Higher education is about to become even more political



Debate has swirled over President Joe Biden’s student loan relief plan, but there has been relatively little consideration for some of its longer-term ramifications. Whatever you think of the initiative itself, it may herald a turning point for American higher education.

Critics of the policy see it as rewarding Democratic supporters and interest groups, including professors and university administrators, but especially students. This perception, whether true or not, will influence political behavior.

Republicans, when in political power, are likely to fight back. They may be more interested in draining the revenue sector. The easiest way to do this would be to limit tuition increases at state universities. De facto tuition caps are already common, but they may become stricter and more explicit, especially in red and purple states. Such policies could also prove popular with voters, especially in times of high inflation.

A second round of reforms could limit the ability of public universities to spend money to hire more administrators, including people who work on so-called DEI issues. Given the fungibility of funds and the ability of directors to reappoint new positions, these restrictions may not be fully enforceable. Yet that would mean less autonomy for public universities, as many states’ policies attempted to thwart their current leftward movement.

Another possible reform could tie the funding of a school or major to the future earnings of graduates. This would likely penalize the humanities, which already tend to be one of the most politicized segments of the modern university.

Overall, the trend might look like this: Government policies toward colleges and universities have been largely predictable over the past few decades, with aid levels steadily declining in most states, due to pressures growing budgets. This slow decline could be replaced by more open forms of political warfare – and by more drastic budget cuts for universities that do not take a more centrist position. Republican leaders might decide that since so few of their constituents view universities as politically neutral, it makes no sense to treat them that way.

As Declan Leary, writing in The American Conservative, puts it: “Cut government funding to universities as completely and quickly as possible.

The Supreme Court can also come into play; there are two ongoing cases concerning affirmative action in universities. It’s hard to predict the reach of a decision, but after the overturning of Roe v. Wade, a radical outcome hardly seems out of the question. Keep in mind that, in a poll, about 74% of Americans oppose affirmative action.

In short, Republicans can do a lot of things that might make them more popular, or at least won’t make them less popular.

In the longer term, a future Republican administration may decide to restructure the entire federal student loan system. How about making student loans dischargeable through normal bankruptcy proceedings? This may seem like a pretty trivial idea to most voters, and many economists, including Larry Summers, support it. It would also allow some measure of debt relief without extending it to the creditworthy and the wealthy.

Nevertheless, the long-term consequences of this reform would probably lead to a significant contraction in credit. In fact, most enrolled students do not complete college and many end up with low net worth but tens of thousands of dollars in debt. (According to one estimate, the net worth of the median American under 35 is $13,900.) The incentives to declare bankruptcy could therefore be relatively high. This would make federal student loans a more expensive and less attractive proposition. Private lenders would also be more wary. Higher education would likely contract.

The net effect of the president’s loan forgiveness initiative — which is an executive order and therefore lacks a lasting legislative majority — could be a one-time benefit for students, no impact on rising student costs. education and the escalation of the culture wars over higher education.

It is possible that the high cost of this policy, and the bad publicity that surrounds it, provide a necessary wake-up call to higher education. But as someone who works in the sector, I have no hope. Universities have had more than their share of drama in recent years. Biden’s student loan initiative will only make matters worse, and that too will be part of his legacy.

More from Bloomberg Opinion:

• Tuition fees are too high, but they’re not really going up: Matthew Yglesias

• Biden’s student loan plan fails older borrowers: Alexis Leondis

• Biden’s debt relief plan will worsen US politics: Clive Crook

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the Marginal Revolution blog. He is co-author of “Talent: How to Identify the Energizers, Creatives and Winners in the World”.

More stories like this are available at bloomberg.com/opinion


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