Glenn Reynolds: Let's put colleges on the hook for loans that their students can't repay

How do you solve the problem of young adults earning worthless degrees and a truckload of debt? Three ways. One: The Chinese way, which, while characteristically direct, is probably too authoritarian for most Americans’ tastes. Two: End federal student loans. Let kids take their chances with private lenders, who’ll need assurances up front before they lay out the cash that they’ll get a return on their investment after graduation. This idea would, I assume, die a grisly death after the first round of “all Jimmy/Sally wanted to do was go to State but he/she couldn’t get the money” stories. Three: The Reynolds way.

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This is a simple case of inflation: When you artificially pump up the supply of something (whether it’s currency or diplomas), the value drops. The reason why a bachelor’s degree on its own no longer conveys intelligence and capability is that the government decided that as many people as possible should have bachelor’s degrees.

There’s something of a pattern here. The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle class people.

But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay in, the middle class.

Subsidizing the markers doesn’t produce the traits; if anything, it undermines them. One might as well try to promote basketball skills by distributing expensive sneakers…

For higher education, the solution is more value for less money. Student loans, if they are to continue, should be made dischargeable in bankruptcy after five years — but with the school that received the money on the hook for all or part of the unpaid balance.

As our Republican frontrunner once famously said, this smacks of right-wing social engineering. And I love it. Or rather, I love the basic idea: Colleges can either pare down their curricula to majors that impart actual marketable skills or continue to push crapola on their own dime. The thing is, I’m not sure it would end up producing more skilled grads than we have now. If forced to choose between revamping their course catalogues and continuing Critical Identity Theory Studies programs, I’d bet 95 percent of colleges would go the latter route and try to absorb the resulting cost of guaranteeing their grads’ loans. Culturally, they simply can’t part with super-soft humanities programs; even if they agreed that some are expendable on their educational merits, they’re not expendable politically. Which school would want to be known in liberal academic circles as the one that thought “Marxist Symbolism in the Music of Badfinger” wasn’t important enough to save?

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So what’ll happen, I take it, is that they’ll backstop these loans but shrink their student bodies accordingly to limit their overall exposure — which means some kids who really would have benefited from a college education may be locked out. And after all, the fundamental problem here isn’t that colleges offer degrees in one crap major after another; it’s that students choose to take degrees in those crap majors even though they know, or should know, that it puts them at a heavy disadvantage in a tenuous economy. If you make loans dischargeable in bankruptcy and put the old alma mater on the hook for them, the personal-responsibility calculus arguably gets worse, not better: Students will be even more free to major in crap, which in turns means fewer grads with marketable skills. I guess Glenn is thinking that once you reach a critical mass, where some huge percentage of students is majoring in crap because they know their loans are backstopped, the school will have no choice financially but to eliminate some of those majors. And if student bodies do shrink, the results won’t be entirely bad: Many kids will be spared the loan burden of a B.A., willingly or not, with more cost-effective alternatives to college sure to appear in the market to meet the new demand for higher education. Exit question: Second look at the Chinese system?

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John Stossel 12:00 AM | May 10, 2024
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