![\"President](\"https:\/\/i0.wp.com\/www.dougsbriefcase.com\/blog\/wp-content\/uploads\/2014\/06\/credit-npr.jpg\")
<\/a>Pres\u00adi\u00addent Oba\u00adma believes that requir\u00ading stu\u00addent loans to be repaid is pun\u00adish\u00ading good behav\u00adior. [Cred\u00adit: NPR<\/span>]<\/p><\/div>\u201cIf some\u00adbody plays by the rules, they shouldn\u2019t be pun\u00adished for it.\u201d<\/em> \u2014 Pres\u00adi\u00addent Obama<\/a>\n The Pres\u00adi\u00addent made this inar\u00adguable state\u00adment in the course of pro\u00adclaim\u00ading a change in the law gov\u00adern\u00ading stu\u00addent loans. Hence\u00adforth, mil\u00adlions of peo\u00adple who bor\u00adrowed for col\u00adlege will have their month\u00adly pay\u00adments restruc\u00adtured and, in some cas\u00ades, be entire\u00adly relieved of the oblig\u00ada\u00adtion to repay their debt.<\/p>\n In the President\u2019s mind, bor\u00adrow\u00ading mon\u00adey is play\u00ading by the rules; pay\u00ading it back is punishment.<\/p>\n To his cred\u00adit, the Pres\u00adi\u00addent rec\u00adog\u00adnizes that there is a con\u00adnec\u00adtion between stu\u00addent loan debt and ris\u00ading tuition. He just can\u2019t seem to put his fin\u00adger on why col\u00adleges keep charg\u00ading more for a prod\u00aduct that offers dimin\u00adish\u00ading returns. He is cer\u00adtain that tem\u00adper\u00ada\u00adtures rise due to human activ\u00adi\u00adty. Tuitions, on the oth\u00ader hand, lev\u00adi\u00adtate by some force of nature beyond human con\u00adtrol. Government\u2019s only recourse is to encour\u00adage peo\u00adple to bor\u00adrow more than they can afford to repay, then restruc\u00adture or for\u00adgive their debt.<\/p>\n But what if tuitions are ris\u00ading in part because the ready avail\u00adabil\u00adi\u00adty of cred\u00adit enables uni\u00adver\u00adsi\u00adties to gouge con\u00adsumers with exces\u00adsive prices? Some col\u00adlege degrees are worth the cost, equip\u00adping peo\u00adple for earn\u00adings suf\u00adfi\u00adcient to repay loans with\u00adout finan\u00adcial dis\u00adtress. Oth\u00aders, not so much.<\/p>\n A recent study by Beth Akers<\/a> of the Amer\u00adi\u00adcan Enter\u00adprise Insti\u00adtute pro\u00advides evi\u00addence that repay\u00ading stu\u00addent loans has become more bur\u00adden\u00adsome for mil\u00adlions, not because stu\u00addents have bor\u00adrowed so much, but because they earn so lit\u00adtle \u2014 in spite of their diplomas.<\/p>\n Using data from the Fed\u00ader\u00adal Reserve\u2019s Sur\u00advey of Con\u00adsumer Finances, Akers found that:<\/p>\n There is not a strong pos\u00adi\u00adtive rela\u00adtion\u00adship between stu\u00addent debt and finan\u00adcial hard\u00adship \u2026 In fact, the high\u00adest rates of late bill pay\u00adment, an indi\u00adca\u00adtion of finan\u00adcial hard\u00adship, are observed among house\u00adholds with out\u00adstand\u00ading debts less than $5,000.<\/p><\/blockquote>\n The fact that peo\u00adple who incur large stu\u00addent loan debts aren\u2019t at a pro\u00adpor\u00adtion\u00adate\u00adly high\u00ader risk of falling behind on pay\u00adments may seem coun\u00adter\u00adin\u00adtu\u00aditive, but it actu\u00adal\u00adly makes a good deal of sense. Peo\u00adple with degrees in med\u00adi\u00adcine, for exam\u00adple, often take on sub\u00adstan\u00adtial debt, as do under\u00adgrad\u00adu\u00adates of the most pres\u00adti\u00adgious uni\u00adver\u00adsi\u00adties. Physi\u00adcians and Stan\u00adford alum\u00adni gen\u00ader\u00adal\u00adly earn enough to stay cur\u00adrent on their stu\u00addent loan pay\u00adments, though their debt is often quite high. Peo\u00adple with degrees in stu\u00addio arts from a pub\u00adlic insti\u00adtu\u00adtion may fall behind despite car\u00adry\u00ading less debt.