In my column this week for Defining Ideas, I argue that the federal government needs to rein in the business of making student loans.
In his recent speech at Washington-Lee High School, President Obama turned to the role that the federal government should play in education. Predictably, he urged the Congress, including those stubborn Republicans, to keep the lid on these interest rates, which would otherwise double at the end of the year to 6.8 percent. Interest rates are low in this economy, so this figure may well be high, relative to risk—or it may not be, for some borrowers. But the President never wants to understand how a program should best work. He wants to lash out at everyone who stands in the path of an expansion of yet another government subsidy.
It makes no sense to argue in terms of absolutes by insisting that the national interest is to ensure that a college education “is available to everyone and not just a few at the top” (in the President’s words). There is a lot of ground between the education of the few elites and college for all. For some young people, education is a means to holding down a regular job. For others, the goals should be far higher. So in a sense, the economic situation is worse than we thought. Even if the President was making the right investments in human capital, they would only start to pay off years from now. If, as there is every reason to fear, subsidized loans misdirect long-term investment, then the nation faces a double whammy that further dampens the overall prospects for an economic recovery. I explain further over at Defining Ideas.