Saturday, October 20, 2012

Controlling the Rising Cost of a College Education

The populist rant about student loan debt is epic in its insanity. If I understand it correctly, recent graduates basically are saying they just shouldn’t have to pay back the outrageous amounts they borrowed to finance their college education because  . . . well . . . they borrowed too much.  Looking to the success of the auto industry, they, too, look to the government to bail them out, too.

The underlying problem is this.  Under the ruse of making college attainable for everyone, government-subsidized higher education is really just a government subsidy of universities and colleges themselves.  Government-spons0red student loans, grants and tax credits simply artificially create demand, allowing colleges to more easily raise their tuition, tuition having far surpassed the rate of inflation (even medical care) over the past 30 years.   Just like cheap (and easily obtainable) credit drove up the cost of housing, easily obtainable credit for students is driving up the cost of education. Indeed, student lending is the next financial bubble to be sure.

To control tuition costs (and thus student loan debt and the economic risk that comes with that bubble), I offer “The Smails Plan,”  which would drive down tuition costs by removing all government-sponsored student lending programs.  Once the easy credit is gone, demand goes down and tuition increases are brought under control.  Lloyd saves the economy once again.

The plan and how it works are more fully described in the video below.

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