The Biden administration is poised to enact student college debt forgiveness of upwards of $10,000 per individual and conservatives are rightly concerned about the American taxpayer ultimately footing the bill.
The students who took out loans should be on the hook for paying them back, the argument goes. At the very least, the government should stop providing federally guaranteed loans that allow universities to drive up the cost in the first place, a conservative might say.
Yet there is another idea about how to forgive student debt that would not necessarily burden taxpayers or excuse colleges from their own role in the skyrocketing cost of higher education. Some on the right believe that the federal government should tax, or outright seize, university endowments to enact massive forgiveness of college loans.
As explained by Investopedia, “University endowments are comprised of money or other financial assets that are donated to academic institutions. Charitable donations are the primary source of funds for endowments. Endowment funds support the teaching, research, and public service missions of colleges and universities.” These endowments are largely not taxed because they are supposed to be used to advance their college’s mission of providing a quality product.
While the idea might sound like populist punditry contrived out of misplaced anger, one of the first progenitors of the idea was a man once described as President Ronald Reagan’s favorite economic thinker and author: George Gilder.
Gilder is credited as bolstering Reagan’s belief in the power of supply-side economics with his best-selling book “Wealth & Poverty.” The 40th president believed in Gilder’s creed to capitalism so much so that he even handed out copies of “Wealth & Poverty” around to his friends and cabinet members for their enlightenment.
Since then, Gilder has gone on to predict things such as the iPhone and other technological advancements, all while crafting his own theory about capitalism as an information system and fighting against the scourge of socialism. With a resume like that, his 2018 idea to tax universities’ endowments to cancel student debt should be given some more thought by advocates of limited government economics.
The premise for Gilder’s idea is that, for decades now, universities have perpetuated massive fraud on both the college student and taxpayer. Despite raising the cost of college tuition, there is little evidence that the quality of American higher education has improved at all, he believes.
At the same time, colleges like Havard and Yale have amassed $53 and $42 billion endowments respectively, while pocketing money from students.
In 2018, Gilder told The Wall Street Journal’s Tunku Varadarajan that “human beings have a propensity to believe in leftism”—in the idea that government can “answer all of their problems, guarantee their future, and relieve them of the challenges of life” which allowed this market manipulation to occur in the first place.Gilder explained that the idea of a “‘completely providential government’ arose in America, and a ‘whole generation of young people were given college loans in a fabulous national mistake, in which the Republicans participated.’”
Gilder added that the federally-backed Guaranteed Student Loan Program, which launched under the Higher Education Act of 1965, was used by college administrators to “increase perks and tenured luxuries and ideological distractions”—all of which led to the “diversity campaigns and CO2 panics” that we see today across college campuses paid for by exorbitantly high tuition rates.
Indeed, in 2019, CNBC reported that “From 1964 to 2019, the cost of tuition jumped just under 3,000%. Meanwhile, the cost of a four-year public school soared to just over 3,800%, from a mere $261 annually.”
Gider added that this “vast blunder,” must be undone through massive forgiveness by extracting “the money from all the college endowments and funds that were used to just create useless departments and political campaigns.”
There is evidence behind Gilder’s claim. For example, in 2018, a team of educators researched the impact of Chief Diversity Officers on institutions and found that, despite their job description and despite being paid hundreds of thousands of dollars, they largely did not diversify college education.
The CDO job was popularized in the early 2000s, and by 2016, 65 percent of colleges in America had that position on staff. But, researchers were “unable to find significant statistical evidence that preexisting growth in diversity for underrepresented racial/ethnic minority groups is affected by the hiring of an executive-level diversity officer for new tenure and non-tenure track hires, faculty hired with tenure, or for university administrators.”
That means that students are taking out loans in part to fund lucrative positions for which there is no evidence they actually benefit the college as they are intended to do so.
Other researchers, like Roger Geiger of Pennsylvania State University and Donald Heller of Michigan State University, have also found that “since 1990, in both public and private colleges, expenditures on instruction have risen more slowly than in any other category of spending, even as student numbers have risen. Universities are, however, spending plenty more on administration and support services,” according to The Economist.
