What people subsidize, they get more of. Consequently, about 40 percent of Americans have college degrees, compared with 5 percent in 1940. This growth industry has been unnaturally boosted by government subsidizing higher education with direct funding and more indirectly with low-interest student loans.
This has been mistaken for progress. In reality, it is the victory of the entitlement-minded over those who foot the bill. Ironically, they often are the same young people. As with all income-redistribution schemes, it has unpleasant, unintended consequences.
Almost everyone now realizes living off borrowed money is one of the causes of today’s faltering economy. Bills come due. Defaults are economically damaging. Lenders lose, borrowers lose and the economy eventually self-corrects with contractions, as seen in recent years.
The more than $1 trillion in student loans is another symptom of short-sighted appetites for instant gratification, oblivious to long-term consequences. These debts, much like government-subsidized and incentivized mortgages, have ballooned to ruinous levels.
College enrollment is up 38 percent in the past decade. More than 20 million people are enrolled. Some students amass six-figure loan debts by graduation, and too often can’t even find a paying job.
Nearly 30 percent of college students with loans drop out. Dropouts, according to the Education Sector think tank, are four times more likely to default on their loans.
Much of this problem results from the misguided notion that anyone who can pick up a pencil should attend college.
Government-backed loans and subsidies encouraged colleges to accept more students because tuition is paid upfront, unlike tuition debts. The result is completely unwarranted enrollment numbers.
Vocational education has been downplayed and bad-mouthed. Even in our high-tech culture, 69 percent of jobs don’t require post-high school degrees, the government says.
Unfortunately, the herd mentality persists, urging and luring ever more young people onto campus, instead of creating new vocational and tech opportunities and private-sector apprenticeships. Living off borrowed money remains attractive, at least until the bill comes due.