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Bruce Bialosky

The Ridiculous and Irresponsible Act of Relieving Student Debt

The Democrat candidates for President have been outbidding themselves by promising relief of college loan debt to those who borrowed money through the student loan program. They are taking it a step further than President Obama. He took over the loan issuance, relieved the debt for certain favored people and told people if they worked for the government, they could be absolved of their financial commitments even while they pulled in compensation higher than in private industry. The new proposals could not be more irresponsible but consider the sources.

Remarkably, the cost of college is never a consideration as a source of the problem. The U.S. Bureau of Labor Statistics has stated that current prices for college tuition and fees have risen 391.82% since 1990. That increase compares with the overall cost increase of 102.46% during the same period. No one wants to explain why college costs have gone up almost four times the rate of inflation. You rarely, if ever, hear of the need to cut the costs related to colleges that have really driven the student debt levels.

That would be aiming a knife at friends, colleagues and financial supporters of the people proposing the debt relief. If we were to relieve the debt without confronting the overall costs, in a few years we would have another group of indebted students asking for relief to be paid by the American taxpayers.

Then there are the students and their families that did not incur student debt. What if they took the money out of savings? Or they took out a secured loan on their home because the interest rate was lower, and the parents thought paying for the schooling was their obligation. These people are not necessarily in different financial circumstances than those owing student loans; they just made different decisions. The people who incurred the same costs but financed them in a different manner end up with a severe disadvantage to the people who took the student loan route. Can you think of anything less equitable? And then on top of suffering the hardship of paying their severe college costs, they are now going to be forced to pay for others who took out student loans.

Then there are the rest of the people where no one has attended college. Only 30% are in the category who attended college. There are more that attended college and dropped out. There are many that are more inclined to take a different path. As we all know there are many who should never have gotten a college degree because it has done nothing but harmed them economically. There are many fine jobs in America that are going begging right now where someone needs to have some proper training or an apprenticeship and they could have a very lucrative career such as being a plumber or an air conditioning and heating (HVAC) repair person and their jobs are never going to go away. Business owners cannot find people to fill those jobs, but under these proposals they will have to be paying for the people who incurred the loans and were allowed to walk away.

People make choices and having debt relief would tell them there are no consequences for their actions. If they cannot afford an over-priced university, they should not attend. It is a lie that going to one of the high-priced schools provides a cake walk for the rest of one’s life and the other ones do not. The vast majority of Fortune 500 companies are run by graduates of those other schools. Those people made their choices and they succeeded. What a bad lesson it would be for all the people who would get loan relief to begin their careers by telling them the commitments they made to pay for their college education were bogus.

And what about those highfalutin’ schools – you know the ones that get top ratings in those college surveys? Why do they cost so much? Some have recently eliminated costs for students with certain specialty degrees like doctors, but that has come with special fundraising from limited sources. These schools have humongous endowments. They are supposed to spend the earnings from those endowments. Why are they not paying for these students?

Let’s take one university – University of Pennsylvania. Penn has an estimated endowment of $13.8 billion. That means if they got a return of just 4% (which is lower than most expect) that would be an annual profit of $552 million. With their current tuition (approximately $70,000), they could charge 7,885 students zero tuition. That is 31% of their students. Or you could reduce the tuition of every student by 40%, and that would significantly reduce the stress level of the students. Unfortunately, the universities just keep piling up their endowments and there is no outside pressure to spend the profits.

Here is an idea that has not been explored. Before students sign up for these colleges, they must take a course paid for by the colleges, but administered by independent companies, educating them on the consequences of all this debt burden before they have even started their careers. We all know someone who has $50,000, $100,000 or even much more debt and the only people advising them are the colleges who have every interest in the students taking out the loan, but none of the obligation. You ask a student how they got all this debt and they will tell you it “just happened.” This is the old story of the fox in the hen house, but because they are colleges we look the other way as if these colleges are altruistic. They are businesses with employees making hundreds of thousands of dollars and presidents making seven figure salaries. There could not be a more corrupt system.

Despite that, people running for president are trying to whip up support from voters by buying their votes. One of these people vying for votes taught at a major university and was paid over $400,000 to teach one class and do some other campus responsibilities. She is part of the problem and now she is offering this ridiculous and irresponsible solution. Don’t bite on it.