The Economist also noted, that from 1983 to 2012, “the cost of university per student has risen by almost five times the rate of inflation,” despite no evidence that the quality of education is improving to justify those costs.
Ultimately, Gilder argues that the college education and government loan complex has destroyed “the entrepreneurial optimism of a whole generation of young people, to drive them toward socialism, which they now tend to favor, and to even dissuade them from marriage.”
Furthermore, he adds that the student debt incurred by young adults “cripples them for the future,” and as Varadajran describes, Gilder believes that any educational benefit from college is “nullified by the economic burden inflicted on them, which ‘leaves these kids impotent in the world.’”
Gilder is not alone in this thinking. In 2020, William Chamberlain, attorney and current owner and publisher of Reagan’s favorite magazine, Human Events, delivered a “clarion call” to “seize the endowments” of colleges to forgive student loans.
At the time, Chamberlain wrote, “College debt is uniquely odious; it’s the only debt that’s non-dischargeable, and it’s offered to children. Today, 44.2 million Americans carry almost $1.5 trillion in student loan debt. Inflated tuition costs, of course, is largely to blame; the cost of college for millennials is significantly different from that of their parents.”
Chamberlain, like Gilder, believes that we should recenter the conversation and view the outstanding debt as “fraudulent.” He noted that some progressives like Senators Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) want to forgive student debt outright, and offer free college tuition. But he argues that that ignores why the debt should be forgiven in the first place.
“Students drowning in student loan debt are not freeloaders looking for a handout,” he added. “They are, instead, the victims of fraud, a fraud jointly perpetrated by their alma mater and the federal government.”
“Conservatives oppose fraud,” Chamberlain asserted. “Part of a free enterprise system is holding those who victimize innocent consumers accountable in the courts, making them pay restitution to their victims.”
In a statement given to The Daily Wire, Chamberlain further explained, “The basic idea is that if college debt needs to be forgiven that means it’s odious. If college debt is odious the universities should pay for its forgiveness.”
Indeed, it would appear that the federal government agrees, at least in part, with that assessment.
On Wednesday, June 1, the U.S. Department of Education announced that it would be discharging $5.8 billion worth of loans for 560,000 borrowers who attended Corinthian Colleges.
Corinthian had a series of campuses across the U.S. and operated from 1995 to 2016. It was shut down because they “engaged in widespread and pervasive misrepresentations” related to job placement after college as well as other false claims about the benefits they offered their alumni.
“As of today, every student deceived, defrauded, and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris administration has their back and will discharge their federal student loans,” said U.S. Secretary of Education Miguel Cardona. “For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep.”
Corinthian will not be forced to pay back those loans, which means it will ultimately be foisted upon the taxpayer in one way or another.
But however, using Cardona’s own reasoning for the forgiveness, a conservative could make the case that student loans should be forgiven across the board because universities as a whole have been advancing pet causes, such as diversity initiatives, that have not improved education while banking massive endowments.
Those endowments were only made possible by tax-payer-funded loans in the first place. Therefore, the government should use those endowments to wipe out debt and relieve an entire generation from fraud.
Of course, simply seizing the endowments without cutting off the spigot that de facto funds colleges — the federal government — will not solve the problem in the long run.
Colleges are incentivized to expand their student population because they understand more students have access to government-backed loans. The colleges aren’t on the hook for paying back that money. This, in turn, arguably drives down the value of a degree and decreases the quality of education by allowing more pupils into the university, thus watering down the academic rigor of its student body. The only solution to improving education is to raise the standards of entry and admit fewer students, according to researchers from the Centre for European Policy Studies.
Therefore, the federal government should wash its hands of student loans altogether, making it impossible for colleges to continue raising prices in the first place while admitting more students.
The federal government should end federally-backed loans, thus forcing colleges to lower costs and cut bloated administrative positions which empirically do not improve students’ curriculum.
At the very least, conservatives can entertain the idea that students and taxpayers alike have been defrauded by both big education and big government. In turn, colleges should play a financial role in forgiving student debt if any forgiveness is to happen at all.
The opinions expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.