Uncommon Sense

politics and society are, unfortunately, much the same thing

This Government Program Leads to Rising College Costs

July 13, 2014 by Lindsey Burke

Federal lawmakers have been trying for decades to reduce the burden of paying for college. Congress has significantly expanded lending, lifted caps on borrowing, and cut interest rates on federal student loans. Parents even became eligible to take out loans to pay for children’s college in the 1980s through the Parent PLUS program.

The Obama administration recently used executive action to make federal loan terms even more-generous for students. The executive action extended something known as Pay As You Earn to students who took out loans prior to 2007, extending this taxpayer-financed subsidy to some 5 million additional borrowers.

PAYE is an income-based repayment option, created in 2012. Income-based repayment existed prior to 2012, but was less generous than the new PAYE plan. The PAYE plan caps the amount a student must pay monthly on his loans at 10 percent of discretionary income, with complete loan forgiveness kicking in after 20 years. If a student goes into “public service” — i.e., government or non-profit work — upon graduation, loan forgiveness kicks in after just 10 years.

Capping loan repayments, forgiving balances — none of these options are free. Taxpayers, many of whom don’t hold bachelor’s degrees themselves, must pick up the tab for this federal largesse.

Moreover, generous income-based repayment options and loan forgiveness — and federal student loans and grants generally — do nothing to mitigate ever-increasing college costs. In fact, college costs over the past few decades have risen in tandem with increases in aid, suggesting such aid might actually exacerbate the problem. Why should a university work to keep tuition and fees in check when there is a virtually open spigot of federal aid, readily available to students, with little concern about the student’s credit-worthiness or ability to pay back the loan later?

Equally problematic are issues of equity: Federal higher education subsidies shift the responsibility of paying for college from the student, who directlybenefits from attending college, to the taxpayer. College graduates will earn $650,000 more on average over the course of a lifetime than those with just a high-school diploma.

read full article: This Government Program Leads to Rising College Costs

budget, bureaucracy, entitlements, government, nanny state, politics, public policy, spending, taxes, unintended consequences

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Filed under: budget, bureaucracy, entitlements, government, nanny state, politics, public policy, spending, taxes, unintended consequences

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