The Government’s Reckless Student Lending is Creating a Budget Hole Akin to the 2008 Crisis, New Analysis Shows

Brad Polumbo:

There’s no doubt that federal student loan programs were created with good intentions. Advocates wanted to help more young Americans pursue a college education and achieve social mobility. But the unintended consequences of short-sighted federal intervention into the higher education market are growing ever more apparent by the day.

Ample research already documents the way that federal subsidization of student loans has led to rampant tuition price inflation. 

Per CNBC, private colleges have seen 129 percent price inflation since 1988 in inflation-adjusted dollars. At public colleges, prices have more than doubled over the same period. By handing out student loans like candy on Halloween, the federal government artificially inflated demand—thus encouraging and enabling tuition hikes.

For instance, research published by the New York Federal Reserve found that every dollar the government gave out in subsidized loans led to a 60 cent rise in tuition rates. And a Harvard study comparing higher education programs that accepted federal aid to those that did not found that tuition at aid-accepting programs grew much faster.