The Magazine

The Anti-Dowry

A complaint about our student loan system.

Dec 16, 2002, Vol. 8, No. 14 • By ALLAN CARLSON
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But it's a game that should not continue. The problem is not so much the default rate (although that remains stubbornly high at 11 to 12 percent), nor the spiraling amount of new education debt being generated each year ($42 billion in 2001, up 35 percent since 1995), nor the approach to a probable limit on personal debt that even giddy undergraduates might recognize. Rather, just as with the infamous Aid to Families with Dependent Children (AFDC) program, we see another federal entitlement undermining the material basis of family formation. Intended this time to encourage investment in education (and so improve "human capital"), the student loan program more actively works to postpone marriage and to prevent the birth of children. As an effective form of contraception, the loans actually keep new "human capital" from forming. Viewed this way, the student loan program corrupts the nation's social order and distorts its future.

WHAT THEN SHOULD BE DONE? One option would be to abolish federal student loans altogether, and let the market sort things out. But alas, federal education loans now account indirectly for up to a quarter of college and university revenues. Going cold turkey would close many schools and disrupt them all. These bloated institutions, found in every congressional district, can be counted on to fight abolition--or even significant cutbacks--to the death. In short, repeal or reform is politically unlikely.

Another option would be to convert future loans into "super Pell grants": college vouchers for most, if not quite all, citizens. But the cost of the Pell program is already soaring: $9.1 billion in 2001, up two-thirds since 1995. To replace all federal education loans with grants, another $40 billion would do the trick for 2003. If we assume even modest inflation in program costs (6 percent annually, as opposed to the 11 percent experienced in recent years), this entitlement would rise to the staggering figure of $157 billion in the year 2020.

Yet there is a third choice, one that's cheaper, simpler, and more appropriate. It would take a program that discourages marriage and children and reverse the incentives. Specifically, for every new child born to indebted married parents, the federal government should pay off one-fourth of their outstanding student loan debt, up to $5,000 each for mother and father (a figure that would be indexed to overall inflation).

This choice would begin removing some of the disincentives toward marriage and childbearing that young graduates now face, creating modest incentives in their place. The birth of four children over the space of 6 to 8 years could eliminate debt of over $40,000. At the same time, this plan would be far more cost effective than the "super Pell grants" noted above. Why? It is highly unlikely that all indebted graduates would have the four children needed to eliminate their entire debt. Moreover, the cap on the maximum amount would mean that over half of graduates would still repay a significant share of their obligation, even if they brought four children into the world. Finally, using the overall inflation rate as an index, rather than inflation in education costs alone, would dramatically constrain projected costs.

Allow me to address some of the immediate (and probably frantic) objections:

--Why favor marriage? The state has a compelling public interest in the marriage of young adults. Recent research shows that both married men and women are, on average, more productive, wealthier, healthier, happier, and much more engaged as citizens than the unmarried. Moreover, children growing up in married-couple households are also significantly healthier, safer, and happier, more likely to succeed in school and life, and much less likely to be abused or imprisoned or to use alcohol and illegal drugs than children growing up in any other circumstance. These public goods from marriage translate into higher government revenues, lower government expenses, more citizen engagement, and a more stable public order.

--What about young adults who cannot biologically bear children? The same debt forgiveness could be accorded to those married couples that adopt a child.