Student Loan Fairness Act Misses the Underlying Cause Of Student Debt

College tuition rises at a rate faster than inflation. Increased costs lead to young adults taking on more and more debt. As the problem grows, politicians on Capitol Hill will look to address the issue and provide relief to the next generation of voters, but their efforts may in fact cause more harm than good.

A couple of weeks ago, Rep. Karen Bass (D-Calif.) introduced H.R. 1330, the Student Loan Fairness Act, which was referred to committee. Such a proposal appeals to students as evident by the over 120,000 signatures it received on the signon.org web page.  However, it does not actually solve the problem leading to increased debt, higher tuition costs. 

The proposed bill seeks “[t]o increase purchasing power, strengthen economic recovery, and restore fairness in financing higher education in the United States through student loan forgiveness, caps on interest rates on Federal student loans, and refinancing opportunities for private borrowers,” among other things. These goals are all well in good, but achieving them does not even fully address the problems listed in the findings section of the bill.

One of the findings is that “[e]xcessive student loan debt is impeding economic growth in the United States.” But merely increasing relief by subsidizing tuition does not eliminate the debt. Student loan forgiveness shifts the burden elsewhere so the economy is not actually better off.

Even so, while the overall state of the economy is a concern of millennials, the arguably bigger concern is the exorbitant debt student loan debt which has surpassed total credit card debt in the United States. This is also noted in the findings section of the bill stating, “Because of soaring tuition costs, students often have no choice but to amass significant debt to obtain an education that is widely considered a prerequisite for earning a living wage.”

While acknowledging rising tuition, the bill fails to highlight why costs keep rising and looks to “stagnant grant funding” as one of the problems contributing to growing debt. Essentially, the basic plan of H.R. 1330 is to have the government throw some more money at the problem.

Instead of looking at high costs and immediately deciding that the solution is to subsidize education through government sponsored loan programs we should look at the real cause for the increase. The driving force behind tuition, like everything else, is simple supply and demand. As the demand goes up for college level education, so does the price. Government intervention in the market place further distorts the relationship leading to inflated prices.

If we really want to make it so young people don’t have to take on debt to be competitive in the economy we should be looking at other ways outside of the current system, which includes cutting costs and exploring alternatives to college.