The new study is discussed in The Federalist.
Graduates from the class of 2014 can thank President Obama that they’re exiting college with the highest student loan burden ever. They graduated with an average of $28,950 in student loans, according to a new study by the Institute for College Access and Success (TICAS).
[…]A recent study from the Federal Reserve Bank of New York examining how student loans rose between 2001-2012 concluded that the more government subsidizes education, the more colleges raise their prices.
The study explains:
Yearly student loan originations grew from $53 billion to $120 billion between 2001 and 2012, with about 90% of originations in recent years occurring through federal student aid programs. Against this backdrop of increased borrowing, average sticker tuition rose 46% in constant 2012 dollars between 2001 and 2012, from $6,950 to $10,200.
In the years examined, tuition increased about 55 to 65 cents for every dollar the federal government gave out in student loans or Pell Grants.
Surprise! A government program designed to lower the cost of education actually did the opposite. Once colleges saw they could rake in money from helpless taxpayers, they figured: “Why stop now?” Consequently, tuition has skyrocketed due to government involvement.
Under Obama’s leadership, the U.S. Department of Education has increased the maximum Pell Grant award from $1,000 in 2008 to $5,730 for 2014-15. Additionally, it has doubled the number of students slated to receive these funds. If history is any indication, this expansion won’t lower the cost of higher education. In fact, it will probably do the opposite.
What’s more, increasing numbers of these loans aren’t getting repaid. Currently, about 40 million people owe about $1.2 trillion in student debt. Last year, 11.8 percent of student loans subsidized by the government fell into default, which is bad news for taxpayers, who are left holding the bag.
Well, if the rate of defaults is increasing, then how come bankers are still giving out these loans. Glad you asked. It’s not bankers who is giving out these loans with bank money. It’s Obama giving out these loans with taxpayer money. You see, Obama nationalized the student loan system in 2010, so that anyone can now get a loan no matter what they study, and no one has any requirement that they study something that allows them to pay the money back.
Investors Business Daily explains:
In 2010, Obama eliminated the federal guaranteed loan program, which let private lenders offer student loans at low interest rates. Now, the Department of Education is the only place to go for such loans.
Obama sold this government takeover as a way to save money — why bear the costs of guaranteeing private loans, he said, when the government could cut out the middleman and lend the money itself?
The cost savings didn’t happen. In fact, the Congressional Budget Office just increased its 10-year forecast for the loan program’s costs by $27 billion, or 30%.
What did happen was an explosive growth in the amount of federal student loan debt… The result of Obama’s action is striking. In each of the past six years, federal direct student loan debt has climbed by more than $100 billion.
And since Obama keeps making it easier and easier to avoid repaying those loans, it’s a problem that taxpayers will eventually have to shoulder.
The radically leftist New York Times, of all places, supports this view that big government is behind the rise in the cost of higher education (student loan bubble), just like big government was behind the housing bubble.
This is by Paul F. Campos, law professor at the radically leftist UC Boulder.
[P]ublic investment in higher education in America is vastly larger today, in inflation-adjusted dollars, than it was during the supposed golden age of public funding in the 1960s. Such spending has increased at a much faster rate than government spending in general. For example, the military’s budget is about 1.8 times higher today than it was in 1960, while legislative appropriations to higher education are more than 10 times higher.
[…][F]ar from being caused by funding cuts, the astonishing rise in college tuition correlates closely with a huge increase in public subsidies for higher education.
[…]As the baby boomers reached college age, state appropriations to higher education skyrocketed, increasing more than fourfold in today’s dollars, from $11.1 billion in 1960 to $48.2 billion in 1975. By 1980, state funding for higher education had increased a mind-boggling 390 percent in real terms over the previous 20 years. This tsunami of public money did not reduce tuition: quite the contrary.
[…]State appropriations reached a record inflation-adjusted high of $86.6 billion in 2009. They declined as a consequence of the Great Recession, but have since risen to $81 billion. And these totals do not include the enormous expansion of the federal Pell Grant program, which has grown, in today’s dollars, to $34.3 billion per year from $10.3 billion in 2000.
The more money that is attached to students, the more money universities charge – simple. Taxpayers are on the hook for all these defaulted loans, as well as state funding of higher education, as well as the increase in Pell grants. And what is Hillary Clinton’s response to all this? Why, to make taxpayers pay for college for everyone. Who do you think is going to pay for that?
Maybe we should be electing someone who actually knows how to make the costs of higher education go down so that students don’t have to be stuck with these huge student loan balances.