Memo to Joe Biden: There Is NO ‘Free’ College

A 2020 campaign promise of virtually all Democratic aspirants to the presidency was that at least two years of college will be provided free to all non-superrich Americans wanting it. In a reflection of the often seemingly eccentric nature of American national politics, the probability that the likely 46th president, Joe Biden, can deliver on that promise will very likely be determined by a small percentage of American voters in two special U.S. Senate elections in the state of Georgia on January 5. I predict hundreds of millions will be spent on these elections, but if the Democrats win both seats (not likely based on last week’s results, but certainly highly plausible), a Kamala Harris tie-breaking vote should give Democrats control of the Senate, allowing them to deliver on campaign promises.

However the Biden Administration faces a huge problem: money. Contrary to what some of their economic gurus implicitly assume with their economic theorizing, governments face resource limitations, and multi-trillion-dollar budget deficits cannot persist forever—ask the Greeks or Italians (or, in the New World, Argentina or Venezuela) about the consequences of overly aggressive deficit spending or printing money. Italy’s economic growth in the 21st century is essentially zero.

However, a think tank at Georgetown University, the Center for Education and the Work Force, led by veteran researcher Anthony Carnevale, now says: don’t worry, in the long run the Biden free college proposal will pay for itself. The real costs incurred for a few years will be recouped from increased education and skills of Americans. Specifically, their Dollars and Sense of Free College report finds that “the benefits of Biden’s free college plan would exceed the annual costs of the program within a decade.”

The authors argue that higher education not only raises income for participants, but also “contributes to positive outcomes such as improved health, reduced crime, and a greater sense of well-being.” Speaking of the Biden proposal specifically, first year costs are estimated at $49.6 billion (about one-third absorbed by state governments). But higher earnings of new degree holders combined with other social benefits (e.g., improved health), will yield benefits within a decade exceeding costs.

The study makes implicit but possibly unfounded assumptions about incremental students graduating from college with at least an associate level (two-year) degree. For example, a huge percentage of those entering community colleges do notgraduate. More importantly, it makes the totally unwarranted assumption that earnings differentials of degree holders are attributable mainly or solely to their postsecondary education. Some economists, perhaps most prominently recently economist Bryan Caplan (The Case Against Education), argue that a majority of the earnings differential associated with degrees is not attributable to anything learned in college.

A more fundamental problem with free college proposals never gets discussed. Someone has to pay for college, and if the federal government simply writes checks to colleges for tuition, the schools will raise fees ferociously—that is the experience with other student financial aid programs. To counteract that, the Feds might effectively put in a system of national price controls which the schools would try to evade by special fees. Perhaps the greatest strength of the American higher education system is its diversity coming from 50 state governments controlling public schools along with hundreds of competing private higher education providers. This would further diminish this system, turning more control over to a Washington, D.C. bureaucracy that cannot even deliver the mail as well as private package deliverers.

Even before the pandemic struck there seemed to be a flight to quality in higher education—to private schools and the best state universities, with two-year schools losing enrollment. The advantages of a college education increasingly have been questioned, given the high risks of not getting the credential in the expected time, and with a large percentage of degree-holders “underemployed”. Paying people money to go to college to get a job working as a grocery clerk or home health aide, jobs that could have been obtained with just a high school diploma, makes little sense. “Free college” may be mainly simply a payback to the higher education community that supported the Democratic victory, far more than it is a principled attempt to promote economic growth and greater opportunity for less educated Americans.

https://www.independent.org/news/article.asp?id=13321&omhide=true

A student debt bailout would be unjust and unwise

by Jeff Jacoby

DURING THE presidential primary campaign last winter, as Democratic candidates were promoting various plans to cancel federal student loan debt, one Iowa father's encounter with Elizabeth Warren captured the raw unfairness of the idea.
"My daughter's getting out of school. I saved all my money [so] she doesn't have any student loans," the man said. "Am I going to get my money back?"

"Of course not," Warren answered.

"So you're going to pay for people who didn't save any money, and those of us who did the right thing get screwed," said the father, visibly upset. "My buddy had fun, bought a car, went on vacations. I saved my money. He made more than I did, but I worked a double shift, worked extra. My daughter's worked since she was 10."

That exchange vividly illustrated the injustice of student-debt proposals that would, in effect, punish those who saved and worked more to pay for college, those who deferred higher education until they could afford it, and those who responsibly repaid their loans — by forcing them to pay for those who didn't. Even more outrageous, it would compel the two-thirds of Americans who didn't earn a college degree to help pick up the tab for many of those who did.

Of the nearly $1.7 trillion in student loan debt, according to the Federal Reserve, the vast majority, more than $1.5 trillion, is held by the US government. Since higher education correlates strongly with higher earnings, these college loans are concentrated among the relatively well-to-do. So an immense government program to forgive outstanding student debt would disproportionately benefit high-income people at the expense of those less fortunate. Democrats a year ago may have thought that offering a bailout to college-educated, upper-middle-class voters made political sense. But how can they still think so after an election in which the "blue wave" they expected never materialized, in part because of Republican gains among working-class Americans without college degrees?

