Freedom Line Blog

Among the foremost threats to individual freedom in America is the abusive and oftentimes lawless behavior of federal administrative agencies, whose vast armies of overpaid bureaucrats remain unaccountable for their excesses.

Among the most familiar examples of that bureaucratic abuse is the Department of Education (DOE).  Recall, for instance, the United States Supreme Court’s humiliating rebuke last year of the Biden DOE’s effort to shift hundreds of billions of dollars of student debt from the people who actually owed them onto the backs of American taxpayers.

Even now, despite that rebuke, the Biden DOE launched an alternative scheme last month in an end-around effort to achieve that same result.

Well, the Biden DOE is now attempting to shift tens of millions of dollars of student debt held by thousands of students onto the University of Arizona after the fact following U of A’s acquisition of the for-profit online university that it originally targeted.  In other words, the Biden DOE is compounding its habit of forgiving student debt by shifting the cost ex post facto onto the backs of Arizona taxpayers.

Not exactly the best way to flatter citizens of a swing state whose votes it desperately seeks amid sinking electoral prospects.

Here’s the background.

Amid a rapidly evolving educational environment, in August of 2020 the U of A announced its intent to acquire private online Ashford University in an attempt to extend its global reach, a pursuit shared by numerous other traditional universities.  The new entity was named the University of Arizona Global Campus (UAGC).

Well, years prior to the acquisition California and federal bureaucrats had accused Ashford of “deceptive” tactics, and last year the Biden DOE announced that it would discharge $72 million dollars in debt held by 2,300 of Ashford’s former students.

Lo and behold, this month the Biden DOE announced that it would seek to extract that amount from the U of A, which obviously had nothing to do with the conduct alleged by the DOE and California.

It all adds yet another questionable element to the Biden administration’s ongoing effort to boost its popularity among younger voters by shifting college student debt to anyone and everyone other than the legal borrowers themselves.  Whether that will please taxpayers in the swing state of Arizona might have been a consideration that escaped the Biden folks.

A few weeks ago, I wrote here about the fact that Congress’ ‘fix’ to interest rates on college loans was small potatoes compared to the rapid inflation in the underlying principal. Moreover, I noted, most of President Obama’s proposals for making higher education more affordable have the economics precisely backwards. Today, AEI’s Richard Vedder sounds a similar note over at Bloomberg:

The president’s proposal has one very bad idea: a forgiveness boon for those paying off loans right now. The proposal, limiting loan payments to 10 percent of income, potentially relieves millions of students from repaying part of their obligation. So why not major in fields the economy values least — anthropology or drama instead of engineering or math — if you don’t have to worry about earning enough to pay off your student loans over a certain period?

The idea simply raises incentives for future students to borrow more money, if they know their obligation to pay it back is capped. That, in turn, allows colleges to keep raising costs.

Obama proposes to ignore or worsen the root cause of much of the explosion in student costs: the federal financial assistance programs that encourage schools to raise costs and that haven’t achieved their goals of providing college access to low-income Americans.

As Vedder notes, virtually all of our federal policy on higher education (and most of the policy proposals that have any traction at the moment) generate precisely these kind of perverse incentives. Recommended reading.

Get a load of this economic reasoning from Peter Orszag, Obama’s first Director of the Office of Management and Budget and current vice chairman at megabank Citigroup:

More graduates would mean lower inequality, because the wage premium for a college degree would be reduced by the additional supply. And it would mean higher national income, because better-educated workers are, on average, more productive.

So, lowering the “wage premium” means that income for college graduates will go down with more of them in the job market.  This is a good thing according to Orszag because reducing the value of a college degree will have a leveling effect on incomes (in a downward direction, of course).

On the bright side, it’s a remarkably honest admission about everything that’s wrong with the analysis of people who obsess over economic inequality.  In this worldview, government policies that devalue education and distort the labor market should be praised if it means less people have an opportunity to be rewarded for superior ability.

Thus, while Orszag’s analysis doesn’t square with the diminished aspirations of millions of under- and unemployed college graduates in the Age of Obama, it does help explain why his former boss isn’t putting any muscle behind addressing the depressed job market.  In Obama World, so long as more people make the same – even if it’s less – everything is just fine.

Under the headline “New Course in College Costs,” today’s Wall Street Journal meditates on something that should be obvious:  “As Student Debt Grows, Possible Link Seen Between Federal Aid and Rising Tuition.”

A “Possible Link?”

Apparently, it’s news to academia that federal subsidies lead to higher prices:

Rising student debt levels and fresh academic research have brought greater scrutiny to the question of whether the federal government’s expanding student-aid programs are driving up college tuition.”

But don’t try telling that to the Obama Administration, famously callous toward anything that includes the concept of “profit” or “private”:

A spokesman for Education Secretary Arne Duncan said the administration believes there is a link between federal aid and tuition increases at for-profit schools, but that it sees no such tie with public and nonprofit schools. “

The real-world data contained in the report, however, contravenes the Obama Administration’s party line:

Tuition and fees at four-year public schools have risen 150% since 1990, to an average of $8,244 per student this past academic year, according to the College Board, an advocacy group made up of universities.  Over the same period, federal grants and tax benefits rose 242%, to an average of $4,292 per student, said educations consultants Kathy Payea and Sandy Baum, who conduct the College Board’s annual research on college prices.  Federal loans per student tripled.”

