A better strategy than handouts to reduce student loan debt

The student loan program now has more than $1.75 trillion in outstanding debt. Biden’s plan to grant partial “forgiveness” on loan repayments to families with incomes as high as $250,000 is simply a Robin Hood-in-Reverse transfer of $300 billion from the roughly half of American workers who didn’t attend college to those who have had that advantage but have failed to pay back their college loans. 

We used to refer to people who don’t pay the money they owe as “deadbeats.” The Biden proposal rewards bad behavior and blows another massive hole in a federal budget that is already $24 trillion in arrears. Also, if it is allowed to happen, the student loan program is dead. Few will repay their loans to the government in the future and simply wait for the next amnesty.

Fortunately, there are much smarter solutions to solving the student loan debt crisis, and they won’t cost taxpayers a penny.

First, states and the federal government should insist that universities that receive federal or state aid control their tuition. The student loan program began in the 1960s and with these trillions of dollars of loans, college tuition costs have skyrocketed three times faster than overall inflation. So loans have made college less, not more affordable.

At Purdue University the president of the school, Mitch Daniels has frozen tuition costs for students. Any college that receives federal aid should be required to freeze tuition so middle-class families can afford the costs. ​Daniels has shown that any college can cut costs. 

Second, if someone fails to repay a student loan, the university that the borrower attended should pay the cost. How? Universities have $700 billion in endowments that were never taxed. The government should be reimbursed for bad loans from a “tax” on the endowment equal to the amount unpaid. There is no reason why someone who attended pricey schools like Harvard, Stanford, MIT or Northwestern should then ask a schoolteacher to repay their loan. 

This loan repayment policy would incentivize the universities to make sure they are offering a curriculum that will offer a real income to the graduates. Ethnic studies and psychology degrees are not in high demand in this digital-age economy, so steer kids to degrees that make them valuable contributors to society.     

Finally,  we should change the entire culture of how college is paid for in America. My favorite alternative model is the College of the Ozarks. This is a private school located in the Ozark Mountains of Missouri. Most of the kids come from working-class families or grew up on farms. Most are the first generation in their family to attend college.

The tuition at College of the Ozarks is … zero.

How do they do it?  Every student on campus works an average of 15 hours a week in a job on campus. In other words, the students work for their education. Why can’t that be the case at every university? College students have nothing but free time — although this may mean less time for TV or sorority parties or protesting in the streets for ​certain “social justice” issues. At College of the Ozarks, the kids value their education because they pay for it with their hard work. That’s why College of the Ozarks is known as “Hard Work U.” These are some of the most impressive college students I’ve met. 

Kids who attend Ivy League or big land-grant state universities will get far more out of college if, when they are 19, 20, or 21 years old, they work for the privilege of sitting in a classroom. 

Any of these plans would be far preferable to student loan forgiveness. Middle-class taxpayers who responsibly repaid their debts on time, people who earned their college education by serving our military, and working-class families that didn’t even attend college shouldn’t bear the costs of unpaid student debt.  

Stephen Moore is chief economist at FreedomWorks.  He is the co-founder of the Committee to Unleash Prosperity. His latest book is “Govzilla: How the Relentless Growth of Government Is Devouring Our Economy.”

Editor’s note: This piece was updated on Sept. 2 at 10:35 a.m. ET to correct the average work hours and work locations for students attending the College of the Ozarks.