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Student Loan Excesses Harm the Most Vulnerable

Walter Russell Mead

The real losers in the student loan merry-go-round are precisely kinds of students—marginal, little family experience in college, low income—that the Obama administration most wants to help. The Wall Street Journal:

The conventional wisdom among student activists and and elected leaders is that high levels of student debt are causing young Americans to delay key milestones like buying a home, getting married and having kids.

New research paints a more complicated picture. It suggests student debt is indeed a barrier for a significant minority—college dropouts—but that it’s generally not holding back those who earned degrees […]

College dropouts … typically owe small amounts of student debt—under $10,000—but don’t have the degrees that provide an earnings boost that would position them to buy a home.

The findings highlight what critics of the free-flowing federal student loan spigot have been saying for some time: That greasing the skids for people who are statistically unlikely to graduate in four years (or ever), who don’t understand how debt really works, and who have poor earning prospects if they do drop out, is not doing anyone any favors.

The student loan mess, which has left over 40 percent of borrowers in default, is another spectacular example of good intentions gone awry—similar to the massive government efforts to get low income people qualified for housing loans just as the bubble was really blowing up. And how did that turn out? The housing crash was the most damaging cataclysm to hit the net worth of minority households since the Depression, and African Americans have yet to make up the lost ground.

Well-intentioned but harebrained social engineering is a menace to the poor. Instead of idealistic social schemes, policy elites should go back to the basics: expand vocational education and training programs, limit competition from illegal unskilled immigrants, reduce paperwork and regulatory restrictions that make it hard to start businesses in the cities where so many poor people live, and put an end to the war on low-wage jobs that is forcing employers to replace tellers, checkout clerks and other unskilled and semiskilled jobs with machines.

These are policies that would actually help, but they violate treasured liberal myths, so we earnestly saddle poor kids with debt they can’t afford for degrees they can’t get—after making them waste 12 years in lousy schools that we can’t seem to operate effectively.

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