Wrong incentives and America’s unhealthy relationship with college debt

Two articles from Judah Bellin:

NRO2A Disquieting Truth: Distorted higher-ed incentives are the real cause of student debt

Higher-education policy is ripe for innovation. Not only is the Higher Education Act, which authorizes federal student aid, set to expire at the end of the year, but the problem of staggeringly high student-debt levels has finally captured the nation’s attention. However, our elected officials are thinking about the problem of student-loan debt strictly in terms of the choices students can make. That’s why President Obama and Congress are fiddling over the minor issue of student-loan interest rates and ignoring the badly distorted incentives that govern our broken higher-ed system. As a result, many promising avenues for reform are being missed.

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ManhattanInstituteCollege Credit: Repairing America’s Unhealthy Relationship with Student Debt

Sallie Mae, the largest private lender of student loans, recently announced that it will split into two entities. The first company will manage nearly all of Sallie Mae’s assets—$118.1 billion worth of federal loans and $31.6 billion worth of private loans—and the second will continue to lend to students.[1] This development underscores a disquieting truth: Americans have a healthy attitude toward higher education but an unhealthy relationship with student debt. While household debt comes in many forms, only student debt grew during the Great Recession. Federal policy has encouraged this habit. In the two years following the financial crisis, spending on student loans grew 19 percent and 18 percent, respectively.

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