Unsurprisingly, George Will cogently captures the phenomenon in his latest column entitled “Subprime College Educations”:

This bubble exists for the same reasons the housing bubble did.  The government decided that too few people owned homes/went to college, so government money was poured into subsidized and sometimes subprime mortgages/student loans, with the predictable result that housing prices/college tuitions soared and many borrowers went bust.  Tuitions and fees have risen more than 440 percent in 30 years as schools happily raised prices – and lowered standards – to siphon up federal money.”

It’s just unfortunate that George Will remains too scarce on the syllabi of government and academia.

Tech billionaire and owner of the reigning NBA Champion Dallas Mavericks Mark Cuban correctly identifies the disconnect between the way policymakers talk about higher education spending and its true value to college students:

The President has introduced programs that try to reward schools that don’t raise tuition and costs. They won’t work.  Right now there is a never ending supply of buyers. Students who can’t get jobs or who think that by going to college they enhance their chances to get a job. Its the collegiate equivalent of flipping houses. You borrow as much money as you can for the best school you can get into and afford and then you “flip” that education for the great job you are going to get when you graduate.

Except those great jobs aren’t always there. I don’t think any college kid took on tens of thousands of dollars in debt with the expectation they would get a job working for minimum wage against tips.

At some point potential students will realize that they can’t flip their student loans for a job in 4 years. In fact they will realize that college may be the option for fun and entertainment, but not for education.

One of the hardest hit employment segments in the Obama Economy are college grads with too much education, too much education debt, and not enough work experience.  In a contracting economy, jobs go to those with years of on-the-job training and the financial flexibility to work multiple opportunities.

If Mitt Romney wants to put Barack Obama’s most blindly loyal constituency in play this election, he should pull no punches tying Obama’s spending and business regulations to the dearth of job opportunities available to college students and recent grads.

If you or a family member are weighing a decision about whether or how much college loan money to request from the government next fall, consider this nugget from Michael Barone’s column on the coming burst in the higher education bubble:

Peter Thiel, co-founder of PayPal, is adept at spotting bubbles. He cashed out for $500 million in March 2000, at the peak of the tech bubble, when his partners wanted to hold out for more. He refused to buy a house until the housing bubble burst.

“A true bubble is when something is overvalued and intensely believed,” he has said. “Education may still be the only thing people still believe in in the United States.”

Owning a college degree may certify completion of a program, but it does not guarantee that the holder has marketable skills to land a job, as this report on the ongoing talent shortage details.  Higher education – like all levels and kinds of education – is an investment only if the students, faculty and administrators involved focus on learning and teaching things that matter.  And with a 9.2 percent unemployment rate, that increasingly means basic comprehension of grammar, logic and rhetoric, with some grounding in finance thrown in for good measure.

So, if you know someone thinking about going back to school for a master’s in Religious or Women’s Studies – for the good of your fellow citizens and taxpayers, urge them to reconsider.  We can’t afford the experience.

The Maryland House followed the state Senate’s lead last night and passed a bill giving illegal immigrants in-state tuition rates for community colleges.  After graduating from a two-year school, beneficiaries would then be eligible for in-state tuition at four-year universities.

Maryland: so generous, it’s criminal.

The Wall Street Journal reports that India’s explosive growth in college graduates isn’t translating into employment for millions of newly minted degree holders.  The biggest problem: lack of critical thinking and communication skills.

To compensate, companies are spending large sums of money coaching graduates into employability.  According to one Indian business executive, the problem is the credential mentality infecting education:

“How are you able to change the mind-set that knowledge is more than a stamp?”

Sound familiar?  American higher education too is tempted to treat knowledge-building as a service rather than a task.  When students are treated like customers, the link between effort and reward is broken.  The result is a certification that doesn’t translate into employment.

With half of India’s 1.2 billion population under the age of 25, up to a million new workers a month are estimated to join the labor force over the next decade.  If India continues down the path of graduating young people without critical thinking skills, those workers – and the growing Indian economy – will be in serious trouble.

A sobering bit of news for college administrators about to go on spring break:

“The current prolonged recession means that we can no longer expect new revenue to pay for increasing attainment in higher education,” said Jane V. Wellman, Executive Director of the Delta Cost Project, which does a study every year on the cost of higher education. “In the next decade, we are going to be lucky to hold onto the resources we have. That means that all institutions – from the Ivies to the community colleges –are going to have to develop investment strategies that support goals for attainment. That will require new habits: looking at spending, and promoting the values of efficiency and cost effectiveness as co-partners to the never-ending search for new revenues.”

At first, one might be tempted to think that higher education needs to take a financial haircut just like the rest of the economy.  While that is undoubtedly true, the consequences will be enormous.

Federal higher education loans like Stafford and Grad Plus (and their state counterparts) are used like entitlements, though you’d never hear a recipient saying so.  Though only 1 in 4 Americans eventually graduate with a college degree, nearly everyone qualifies for the loans to finance one.

Because the cost of attendance continues to grow at several times the rate of inflation, grads and non-grads are piling up huge debt loads; prompting some to call the looming student loan crisis our next financial disaster.

The coming cuts in state and federal budgets for higher education financing will significantly decrease the subsidies available to students.  That means fewer students going to college, leaving enrollments peopled with those able to count on private financing.

Since passage of the 1944 GI Bill an essential part of the American dream has been having the opportunity to go to college by removing cost as a consideration.  The same bill did the same thing to spur home ownership via the VA-backed mortgage.  We all know how slippery that slope turned out to be.

Austerity is coming to America.  Hopefully, we can adjust to reduced expectations.