Yet leading Democrats and progressives are doubling down. "Biden-Harris can cancel billions of dollars in student loan debt," Warren tweeted recently. Chuck Schumer, the Senate minority leader, claims that any college graduate's "first $50,000 of debt [can] be vanquished" through an executive order by the next president. On Wednesday, a coalition of 236 liberal organizations called upon Biden to issue that order upon taking office.

It is far from clear that billions of dollars of debt can be simply written off via presidential decree. But set aside the procedural question. A huge new student-loan forgiveness scheme is indefensible as a matter of policy.

As noted, it would amount to a boon for the relatively well-off. But it would also treat similarly situated people dissimilarly. Imagine three 30-year-old neighbors, each of whom earns $50,000 — a construction worker who never went to college, a legal secretary with a two-year associate's degree and $2,000 in remaining student debt, and a software engineer who attended a four-year college and graduate school and still has $50,000 in unpaid loans. A bailout that erased $50,000 of student debt would give nothing to one of the neighbors, a modest $2,000 to the second, and a $50,000 bonanza to the third.

College loan forgiveness isn't just unfair. It is unnecessary. Some borrowers have a hard time managing their student debt, but the data make clear that this is not a national crisis. According to the Consumer Financial Protection Bureau, 70 percent of college loans are fully paid off within 10 years. Among borrowers with loan amounts between $5,000 and $10,000, fully 80 percent clear the debt within a decade.

For the typical American household paying down a student loan, the Federal Reserve's Survey of Consumer Finances has found, payments amount to around 5 percent of income. According to Jason DeLisle, a specialist on higher-education financing at the American Enterprise Institute, a recent analysis of 4 million families' financial records by the JP Morgan Chase Institute calculated that the typical monthly student-loan payment ranged between $144 and $203. For the median family, that amounted to 5.5 percent of take-home income.

Of course there are borrowers who find themselves struggling to make their payments. But those borrowers can avail themselves of existing means to have their debt deferred, reduced, or even cancelled. By one count, there are 13 major student-loan forgiveness programs. Some are geared to people who work in public service, education, health care, or the military; others enable borrowers to have their payments capped at an affordable percentage of their discretionary income. Bottom line: The overwhelming majority of college loans are paid off, and help is available for debtors who get in over their heads.

Even amid the financial stresses triggered by the pandemic, the American people are not drowning in debt, college-related or otherwise. Bloomberg noted the other day that household debt payments are currently lower than they have been in decades. Which suggests that even if the government were to forgive all student-loan debt, it wouldn't provide much of a fiscal stimulus.

What it would provide is an unstoppable demand for the government to wipe out other kinds of personal obligations. "Cancel rent. Cancel mortgage. Cancel student debt," Representative Ayanna Pressley tweeted in July. And why stop there? From Matthew Walther, writing in The Week, comes a call for a "debt jubilee" that would wipe out $50,000 of debt owed for anything at all: "credit cards, auto loans, remaining mortgage balances, and, especially, medical debts, which should be discharged without any limit."

Children send Santa Claus lists of things they want for free, but adults know that Santa isn't real. Santa isn't the federal government, either. Washington cannot magically make people's debts disappear; it can only compel other people to pay them. That may or may not be good politics, but it is certainly terrible economics.

http://www.jeffjacoby.com/24811/a-student-debt-bailout-would-be-unjust-and-unwise

The Biden promise to roll back campus due process reforms

Implications for Australia

Naturally, one of the people celebrating the American election result here in Australia was End Rape on Campus activist Sharna Bremner who was one of the authors of recent advice from TEQSA, our university regulator, on managing the kangaroo courts. I've written before about how astonishing it is that our official tertiary education authority would include this activist as one of the authors of advice to the unversities about these matters.

Bremner is delighted that a Biden victory will lead to his promised roll-back in the due process reforms introduced by Trump’s Education Secretary, Betsy DeVos. See her tweet when it dawned on her that DeVos would be leaving:

Here she is acknowledging that in the document she helped craft for TEQSA she’d introduced some minor changes to Australian policies after the DeVos reforms to Title IX, the anti-discrimination regulations responsible for America’s college tribunal system. Clearly now she’s hoping we will follow suit and give up any pretense of protecting the rights of the accused.

It is really shameful that this feminist activist would have no hesitation in publicly revealing the key role she is having in shaping university policy. What a clear demonstration of how the entire higher education system has been captured.

https://www.thinkspot.com/discourse/XLuZOO/post/bettina-arndt/the-biden-promise-to-roll-back-campus-due-process-reforms/bvZtjy

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