So U.S. Sen. Elizabeth Warren and President Obama bring the $1.2 trillion in student loan debt to the forefront, calling for more taxes “on the rich” in an election year. College tuition’s astronomical rise is a direct result of this limitless student credit — huge loans given with no regard to students’ probability of graduating or employability in their chosen major.
In the last housing bubble, credit went to those not qualified for mortgages, as the feds imposed unwise quotas for new minority housing mortgages. Lenders offered two-year “teaser” rates to lure millions of low-income, new homebuyers into “sub-prime,” doomed mortgages, and housing prices skyrocketed.
Similarly, college tuition is capped only by the availability of the students’ money. Trillions of dollars in loans do not make education more obtainable — simply more expensive. Fixing that means capping the loans. Within two years, tuition will plummet because schools will be forced to charge what the students are able to pay. Real estate prices plummeted when lenders took borrowers’ household income levels seriously in approving mortgages.
Vast sums of loan money fund college tuition, allowing schools to hike tuition astronomically. Economics 1001: Set your price at the level the customer can pay. Stop the loan madness, and tuition will fall precipitously.