President Biden has proposed doubling Pell Grants, fully subsidizing the costs of community college, and partially forgiving student loans. Some in Biden's party, including Senator Bernie Sanders, want to go even further, calling for free four-year college and the cancelation of all $1.7 trillion in outstanding student loans.
These policies aim to address what progressives view as the central problems in higher education: inequitable access, a lack of affordability, and crushing student debt. But as Jason Delisle and I write in a new essay for National Affairs, these issues are usually overblown. Moreover, progressive policies gloss over the true problems in America's postsecondary education system.
While levels of student debt have risen dramatically over the past two decades, monthly payments as a share of income have not. Falling interest rates and income-based repayment plans have kept typical monthly payments between 4 and 6 percent of borrower income. That's significant, but affordable for most borrowers.
It's also true that the cost of college has spiraled upward. But more generous financial aid has softened the blow. A Pell Grant student usually receives over $9,000 per year in aid from government grants and tax credits, meaning low-income students typically pay far less for college than the sticker price. Many pay nothing at all. Lower-income students are also attending college at higher rates, especially if they have strong academic credentials.
The real problems in higher education are different. They include the underlying cost of college, which is among the highest in the developed world. Students drop out of college at high rates and subsequently default on their loans, which subjects them to heavy penalties. Moreover, the minority of students who borrow six figures to attend graduate school receive the bulk of student loan subsidies, draining taxpayer resources and fueling credential inflation.
Forgiving student loans or doubling Pell Grants will not solve these problems. Less costly policies will do the trick: more competition among colleges and a simpler student loan program with a better-targeted safety net. Solving the challenges facing higher education starts with an honest reckoning of what those challenges are.