 billion cost to be paid for in part by a federal tax on financial trading. So popular was the idea among primary voters that Democratic nominee Hillary Clinton, after first attacking the Sanders plan (correctly) as an unfocused subsidy that would benefit many well-to-do families, has had to incorporate Sandersian rhetoric into the party platform and offer a free-tuition plan of her own, albeit one limited to families making $125,000 per year or less — most of them living well above the poverty line. Hers would cost $350?billion over 10 years. Improving on the Sanders plan, Ms. Clinton also adds measures to keep college costs down and increase accountability for student outcomes. And on this issue, as on so many others, Republican nominee Donald Trump has offered nothing but vague assurances.
But what if the Democratic nominee’s plan overcommits scarce resources to a problem that, while real, is not as bad as she and Mr. Sanders say? Despite rhetoric about “crushing” student debt, 44?percent of students at two- and four-year institutions do not borrow at all, and of those who do, 59?percent borrow less than $20,000. The average undergraduate loan burden in 2015 was $17,900. (The average new car loan, according to Experian: $30,000.) The students whom Democratic plans would aid most — state-school undergrads — are generally among the least indebted already.
Our source for this data is a comprehensive new report on student borrowing issued by President Obama’s economic advisers. It concludes that debt distress mainly afflicts certain categories of students (those in graduate school or for-profit undergraduate schools). Otherwise, the typical “amount of debt owed . . . remains modest,” given the median $1 million lifetime income advantage that college grads can expect to realize.
Society has a stake in a well-educated populace, so society should contribute to producing one, as it already does through direct grants, federal loans and in-state tuition subsidies. It is also true, as the large earnings premium suggests, that the benefits from such investment in human capital accrue to individuals who possess it. So it is not unreasonable to ask them to share the cost. What about Ms.?Clinton’s claim that higher student debt is “holding our economy back”? Well, the White House report says it “does not appear to have substantially altered” macroeconomic performance. Why not? Only about 2 percent of households in 2014 had student debt exceeding $50,000. And three-quarters of those incurred it pursuing law, medical and other advanced degrees that confer extra-high future earnings.
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