Close in Spirit

…but wide of the mark. Wide of the target itself, even. In Wednesday’s Wall Street Journal Letters section, a letter-writer offered this on the matter of student loan debt:

The solution is to hold academic institutions accountable. If they want government to give my money to their students, they need to prove the value of their product. Set parameters: an 80% graduation rate in five years, and the ability to secure a job at a reasonable salary one year postgraduation. Failure results in withdrawal of federal money available to future students until parameters are met.

It’s entirely appropriate to hold the colleges and universities individually responsible for their product: students taught, successfully or not, for one or more years along with graduated students. But the writer’s suggestion still wants far more government intervention than is warranted.

Let the free market solve the puzzle, and here is where legitimate government intervention would be appropriate. Information is key. Require the colleges and universities to publish their dropout rates by number of years in school, graduation rates by major, and both the median and mean annual incomes, again by major, of graduated students five years after graduation.

One more path for government intervention: require the colleges and universities to be the primary lender to the student or to co-sign as borrower on the loan to their students. As part of the loan or co-signed loan document, require the borrowing student to answer the income survey.

A final act of government intervention: let the borrowing student discharge his student loan debt through personal bankruptcy, as with any other personal debt, and then deal with the economic and reputational consequences of that bankruptcy.

With this, there would be no need for government to lend to students or to guarantee any loans to students. Thus, a final final act of government intervention: government should withdraw entirely from the student loan industry.

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