June 7, 2014
University officials love to complain that they don’t get all the state and federal money they’d like. They don’t complain, though, about the huge subsidies they get from governments via the subsidized tuition their increasingly indebted student bodies fork over. Scratch a whining provost and you find an executive in one of America’s most secure, sclerotic and administratively top-heavy industries.
Some bright thinkers in that industry, such as law prof and higher ed author Glenn Harlan Reynolds at the University of Tennessee, offer innovative ideas that would complement Obama’s push for more consumer info about colleges. In essence, Reynolds contends that if Muffy or Biff gets a loan, State U. collects tuition and fees but suffers little if Muffy flunks out and Biff can’t land a job. Instead, Tom and Tess Taxpayer often bear a cost.
Reynolds thinks colleges that benefit from subsidized loan money should be liable for part of the debt if a student defaults: Schools would have incentives to accept applicants who have a reasonable chance of graduating — and to warn prospective and enrolled students, loudly, that college loan money isn’t free.