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Graduate School Loans

By July 17, 2023Commentary

Federal do-gooding programs have proliferated and are a primary cause of the soaring federal deficit.  The programs, however, are generally stupid and never accomplish what they are intended to, unless they intend was to help rich people get richer while bankrupting the country.  Here is another example, making unlimited federal loans available for graduate school programs.  As anyone with a brain, which once again leaves out pro(re)gressives and federal bureaucrats, not to mention Congress, could have figured out, giving people access to more money just means they will borrow more, not that they will put it to good use.  And they didn’t, as they number of people who actually finished a graduate program did not increase.  Nor did the uncapping of loans increase access to graduate programs by the “underprivileged”, i.e., whatever skin color, religion, sex or sexual orientation is currently favored by the whackos in charge of universities.  And now of course, these federal loans are being forgiven, illegally, by the Bidementia administration.  So the deficit increases, we got nothing for the money, and oh, here is another little bonus–the graduate programs raised their prices.  Kind of the way when you subsidize electric car purchases the price goes up by the exact amount of the subsidy.  And university professors, who are grotesquely overpaid, got even more overpaid.  All in all, a typical government program, that benefits no one but bureaucrats, and as I said, the already wealthy.   (NBER Paper)

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  • John Oh says:

    The consistent element of all this is that the government never acts to make things more affordable. It always offers “programs” to cultivate a new constituency. Utility costs are a good example. Senior citizens and income tested people qualify for modest subsidies to help pay for electricity. It never occurred to anyone to try and bring down the cost for everyone so that the subsidy wouldn’t be necessary. Over time, every time the loan amounts have been raised tuition also goes up, and it’s a pretty stark curve when shown on a chart. The scandal isn’t how much faculty make, it’s the increase in the number and salary paid to administrators. And it’s not just at private liberal arts institutions either. I’ll bet state schools in MN now have twice as many administrative staff now as they did in 2010 or 2020, while the number of students and faculty have gone up far less (if at all).

  • Dallas CPA says:

    I made frequent comments in the 1980’s and 1990’s that the availability of student loans , the tuition tax credits and other programs to make college “more affordable” were designed to benefit the “education industrial complex” (to paraphrase Eisenhower). They were not designed to benefit students or make college more affordable. The result of rapid tuition increases were very easy to predict as far back as the 1980’s – basis understanding of economics.

    One of the most important concepts in economics is the law of supply and demand. Tuition tax credits, Electric car tax credits, energy equipment tax credits, etc artificially shift the demand curve such that almost all of the benefits of the tax credit go to the seller in the form of higher prices for the product ( market price / equalibrium price of EV is = $25,000 with $5,000 tax credit, the retail price becomes $30,000 – the buyer is still paying the price where the supply and demand curve cross net of the credit, $25,000 in my example, yet the seller gets the $5,000 increase in price)

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