The Government Should Stop Funding Student Loans

Only a crazy right winger, or libertarian could possibly believe that, you say? A proposal that favors the rich at the expense of the poor, you say?

If you do, you would be wrong on both counts. That is precisely the latest topic by one of the most respected living economists Gary S. Becker, Professor Of Economics At The University Of Chicago and winner of the Nobel Prize in Economic Sciences in 1992, over at the Becker-Posner blog. More importantly, he makes a compelling case for doing just that primarily because of poor people.

Countries typically help students by paying most of the direct costs of higher education, and also sometimes by providing scholarships to help pay for the cost of living while in school. Though the stated reason for this is to allow poorer students access to higher education, the beneficiaries are mainly children from the middle and upper classes since they are the ones who attend these mainly state-run colleges and universities. Even in the Unites States, about 80% of all students are enrolled in subsidized state-run institutions. This system penalizes less prosperous families who do not have children at universities and colleges, but are nevertheless taxed to help support the education of children from richer families. Even children from modest backgrounds who do manage to get a university education tend to become part of the economic elite.

A blog well worth your attention.

Btw, question for those more economically in tune than I, Becker states, Put differently, lenders cannot take ownership of the human capital they finance since that means taking ownership of the individuals receiving the education, and no modern country allows people or institutions to own other individuals.

That’s odd. One of my favorite Economist Milton Friedman, in his book Capitalism and Freedom, argues for precisely that. Saying that student loan lenders should be allowed to take ownership in part of the salary of their customers, provided the customer accepts those terms. Am I missing something? Did something change since the 60’s and 70’s when Friedman wrote his book to now or might this just be a difference in opinion? Comments appreciated.

Update: Arnold Kling has more.

Update2: Even more.

Update3: Becker responds to comments.

Update4: Posner responds to comments.

1 Response to “The Government Should Stop Funding Student Loans”

  • The better question is where are the student loans to be found at,
    , Oh!!!! and student grants.Not whether to have them or not. I tell the kids that I meet “all of the time” where to find the educational grants directory.

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