HIGHER EDUCATION BUBBLE UPDATE: Obama and Elizabeth Warren Feed the College Beast.

The proposals put forward by Obama, House Republicans, and Senators Jack Reed (D-RI) and Dick Durbin (D-IL) would tie student loans to the market rate (either the 10-year or the 91-day Treasury rate), though each with its own variation. The boldest plan, from new Senator Elizabeth Warren (D-MA), would reduce student loan rates to .75 percent (the rate at which banks borrow from the Federal Reserve) for one year.

These proposals would offer students some relief, but none of them address the core problem that rising college tuition rates are closely linked to the increased availability of government loans. Stafford loans have been around for just over forty years, and over the past thirty, college tuition and fees surged 1,120 percent—four times faster than the consumer price index, more than medical or food prices. And this isn’t all due to a rising cost of teaching: Colleges have used their newfound wealth to bloat their administrative ranks and spend lavishly on construction projects.

These new student loan proposals, particularly Warren’s, will only feed the higher education beast. Perhaps lawmakers should give more thought to policies that would increase price competition among universities and drive down costs.

I think making them bear some of the loss in defaulted student loans would help.