COMMENT: Throwing money at the rich | Opinion

Second, it is a market with government subsidized demand (through secured loans) and tight supply, making tuition fees unnecessarily high. Basically it all comes down to the fact that college is more expensive than it should be, and there are a lot of places that offer a worthless product that survive.

Many people who have student debt due to worthless degrees did not know what they were getting into. It is not unreasonable to view this as a scam. It is not unreasonable to materially support these people, as we could materially support the victims of any other scam.

But we should be directing our political energy towards stopping the scam business as a whole. If we only reimburse people who have been scammed, we are only making the installation of fraudsters more interesting. That’s why any good faith effort to tackle the mess of higher education must take into account the incentives the government is providing bad schools to keep selling worthless degrees.

An untargeted student loan forgiveness would do nothing to address the poor incentives in higher education. On its own, that would worsen these incentives. Thus, untargeted forgiveness would at best be a simple transfer of wealth. And despite the way the boosters talk about it, it would be a transfer of wealth that mostly goes to the highest paid people in the country.

Economists Sylvain Catherine and Constantine Yannelis estimated that, in untargeted universal forgiveness plans, half of the transferred wealth would go to people belonging to the richest 30% of the income distribution. Even an untargeted forgiveness of just $ 10,000 in loans would result in a shift primarily to wage earners above the median. Rather than looking for people scammed by bad schools, it would mostly just be a reward for the rich.

About Yvonne Lozier

Check Also

Colorado sues Pennsylvania company over student loans to public service workers – CBS Denver

DENVER (CBS4) – The Colorado attorney general’s office on Wednesday filed a lawsuit against a …

Leave a Reply

Your email address will not be published.