What's the Alternative to Student Debt?

Lately I've been seeing a lot of estimates of the damage that student loans do to the economy. A recent Demos study claimed that they reduce a two-degree household's lifetime wealth by more than $200,000, and New Geography notes that if we bailed out student-loan debt, some of that money would be spent on housing.

But Demos admits that its baseline is a household that has two degrees but no debt -- in other words, a household whose education was provided at someone else's expense. And obviously any bailout needs to be paid for somehow too.

So, who foots the bill if college students don't? How much will those payments reduce household wealth and hurt the housing market? Given that the benefits of education accrue largely to the degree-holder, and that American college students are some of the most fortunate people in the world, how is an alternative to student debt fairer than the status quo?

And given that wealth is positively correlated with student debt -- rich people are more likely to have degrees and more likely to have paid a lot for them -- how much redistribution could we even achieve by pushing this burden onto taxpayers? For the most part, we'd have college graduates being taxed to pay for college instead of paying off loans or paying tuition for their kids. The biggest beneficiaries would be people who went to college but didn't graduate or didn't benefit much economically, precisely the people whom we perhaps shouldn't be encouraging to go to college in the first place.

Obviously, rising tuition costs are a problem. Maybe we need to explore alternatives to four-year degrees. Maybe getting the government out of the situation would cause tuition to drop. And there are even ways to adjust how students pay for college without just shifting the costs to other people: Oregon's "Pay It Forward" program, under which students would be charged a percentage of their future income, would avoid burdening students who didn't make it economically -- but such a system could also be designed to punish colleges (rather than taxpayers) when they enroll students who don't benefit from education, encouraging them to be more prudent.

In other words, we need to find a way to get the benefits of today's college system without paying so much. We don't need to give people an educaton at the expense of others.

Robert VerBruggen is editor of RealClearPolicy. Twitter: @RAVerBruggen