The Higher Education Bubble

August 05, 2015

by Lloyd M. Bentsen IV

Chairman Alexander, Senator Murray and members of the committee, thank you for the opportunity to submit written comments about reauthorizing the higher education act. I am Lloyd Bentsen IV, a senior research fellow at the National Center for Policy Analysis (NCPA). We are a nonprofit, nonpartisan public policy research organization dedicated to developing and promoting private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. The NCPA is headquartered in Dallas, Texas.

The result of infusing colleges with billions of dollars in additional funds will be to raise the cost of a college education even higher ― just as student loans and federal grants have encouraged wasteful spending by colleges and universities across the country. The open spigot of federal money continues to flow, mostly in the form of guaranteed student loans. These institutions are charging higher tuition rates because they can rely on receiving guaranteed money from the government. Because of these practices, student debt has reached $1 trillion, surpassing credit cards and car loans as the largest source of debt in the country, and there is growing evidence this is creating a “student loan bubble.”

The government’s intervention in the health care sector should have warned us of the cost-increasing effects that result from government involvement. Just as health care costs spiraled out of control after the government began Medicaid and Medicare, so too are education costs rising much faster than other consumer prices. In fact, according to College Board, tuition and fees jumped 27 percent between the 2008-2009 and 2013-2014 school years. They have increased nearly 160 percent since 1990 (after adjusting for inflation).

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