<\/p>\n \u201c<\/span>Over\u00adbor\u00adrow\u00ading,\u201d Akers writes, \u201coccurs when stu\u00addents bor\u00adrow more than they can expect their degree to return in future wages.\u201d<\/p>\n The Pres\u00adi\u00addent would nev\u00ader use a term like \u201cover\u00adbor\u00adrow\u00ading,\u201d but it is pre\u00adcise\u00adly the prob\u00adlem that the stu\u00addent loan cri\u00adsis presents: mil\u00adlions have bor\u00adrowed more than their degree is worth.<\/p>\n Akers out\u00adlines some sen\u00adsi\u00adble solu\u00adtions to pro\u00adtect con\u00adsumers from falling too deeply into debt. Loans are gen\u00ader\u00adal\u00adly pred\u00adi\u00adcat\u00aded on two fac\u00adtors: col\u00adlat\u00ader\u00adal and cred\u00adit\u00adwor\u00adthi\u00adness. Stu\u00addent loans, for the most part, take nei\u00adther into account. Like cred\u00adit card debt, there is no col\u00adlat\u00ader\u00adal, noth\u00ading that lenders can recov\u00ader in the event of default. Nor is there an eval\u00adu\u00ada\u00adtion of an individual\u2019s capac\u00adi\u00adty to repay. There is mere\u00adly the assump\u00adtion \u2013 in many cas\u00ades with\u00adout basis and often false \u2013 that a col\u00adlege degree will result in future earn\u00adings that will enable a bor\u00adrow\u00ader to repay the loan with\u00adout hardship.<\/p>\n Instead of bas\u00ading loan amounts on such vague and faulty assump\u00adtions, Akers argues for mak\u00ading \u201cloan eli\u00adgi\u00adbil\u00adi\u00adty deter\u00admi\u00adna\u00adtions on an indi\u00advid\u00adual basis, tak\u00ading into con\u00adsid\u00ader\u00ada\u00adtion all of the cir\u00adcum\u00adstances faced by the indi\u00advid\u00adual, as well as the out\u00adlook for future abil\u00adi\u00adty to pay.\u201d Such deter\u00admi\u00adna\u00adtions might con\u00adsid\u00ader, among oth\u00ader things, the insti\u00adtu\u00adtion a stu\u00addent attends, what he or she is study\u00ading, and what grades he or she is making.<\/p>\n Bas\u00ading stu\u00addent loan eli\u00adgi\u00adbil\u00adi\u00adty on indi\u00advid\u00adual bor\u00adrow\u00ader char\u00adac\u00adter\u00adis\u00adtics would, of course, reduce the amount a stu\u00addent could bor\u00adrow to study at cer\u00adtain insti\u00adtu\u00adtions and to pur\u00adsue cer\u00adtain majors. That, in turn, would force uni\u00adver\u00adsi\u00adties to reduce tuitions or at least to vary them by course of study, some\u00adthing that the high\u00ader edu\u00adca\u00adtion estab\u00adlish\u00adment would find threatening.<\/p>\n Threat\u00aden\u00ading, but fair\u00ader to stu\u00addents and their fam\u00adi\u00adlies. The val\u00adue of uni\u00adver\u00adsi\u00adty diplo\u00admas dif\u00adfers dra\u00admat\u00adi\u00adcal\u00adly by major. That dif\u00adfer\u00adence is quan\u00adtifi\u00adable. Antho\u00adny Carnevale<\/a> of George\u00adtown Uni\u00adver\u00adsi\u00adty has found that peo\u00adple with under\u00adgrad\u00adu\u00adate degrees in engi\u00adneer\u00ading have medi\u00adan earn\u00adings of $80,000 \u2014 $120,000, fig\u00adures that are 2\u20133 times that of those who pur\u00adsued such cours\u00ades of study as visu\u00adal and per\u00adform\u00ading arts, dra\u00adma and the\u00adater arts, social work, and coun\u00adsel\u00ading psychology.