Editors at National Review take a dim view of Democratic presidential candidate Hillary Clinton’s approach to college student loan debt.
Hillary Rodham Clinton, fresh from vanquishing Senator Bernie Sanders, has, rather than making the traditional post-primary turn to the middle, tacked to the left, and hard, with a pandering proffer of giveaways to college students and recent graduates that is as ambitious as it is stupid, ambition and stupidity being a particularly potent and popular combination in this year’s presidential politics. Its main features are a three-month loan-repayment holiday for student loans, new subsidies for student debtors, and free — “free” — college educations for children of American families making up to $125,000 a year and attending state schools.
The rate of default on student loans is quite high, owing to several factors. The near-term one is the lackluster job market; the long-term problem is that too many Americans borrow too much money to attend institutions that charge too much in tuition in exchange for education that is of limited professional and intellectual value. Mrs. Clinton proposes to make that problem worse by artificially lowering interest rates on federal student loans (the federal government now has a monopoly on those, thanks to the innovations of Barack Obama, one that is tens of billions of dollars upside-down on its finances), thereby encouraging students to borrow more and university administrations to raise tuition in order to soak up the cheap new money those low rates would make available.
Implicit in the argument about interest rates on student loans is the question of what those rates really should be, and the answer is: No one knows. The federal government does essentially no underwriting on its undergraduate lending — no consideration of creditworthiness, ability and inclination to repay the debt, etc. There are, essentially, no lending standards in the program. You remember lending standards: Everybody was talking about them for about five minutes after the subprime-mortgage market collapsed. That was no fun. But fear not: The student loans you federal taxpayers are on the hook for add up to only a measly . . . $1.2 trillion.
