Bernie Sanders’ loan bailout would benefit colleges, not students

By Mary Clare Amselem | The Daily Signal

Young Americans are being crushed by student loan debt. Unfortunately, a new bailout proposal wouldn’t help them much in the long term.

On Monday, Sen. Bernie Sanders, I-Vt., and Rep. Ilhan Omar, D-Minn., introduced legislation to wipe out every dollar of student loan debt in the United States, eliminating it for roughly 45 million Americans. Additionally, the proposal would make public colleges and community colleges tuition-free.

In a press conference announcing the proposal, Sanders said, “The American people bailed out Wall Street. Now it is time for Wall Street to come to the aid of the middle-class people of this country.”

That’s not, however, what the bill would end up doing. Loan forgiveness will not be a bailout for the middle class, but rather for colleges and universities.

Gage Skidmore/Flickr

Contrary to the plan introduced by Sen. Elizabeth Warren, D-Mass., which would forgive up to $50,000 of student loan debt based on one’s income, Sen. Bernie Sanders’ proposal would eliminate all student debt regardless of one’s level of need.

The reason schools keep raising their tuition is that students have easy access to federal student loans, and the government has a near-monopoly on the sector. Colleges know they can keep raising tuition without fear of losing students because federal loans serve as a guaranteed subsidy.

Thus, the cost of college has skyrocketed and students find themselves deeper in debt.

The solution is not to pay off existing student debt, but to dramatically reduce the federal subsidies pouring into higher education and restore the private market’s role in providing student loans.

This would put long-needed pressure on colleges to keep their costs in check, since students would no longer have unlimited, guaranteed funds from the government. This, in turn, would insulate taxpayers from having to cover loan defaults and forgiveness.

The Sanders proposal goes in the exact opposite direction.

Contrary to the plan introduced by Sen. Elizabeth Warren, D-Mass., which would forgive up to $50,000 of student loan debt based on one’s income, Sanders’ proposal would eliminate all student debt regardless of one’s level of need. A barista at Starbucks would get the same deal as a Donald Trump Jr.

Both plans would certainly increase federal subsidies for higher education, thus ignoring the root cause driving much of the $1.5 trillion student debt crisis.

The Sanders bailout plan would be financed through a tax on Wall Street trading, which he claims would generate $2.2 trillion over the next 10 years. This includes a massive 0.5% tax on stock transactions and a 0.1% tax on bonds.

The Heritage Foundation’s Adam Michel has warned that such taxes would hurt the economy:

It would increase rather than decrease market volatility; it would hurt digital traders, who benefit the market; it would not raise as much revenue as projected; and the tax would ultimately be paid by American savers through lower investment returns and fewer economic opportunities.

Ultimately, the negative impact on the economy imposed by such taxes would far outweigh any perceived benefits.

At a time when Americans are more frustrated than ever with the education colleges are providing for the price, policymakers should be discussing ways to hold colleges accountable, rather than rewarding them with a blank check.

The best way to lower tuition and encourage colleges to provide a high-quality education would be to eliminate, or dramatically cap, federal lending.

Tightening the purse strings would make space for alternatives, such as private lending or income share agreements. This would not only lower costs, but prevent students from taking on unmanageable debt with no realistic plan to pay it back.

Faith in higher education is declining. Only 48% of Americans expressed confidence in the institution of higher education in a 2018 Gallup poll, down from 57% in 2015.

Policymakers should be looking at ways to reform the broken system and reshape its flawed incentive structure, rather than entrenching the status quo with more subsidies.

Free college and loan forgiveness sounds like an attractive offer on the surface. But damaging the economy, bailing out colleges that will only jack up tuition more, and weakening the quality of higher education in the process is a bad deal for every American.

Image courtesy of Gage Skidmore/Flickr

8 thoughts on “Bernie Sanders’ loan bailout would benefit colleges, not students

  1. Bernies wife did such an amazing job with the college she was involved with. The college is now out of business and Jane Sanders received a huge golden parachute check.

  2. The race is on to see which of the 20 something Dem candidates can come up with the most free stuff. Seems as if Bernie and Pocahontas are running neck and neck with Kamala and. Cory desperately trying to catch up. Whose next with what?

  3. I honestly believe there is something wrong with Sanders. How can he possibly think forgiving 1.5 trillion dollars in student loans will generate 2.2 trillion to the economy ? He rants and raves about all the free giveaways he will magically give everyone but does not say where this money comes from. He knows where it will come from, the same place he got his money until he finally earned a paycheck at 40 years old. From the taxpayer. If he becomes president he will destroy the economy. As far as I know he has no background in finance, management or any business skills that could help him do the job. He has been on the government dole all his life and has no clue what Americans have to go through to make ends meet. If he is elected president America as we know it will no longer be. We all have to pay our debts. We pay on our credit cards,car loans, mortgages. Why should people who take out loans for their education not be required to pay it back. I believe these folks at one time were called deadbeats. I did not go to college because I could not afford college. Too many people want a free ride and too many politicians care nothing about our country except how to trick folks into voting for them.

  4. DO NOT LET THE BERNIE CREW NEAR COLLEGES! This is just part of his socialist scheme to take over public colleges.
    This may help the students even those with wasted degrees but guess who picks up the tab for Susies degree in naval gazing ….umm us! The beneficiaries are the students and teachers loser is you.

  5. CH

    You are right on!!! Sanders promises everything with everyone else’s money. He has no clue (= total ignorance) about finance/economics or maybe he just doesn’t (want to) recognize the subject. All he has are sheep that pathetically and ignorantly respond to his feeding regimen.
    He never says how he will fund his proposals and how/why the sources will comply. As for college tuition for too many years the government lead people to believe college was the only path to success and that message became a super demand which along with government loans and strings attached that forced colleges wanting to play to add layers of “staff” to shuffeling federal paperwork.
    The root of problems like Sanders is the apathetic voters that don’t vote or follow the pied piper to the economy’s death.

  6. As a moderate conservative, I cannot believe I am, in a small way, agreeing with Bernita.
    The cost of college today is unconscionable. Sanders is absolutely correct when he says that as college loans become easier and reasoner to obtain, colleges, then jack up he price making a year being “educated” becomes an exercise in fiscal obscenity.
    I cannot stand the man, but, on occasion, he rails against something that is legitimately a huge issue – this is one.

  7. A bill sponsored by a commie and a America Hater click boom jahadi.
    What could go right with that??? As the article mentions this is only a
    short term non solution that doesn’t address the problem of too
    high cost of collage education. The administrations continue to get building rich off the next crop of students which will need the same bail
    out down the road. The problem is paying prof’s like Lieawatha $300,000 for teaching one class and top heavy administrations making big bucks for doing nothing. burnee’s solution sucks but would generate votes for him which is all the piece of crap commie wants.

  8. Vermont’s Barking Buffoon and his new plan to pay off college debt by taxing any and
    all stock trade transactions does this fool, his co-sponsor ” Anti American” Ilhan Omar
    actually, think the big guns on wall street are going to pay anything ??

    For all, you working Vermonter’s that are putting every free penny you can into your
    retirement account ( Stock Market ) well hang on as you’ll be funding Bernie’s new
    project paying off the student debt for all the snowflakes and there ” Gender Study ”
    degree !!

    Socialist Sanders is pretty good at spending other peoples money and the minions
    that have this debt and a useless degree believe is Rhetoric, so you should help pay
    off their debt !!

    Oh yeah, who helped you pay off your debt ?? , you paid off your own debt correct.

    Wake up people, you vote him in year after year, why ???????

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