 Ah, college. The opening premised almost all of the pornography I consume. Smart ladies in STEM fields courted by gentlemen who appreciate personality. Americans are swimming in student loan debt to the tune of at least $1.6 trillion. That's almost enough money to liberate Iraq all over again, this time just for kicks. That whopping debt is held by some 45 million Americans. And it's virtually impossible to discharge like normal debt via bankruptcy or by faking your own death. Hello, car monger? Yeah, I can't pay back that car loan on account of I am dead. Uh-huh. Murder suicide. Yeah, I'll be missed. Thanks so much. Okay. This led President Joe Biden to issue a legally questionable executive order for giving up to $20,000 to those who make less than $125,000 per year. Even though that disproportionately benefits wealthy households over lower income households, Senators Warren and Schumer say the government is still being too stingy in an order to forgive up to $50,000. Bernie Sanders says cancel all student loan debt and outlaw greed, humidity, diabetes, storm the Bastille, and so forth. The narrative goes something like this, student loan debt sucks, pang student loan debt sucks, and it makes life very difficult. Like trying to get out from under a mountain of wet carpets, so why doesn't the government help the many people chafing under it? Everybody needs a college degree to participate in a modern economy. What with the robots and the Netflix and the polio vaccines? So the government ought to forgive those loans unfairly burdening graduates. Now far be it from me to try to dissuade anybody from solving a problem by throwing money at it. But I do have some concerns. First, Biden's plan is projected to cost the federal government $400 billion, and at first I was fine with that. But then I learned that taxpayers fund the federal government. Then I kind of got distracted and I learned about narwhals for a while. Then I scored some Adderall and I went back to learning about taxpayers. Under Biden's student loan forgiveness plan, the average taxpayer will be on the hook for over $2,000. Then it turned out it wasn't actually Adderall, it was just an antihistamine. So I went back to learning about narwhals, which are not eligible for Biden's student loan plan. Before we try to solve the student loan crisis by smothering it in money from people who mostly didn't go to college, we ought to ask ourselves, why is college tuition so expensive? Normally, sorts of friends I have who wear Shea Guevara t-shirts and engage in recreational protesting are apt to explain higher prices as a function of greed. I.e., corporations are lusty characters in a Dickens novel and so they drive up prices in order to buy more cigars. Ergo, college tuition is increasing because of greed. But, 90% of student loan debt is owned by the federal government to cover tuition at universities, who are more likely to be Shea Guevara fans than coal companies or guys who own blimps. The vague notion of greed can't really account for that pricing. Another explanation is that states have defunded higher education, forcing students to take up the slack. And that's partly true. When state revenue dried up in the 2008 recession, so did educational funding and universities responded by spiking tuition to cover the difference. But there are some big caveats to this argument. First, discussions of state funding for higher ed focus on per student spending. If the budget stays the same, but there are more students, then per student spending declines. And that's definitely happened. In 1940, less than 5% of the population had a college degree. And from what I can tell, 80% of those people wore ridiculous leather football helmets to protect themselves from cigarettes. Back then, states could easily subsidize most of the costs of classes and leather football helmets for that fractional percentage of the population. Whereas today, 13% of Americans have a graduate degree, about a third of the population has a four-year college degree, and schools have been pushing the you must have a college degree narrative for 30 years. The more people go to college, the more state resources are spread thin. Even so, declining per student spending doesn't cover the increase in college degrees. Tuition at public universities has gone up by between 30 and 37% between 2008 and 2018. But in 2018, per student funding was only 13% lower than it had been in 2008. Even if stingy, stupid state governments stupidly don't understand the benefits of everyone in America having a college degree, stupidly. There's still a 20% rise in tuition prices to account for. Most of the price increase is arising from some additional cause beyond greed or state governments. And if inadequate public funding is the reason college is so expensive, why is private tuition also going up? Private universities don't get subsidized by the state, they're private. But they've also increased tuition. So some other factor is accounting for the steep increase in the price of higher education. And I know what you're thinking, ghosts, but no, it's not ghosts. It's the fact that we keep throwing money at