I've written about government subsidies and college loans before. Now, the topic is receiving lots of publicity because all the candidates think it's important. It's my belief that the chief beneficiaries of government loan subsidies are the colleges themselves. The government ups loan limits, magically, tuition increases. and voila! college students are screwed.
Now, Ilya Somin sees the benefits of rising tuition costs, and makes that case that compared to not having a college education, receiving a college education is a good deal. So, that's his reasoning for no subsidized tuition:
Even at the most expensive private universities, four years of tuition, room, and board is unlikely to cost more than $180,000 or so (the approximate cost of four years at Harvard at maximum tuition rates). And, as Becker notes, many students (especially the poor) don't pay the full sticker price because of widely available financial aid and merit scholarships. The income gains of getting a higher education far outstrip the tuition. The vast majority of students can therefore afford to pay for college by borrowing against their future incomes, and still have an enormous income gain left over. Thus, there is no reason for government to subsidize college tuition on the grounds that it is "unaffordable" - even for those students who are unfortunate enough to have to bear the full cost themselves, without parental assistance.Well, I didn't have parental assistance for any of my college and worked my way through all of them. And ten years out, I'm still paying loans off even with the income gains. What I don't think Somin is factoring in, is that the loans are such a heavy, long-standing burden, they affect the next generation.
Of course, the kids whose parents are paying the bills are at a huge, long-term advantage. Those who pay off their own loans for years, to the point that they're not saving for their own children perpetuate a cycle of governmental indebtedness. It's just not a good pattern. And yeah, there is free will. And yeah, the professional life is much better than I expect I would have had without the education. And yeah, it's worth it.
Still, my reasons for disliking governmental subsidies are different. Without them, the institutions wouldn't be subsidized. They'd have less students entering. There would be more competition. They'd have to control costs. Students would benefit.
Either way, I want the government out of the college loan business.