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Policy Expert: Explosion of Debt Shows Higher Education Is Rigged Against Students

Policy Expert: Explosion of Debt Shows Higher Education Is Rigged Against Students

“Americans owe more than $1.4 trillion in student debt – double what they owed in 2009”

David Barnes of Generation Opportunity wrote this piece for Real Clear Education. He makes an excellent point.

As millions of college students across the country pack their bags for the fall semester, many are wondering how they are going to pay for it.

Millennials today face tuition and fees three times higher than their parents did in the ‘70s and ‘80s, adjusting for inflation. Skyrocketing costs are forcing students to borrow money at historic levels. Nationwide, Americans owe more than $1.4 trillion in student debt – double what they owed in 2009.

With the rise in tuition rates and student debt showing no sign of slowing, it might seem as if our nation’s higher education system is rigged against the very students it is designed to serve. In fact, it is.

Empowered by the federal government, a powerful cartel of college accreditors is stifling competition, driving up tuition costs and limiting the options available to students.

College accreditation is technically voluntary. But under the Higher Education Act, only schools accredited by federally approved institutions are eligible for grants and financial aid. With federal student aid and subsidies accounting for an ever-growing share of university budgets, accreditation is all but mandatory for most schools.

As a result, college accreditors have become the de facto gatekeepers of the higher education system. It’s an arrangement riddled with conflicts of interest. Many colleges and universities are dues-paying members of the same accrediting associations that oversee their accreditation. Even the staff of accreditation agencies are often employed by the very colleges they monitor.


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Given the poor quality of some of the more infamous for-profit alternatives, I think there’s nothing wrong with accreditation, per se. The problem stems from government subsidizing higher ed, thereby distorting the supply/demand curves for its services.

The main other market distortion comes from too many businesses requiring bachelor’s degrees, often for work which doesn’t require them. This is a legacy of Griggs v. Duke Power, which forbade business from using standardized tests to measure aptitude.

Democrats benefit from higher education teachers’ unions and administrators, so they juiced both ends of the market. End this market distortion and many of America’s most pressing problems will evaporate.

It’s not clear that we have to postulate some sort of racket. Ordinary economics can account for it.

An increase in debt means that credit is relatively easy to get.

Easy credit means more borrowing (which equals more debt), and more borrowing means more spending, which leads to higher prices. If credit remains easy, then higher prices lead to even more borrowing, more spending, and even higher prices.

This mechanism has been pretty clear for nearly three centuries. So what’s changed recently? Mainly demand, and easy qualification for college loans (which contributes to demand).

My own suspicion has long been that the idea that everybody simply has to go to college was kicked off by the draft deferments of the Vietnam era. Suddenly, many who had never considered college to be a necessary (or even desirable) interlude in life found they had an excellent reason to consider it. Even those not particularly qualified for higher formal education now found the idea attractive, albeit expensive. And that eventually made it even more expensive.

It also led to the quality decline of the average college education, and for the same reasons, but that has little to do with money.