The Biden administration’s decision to “forgive” $5.8 billion in debt for 560,000 former Corinthian College students is terrible policy that could backfire politically. And of course, the loans aren’t truly “forgiven” because they will be shouldered by taxpayers, including poor and middle-class Americans who never had the privilege of attending college at all.
The move, announced Wednesday by Vice President Kamala Harris, is the latest salvo in a destructive Democratic war on private and for-profit education. Liberals claim for-profit schools exploit low-income and minority students, saddling them with heavy debt, meager job prospects and low graduation rates.
Yet these liberals apply laxer standards and greater mercy to public and private non-profit schools, which are complicit with the government in fueling the student-loan bubble. For-profit colleges account for a much smaller percentage of outstanding student-loan debt (just 17%) than other types of colleges — but you wouldn’t guess that by the screaming headlines against them.
The federal government is also complicit in the scandal at Corinthian, a school that was Harris’ personal pinata while she was California attorney general. Harris loved to flog Corinthian for political gain and leveraged this to snag her U.S. Senate seat. As The Wall Street Journal reports, Harris “began investigating the for-profit in 2013 for allegedly misrepresenting job-placement rates, but she struggled to support her claims. The [Obama] Education Department rode to her rescue by making exhaustive document demands.”
And when the school didn’t produce the docs fast enough, the feds cut off all student aid — which rapidly drove Corinthian into bankruptcy.
Harris and her party have done nothing to stop the federal government from shelling out student loans without accountability for colleges of all stripes. Over the past two decades, college tuition rapidly outpaced inflation, but colleges continued to hike tuition because they knew government-backed student loans would keep them afloat. It’s a textbook case of moral hazard — prodigal college administrators behaving badly because someone else is footing the bill.
Reckless government lending incentivizes risky student-loan business, both from students and school administrators. A 2017 Federal Reserve Bank of New York study found that $1 of government student-loan expansion was tied to a tuition hike of 60 cents.
Despite Democrats’ holy war against them, for-profit colleges play an important role, particularly in market-based jobs programs. But there should be much stricter limits about government lending. This would help keep tuition lower, and if you take out a loan, it should be a private bank that’s on the hook — not Uncle Sam.
“For-profit colleges are more nimble than most traditional colleges, including community colleges, in developing and implementing programs,” per a GOP report from the Senate Health, Education, Labor and Pensions Committee. “When those programs respond to workforce needs and result in jobs in high demand fields that pay good salaries, the outcome for students can be excellent.”
What’s more, for-profit associate and occupational programs don’t block the prospect of moving on into four-year college programs. Rather, they can serve as a base foundation and are “stackable,” notes Nicholas Wyman in his book “Job U: How to Find Wealth and Success by Developing the Skills Companies Actually Need.”
For-profit schools have empowered many lower-income and racial-minority students, including nontraditional students, to gain real-world skills that better equip them for the job market relative to many traditional academic paths. Manhattan Institute adjunct fellow Judah Bellin detailed in City Journal how New York state’s two-year, degree-granting, for-profit colleges graduated a higher share of students than any other higher-ed sector, including private non-profit colleges.
As so-called STEM (science, technology, engineering and math) careers dominate the growth economies, for-profit college haters take note: For-profit colleges produced 51% of associate degrees in computer science and information technology, Harvard University research found.
Politically, the Biden administration’s move to favor one class of people — the educated — over the less-educated could backfire. After all, just 38% of Americans have completed a bachelor’s degree or higher and just 13% have student debt. With many families struggling to survive record inflation, baby-formula shortages and sky-high gasoline prices, millions will be upset that the federal government is cherry-picking a select few for magical fairy-wand relief.
Student-debt holders have already received unprecedented relief from student-loan-payment forbearance President Donald Trump started during COVID. President Joe Biden keeps kicking this loan forbearance further and further away from the actual pandemic period. What’s becoming clear is that Team Biden wants reckless educational policy to remain endemic.