<\/p>\n This is in no way to dis\u00adpar\u00adage such majors. The prob\u00adlem is not that a stu\u00addent might choose to pur\u00adsue a degree in com\u00admu\u00adni\u00adca\u00adtions dis\u00ador\u00adders sci\u00adences, but that a uni\u00adver\u00adsi\u00adty charges such stu\u00addents and their fam\u00adi\u00adlies out\u00adlandish tuitions for such a degree, know\u00ading that gov\u00adern\u00adment loans will help pay the inflat\u00aded price.<\/p>\n The dirty lit\u00adtle secret of the stu\u00addent loan pro\u00adgram is that, as cur\u00adrent\u00adly struc\u00adtured, it facil\u00adi\u00adtates bad behav\u00adior by uni\u00adver\u00adsi\u00adties. They hike tuitions to max\u00adi\u00admize their rev\u00adenue from gov\u00adern\u00adment-backed stu\u00addent loans, then con\u00adfer degrees that offer lit\u00adtle eco\u00adnom\u00adic val\u00adue to many of their grad\u00adu\u00adates. Mil\u00adlions of those alum\u00adni strug\u00adgle to pay back mon\u00adey they bor\u00adrowed for a diplo\u00adma that was\u00adn\u2019t worth the price. The uni\u00adver\u00adsi\u00adties\u2019 pri\u00advate gain is at the root of this pub\u00adlic problem.<\/p>\n The Pres\u00adi\u00addent, unfor\u00adtu\u00adnate\u00adly, has cho\u00adsen to reward this rent-seek\u00ading behav\u00adior by the high\u00ader edu\u00adca\u00adtion lob\u00adby, call\u00ading for even more debt and more debt for\u00adgive\u00adness, deep\u00aden\u00ading a cri\u00adsis that gov\u00adern\u00adment and uni\u00adver\u00adsi\u00adties have been com\u00adplic\u00adit in cre\u00adat\u00ading. He should call on Con\u00adgress to reform the stu\u00addent loan pro\u00adgram, not by expand\u00ading loan for\u00adgive\u00adness and arti\u00adfi\u00adcial\u00adly sup\u00adpress\u00ading inter\u00adest rates, but by pro\u00adtect\u00ading stu\u00addents against bor\u00adrow\u00ading too much. Akers\u2019 sug\u00adges\u00adtion of indi\u00advid\u00adual under\u00adwrit\u00ading, though not with\u00adout flaws, would be a sen\u00adsi\u00adble point of departure.<\/p>\n His plan to increase new stu\u00addent bor\u00adrow\u00ading and to restruc\u00adture and for\u00adgive more exist\u00ading debt is con\u00adsis\u00adtent with his Administration\u2019s pecu\u00adliar def\u00adi\u00adn\u00adi\u00adtion of suc\u00adcess. The rise in loan for\u00adgive\u00adness (defaults) \u2014 like the rise in the num\u00adber of peo\u00adple who col\u00adlect food stamps, sign up for Med\u00adic\u00adaid, restruc\u00adture their under\u00adwa\u00adter mort\u00adgages, and col\u00adlect ben\u00ade\u00adfits while remain\u00ading job\u00adless for extend\u00aded peri\u00adods of time \u2014 might be under\u00adstood as indices of eco\u00adnom\u00adic fail\u00adure with deep\u00aden\u00ading cul\u00adtur\u00adal roots. The Pres\u00adi\u00addent regards them as pol\u00adi\u00adcy achievements.<\/p>\n There are con\u00adsid\u00ader\u00adable costs for such achieve\u00adments, costs that will be borne by the shrink\u00ading per\u00adcent\u00adage of house\u00adholds that pay fed\u00ader\u00adal tax\u00ades. These are the peo\u00adple who, as the Pres\u00adi\u00addent might say, \u201cplay by the rules.\u201d He is pun\u00adish\u00ading them for it.<\/p>\n","protected":false},"excerpt":{"rendered":" \u201c<\/span>If some\u00adbody plays by the rules, they shouldn\u2019t be pun\u00adished for it.\u201d \u2014 Pres\u00adi\u00addent Oba\u00adma The Pres\u00adi\u00addent made this inar\u00adguable state\u00adment in the course of pro\u00adclaim\u00ading a change in the law gov\u00adern\u00ading stu\u00addent loans. Hence\u00adforth, mil\u00adlions of peo\u00adple who bor\u00adrowed for col\u00adlege will \u2026 Con\u00adtin\u00adue read\u00ading