Moral Hazard

Apparently Biden the inflation-fighter has another huge spending program to put away the beast. This is forgiving a portion of outstanding student loans, a program estimated to cost between $300 billion and $900 billion over the next ten years.

The Federal government should never have been in the student loan business in the first place. It has caused massive hikes in college prices, far outstripping inflation, purely because the students can borrow the money to pay whatever the colleges ask. Then the students are saddled with big debts. The right solution is for colleges to have a financial commitment to the future success of their students, with a positive return on their education investment. Colleges should accept a share of future income instead of up-front fees, encouraging them to invest in the quality and relevance of education rather than lavish facilities and top-heavy administration.

The inevitable result of this program is more moral hazard. Students will expect further bailouts, and colleges will charge more.

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