Over one million students graduate college each year with student debt. And the debt loads at graduation keep rising (to say nothing of the debt loads of the usually less employable college drop-outs). Naturally, politicians of all stripes are proposing policy solutions.
For example, the following has been proposed by 2016 Ohio candidate for the U.S. Senate, Democrat P.G. Sittenfeld:
- Reduce interest rates to 2 percent for all recipients of subsidized federal loans who graduated with a four-year college degree since 2009.
- Reduce interest rates to 3 percent for other federal loan recipients who graduated with a four-year college degree from public institutions since 2009.
- Provide one year, up to $12,500, of federal student loan forgiveness to Pell Grant recipients upon their completion of a four-year degree.
Sounds compassionate, right? Douglas Holtz-Eakin (President of the American Action Forum) and Chad Miller (Director of Education Policy at the American Action Forum) break down the unintended consequences:
The proposal does nothing to slow the growth of college costs.
The proposal sharply increases federal deficits.
The interest rate reductions would not induce a single additional young American to attend college.
The proposal’s loan forgiveness for Pell recipients doesn’t reduce borrowing.
The interest rate cuts are targeted on those most able to pay.
Read the whole thing.