“Stop subsidizing colleges’ 100-year debt binge,” says the headline on Dr. Richard Vedder’s Oct. 30 column from Bloomberg. Vedder is Director of the Center for College Affordability and Productivity and Professor Emeritus of Economics at Ohio University’s College of Arts & Sciences.
Dr. Richard Vedder
The Barack Obama administration and Congress purport to care about the rising costs of college. Yet the government’s policies are only fueling the higher-education arms race.
I have written before on how the expansion of federal student-loan programs has encouraged colleges to simply raise their costs. Students are left to pile up more debt while colleges indulge in their Edifice Complex — building luxury dorms and gyms and stadiums (all “sustainable,” of course) at the expense of poorer students. There is another, related government subsidy that also has perverse effects and needs reform: the tax-exempt debt binge by universities.
Schools are exuberantly borrowing, in some cases issuing 100-year (century) bonds. Some bond offerings are justified, even wise, as schools are taking advantage of low interest rates to reduce future debt-service obligations. But a lot of this activity is financing construction of high-end student housing, faddish “centers” and stadiums.
These perquisites appeal to the most affluent. For many students, however, the costs of college are rising relative to the perceived benefits, pushing them to consider lower-cost substitutes (online education, nondegree certificate programs).
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