April 28, 2012

INVESTOR’S BUSINESS DAILY: Congress Is Making The Higher Education Bubble Worse.

By keeping the price of loans artificially low, Congress will make the value of getting a college degree appear to be worth more than it really is, thereby encouraging more students and their families to take out more loans. That means more demand for college, resulting in higher tuition. So Congress is putting more air into the higher-ed bubble.

So why are lawmakers doing it? The simple answer is the election is six months away, college loans are, in effect, a middle-class subsidy, and neither political party wants to upset loads of middle-class voters. And with all the emphasis both sides are putting on attracting young voters, they especially don’t want to anger them by increasing the price of college.

The somewhat more complicated answer is that politicians know that they are not likely to be blamed if the bubble does eventually burst. The economist Thomas Sowell once told me, “People ask me, after something like the housing bubble, don’t members of Congress ever learn? And I reply, ‘Of course they learn. They learn they can get away with it!’”

Indeed.