Tag Archives: Brookings Institute

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Forgiving Student Loan Debt: Just Don’t Do It

A lot of progressive Democrats seem to think an aggressive cancellation of federal student loans by President Biden will generate a big bump in support for their party in the upcoming midterms.

They’re dreaming.

The most outspoken progressives are pushing for cancellation of $50,000 per borrower.  Biden has said “No way” to that amount, but appears to be amenable to cancelling $10,000.

“…finding ways to provide relief to students to make sure that these working-class, working families are getting relief is more important than tax cuts to millionaires, billionaires, and corporations,” White House press secretary Jen Psaki said Thursday.

Forgiveness of up to $10,000 per person would cost the federal government about $373 billion. according to the Brookings Institute, while forgiveness of up to $50,000 per borrower would cost an estimated $1 trillion.

Biden has already been taking action to eat away at student loan debt in a kind of stealth program by doing it piece by piece. CNN recently reported that the Biden administration has expanded existing loan forgiveness programs for borrowers who work in the public sector, were defrauded by for-profit colleges and are permanently disabled. These measures, CNN said, brought relief totaling more than $17 billion.

On May 5, Biden’s Education Department said it would cancel the loans of 28,000 student borrowers who attended the Marinello Schools of Beauty, a now-defunct for-profit chain of cosmetology schools, between 2009 and its closure in 2016. The relief, which will even go to those who haven’t applied for relief, could cost the federal government $238 million.

Biden has also been pausing student loan payments, the most recent extension moving the expiration date to August 31, 2022. Lest you think these pauses are free, the Committee for a Responsible Federal Budget says they are costing the government about $4 billion a month, 

According to the Oregon Department of Justice:

  • The average Oregon student loan borrower owes over $38,000 by the time they graduate 
  • Oregonians have more than $20.5 billion dollars in student loan debt
  • An estimated 85,000 Oregonians are currently behind on their loans.

So what are the downsides to helping out all these folks? Don’t people love free money?

People who made tremendous sacrifices by working their way through college, rather than taking on student loan debt, and students who have sacrificed to repay their student loans, aren’t likely to take kindly to loan forgiveness by the Biden administration now. More likely, they will resent such action and take it out on Democrats.

A lot of student loan debt is also held by people who are in a position to pay it off because they are in high-paying positions, sometimes because they borrowed money to attend graduate school. Low and middle-income Americans aren’t likely to appreciate these folks getting off the hook.

Student loan forgiveness would also be likely to tick off a lot of Americans who never went to college at all, particularly those who skipped college because of the cost. Aren’t many of these folks supposed to be  part of the Democrats’ base.

David Bahnsen, the author of Crisis of Responsibility, has argued convincingly in The Dispatch that the government created the problem in the first place when it decided to subsidize student debt. “The injustice is the runaway inflation in the cost of higher education disproportionate to the benefits it provides,” he wrote. “That dynamic is a direct result of the very existence of the loan market college administrators have so exploited. That subsidy has facilitated a reckless allocation of resources to the absurd and the indoctrinating—dormitory amenities for recruitment purposes, exorbitant “diversity” departments—but it has not facilitated a greater experience for college students.” 

Left-leaning Brookings has asserted that that if the government really wants to spend a ton of money on something to advance the progressive agenda, there are a lot of better things to do than forgive student loans. “Increasing spending on more targeted policies would benefit families that are poorer, more disadvantaged, and more likely to be Black and Hispanic, compared to those who stand to benefit from broad student loan forgiveness,” Brookings said.  “Indeed, shoring up spending on other safety net programs would be a far more effective way to help low-income people and people of color.”

And then, of course, there’s the question of what to do about students who take on college debt after the loan forgiveness cohort? Talk about a conundrum.

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Less State Money = Higher Tuition At Oregon State Universities. Not So Fast.

UofOtuitionincrease

A group of University of Oregon students protested tuition hikes on May 25, 2017.

Here we go again.

Oregon’s state universities will be raising their tuition again next school year.

Oregon’s Higher Education Coordinating Commission recently approved a resident undergraduate in-state tuition increase of 8.37 percent at Portland State University (PSU)  for 2017-18, as well as increases at other Oregon state universities.

With the state’s fairly steady disinvestment in higher education over the years, it is commonly assumed that this has been the primary driver of tuition increases.

I even wrote an article a while ago blaming the Legislature for rising tuition at state universities. “Because of the Legislature’s calculated callousness or pure indifference in funding Oregon universities, young people across the state are facing soaring college loan debts and diminished opportunities for higher education,” I wrote.

But research indicates that declines in state support may not be the primary villain.

A Brookings Institute review of research on the disinvestment hypotheses revealed that a clear causal relationship between reductions in per-student state appropriations and increases in tuition has not been established. Moreover, there’s a “surprisingly thin” amount of research on the relationship.

Sure, higher education tuition has been rising as state support has been declining, but claims that changes in state appropriations are the biggest factor causing tuition increases are simplistic assertions based on nothing more than a comparison of two trends, a Brookings Institute paper said.

For example, in a recent article for FiveThirtyEight, Doug Webber, a professor at Temple University, put changes in tuition at public universities side-by-side with changes in state appropriations in a table, divided one column into the other, and then labeled the result, “share of tuition hike explained by cuts” [Emphasis added].

Brookings challenged this analysis. “..it does not explain how much of the funding cut caused the increase in tuition…Rather, it assumes that a causal relationship already exists, that it is dollar-for-dollar, and that no other factor could explain the changes in tuition,” Brookings said.

A study by the U.S. Department of Education’s National Center for Education Statistics found that changes in appropriations account for only between 19 percent and 28 percent of changes in published in-state tuition prices.

Another study published in a National Bureau of Economic Research volume examined a dozen factors that might be associated with changes in tuition, including changes in appropriations from state governments. This study, by Michael Rizzo and Ronald G. Ehrenberg, looked at these changes for 98 universities over a 10-year period.

The paper includes an important finding on the magnitude of the effect of a reduction in state appropriations on tuition. The effect, it concluded, is miniscule. The authors found that, “for the average institution in our sample, it would take an increase of $1,000 in state appropriations per student to generate an in-state tuition reduction of only $60.” That means six cents of every dollar in appropriations find their way into lower tuition.

A George Washington University study also has found that changes in appropriations have a very small effect on tuition at public universities. This study found that just ten cents of every dollar increase in appropriations would find their way into lower tuition, an effect similar in magnitude to what Rizzo and Ehrenberg found.

“If the relationship between state appropriations and tuition at public universities is as weak as the two studies show, the ubiquitous claim that cuts to state funding are the “primary driver” of changes in tuition are simply not supported by the research,” the Brookings Institute reported.

Equally, the research suggests that increased appropriations for public universities are unlikely to have an effect as large as advocates assume. “That makes increasing appropriations for public colleges and universities an ineffective—even wasteful—policy for keeping tuition low,” Brookings said. “It also implies that grant aid might deliver more bang for the buck than larger state appropriations.”

So why such an apparently weak link between appropriatio0ns and tuition? Brookings speculates that universities may be simply looking to exploit their pricing power in the market, leading them to raise tuition whether appropriations rise or fall.