education. More specifically, when Uncle Sam increases the amount of money available to prospective students via student loans, colleges compete for that potential money. Schools add perks, which didn't exist in the 1940s when education referred only to actual classes. Things like dormitories, cafeterias, study abroad programs, student life activities, pools, therapy dolphins, and new and exotic breeds of administrators. Then once that college has built a new pool and dormitory, secured a castle to do study abroad programs in and clone some new hot administrators, it increases its tuition to pay for it. Eventually, Congress sees that tuition has gone up and says, whoa, that's too high, that's not fair. And it authorizes more funding for student loans. Which go to castles and clones. The Federal Reserve Board of New York recently conducted a study which found that for every new dollar of federal direct subsidized loans, tuition rises by 65 cents. For every dollar of federal Pell Grants, tuition rises by 50 cents. In 2017, University of Vanderbilt Economist Leslie J. Turner analyzed need-based Pell Grants and estimated that between 11% and 20% of Pell Grant aid is passed through to schools, meaning that the schools find a way to capture it without charging students less for out-of-pocket expenses. So if we wanted to help out student loan borrowers and narwhals, without accidentally jacking up tuition prices, how would we go about doing that? I'm glad you asked. To start, allow student loans to be discharged through bankruptcy. For decades, it's been notoriously difficult to get a student loan discharged through bankruptcy. Because in 1976, Congress extended eligibility for federal student loans to applicants who had not completed high school. The logic being, high school dropouts are struggling, so making them eligible for student loans to get into Votex or training schools ought to help improve their situation. Private loan companies and state guarantee agencies were wary of giving loans to high school dropouts. So Congress eventually stepped in and said, hey, no problem. We, the federal government, will guarantee their loans if somebody defaults. We'll cover the bill. Great system. Take high school dropouts. Give them the option of attending a for-profit college now. Tell loan companies there's no risk of giving the loans out because if they default, Uncle Sam will have your back. If I were a loan company, and man, I wish I was, because I am so tired of being Andrew Heaton. Have you ever seen Newhart? As a loan company, I knew that I had no risks whatsoever in taking on such clients. It's either upshot or refund. I'd pass out loans like narwhal candy. If they pay back the interest, great. If they don't, also not a problem. Can't make a wrong move. As a loan company, I no longer remotely care whether or not this person will default or not. Or about the gaping hole in my heart that no amount of praise, bourbon, or chocolate seems to fill. Anyway, that's exactly what happened. With predictable results, by the late 1980s and early 1990s, there was a flood of loan defaults from people who the government altruistically set up for failure to the tune of a billion dollars to compensate. The government gradually restricted more and more situations in loans from dischargeability through bankruptcy, until more or less outlawing it altogether entirely in 2005. If you've ever wondered why you can't just declare bankruptcy to get rid of your student loans, that's why. The government outlawed it after precipitating the problem it outlawed. Recently, Associate Attorney General Vanita Gupta announced changes to the bankruptcy guidelines she says will allow for a better, fairer, more transparent process. It's too early to know if the changes will help more of those in need, but it's good to see some in Washington acknowledging the mess they've created. Next, if you actually want to drive down college tuition, put schools on the hook. Whenever somebody defaults on their student loan, make their college eat half of it. If colleges realized they only got paid if their graduates could actually pay them back, it would collapse predatory for-profit schools and compel public universities to reconsider how many degrees they pass out with the word studies at the end. Right now, universities understandably allocate seats and majors based on popularity, not on how useful the degree is in the real world, because they get paid by selling degrees to students, not by how useful those degrees actually are. Whereas if a university knows that my degree is in one of these obscure, ridiculous categories and it probably will never result in me paying the back, they'd probably cap how many spots are in that program and instead push prospective students towards a field where the degree might actually result in economic investment, probably involving some kind of math. If our leaders want to handle student loans by throwing other people's money at them, they should at least pair those wads of cash with structural reforms that will reduce the cost of tuition. So far, they're trying to put out a grease fire by hosing it down with a grease pump.