the Department of Education as loan shark

Jordan Weissmann’s piece today, discussing grad student loan debt today, is a bit of a logical pretzel.  The piece is set up as a complaint about the fiscal damage grad students are doing to the budget, with a headline reading “The Newest Scourge of the Federal Budget: Graduate Students.” But as Weissmann points out, grad students are a large money maker for the federal government. That’s because the federal government draws huge interest payments off of grad students, as they do off of all students who take advantage of student loans. Weissmann says that “Graduate degree holders are relatively affluent, meaning there isn’t a great argument for heavily subsidizing their educations.” As Mike Konczal has pointed out (I can’t find where right now), if the government is making money off of a financial program, that’s the precise opposite of a subsidy. Would Weissmann say that payday lenders are subsidizing poor people who take out predatory loans to pay for food or the rent?

Now I agree that we should cap the federal loans that a given grad student can take out. I also have written acres of words on why not (and, very rarely, why to) go to grad school, which you can look up. And, of course, that one rare example of the person who apparently went unfunded through a grad program to the tune of a quarter million dollars and will get most of it forgiven looks bad. But most grad students are not using the federal loan system as a source of graft. Most grad students are not living high on the hog on loans. As someone who recently graduated from grad school myself, I would again ask for a little more human sympathy for grad students, who as a group are subject to constant ridicule. The idea that getting more education is a noble path forward is inscribed in our national mythology. Politicians constantly cite a more educated populace as a goal for our government. And I’ll remind you that many of today’s grad students felt forced back to school by an unprecedently terrible job market for recent college graduates, one that left them hopeless. For many of them, the choice was not between grad school and responsible employment but between grad school and unemployment. Now, they’re generating money for the federal loan system, which is not only self-funding, it draws a cool profit. I can’t blame any of them for settling with the government for somewhat less than they originally owed under those circumstances.

Yes, I think it’s in some sense unfortunate that some grad students who are likely to be more affluent are going to take advantage of the system when there are poorer people who won’t be able to. But that’s the reality of the kind of large-scale social engineering that our efforts to educate our populace results in. People will work the system to their advantage, and given all of the other federal spending we could get mad about — enormous bank bailouts, the $1.5 trillion dollar F-35 boondoggle, corporate welfare — well, I just can’t get mad if someone works that system to their advantage. There are much bigger fish to fry than grad students who rake in profit for the federal government for all you fiscal hawks. Particularly in a world where some countries pay for all of their citizens’ higher education. Personally, I don’t think the federal government should be making a profit on student loans at all.

I don’t think Weissmann’s this sloppy. I think, to be frank with you, that he needs to get a little grad student resentment in there because it’s such a reliable generator of attention and hate clicks. I can only imagine what the comments of that piece are like, for example. I’ve said before that the resentment of others, particularly those who remind you too much of yourselves, is a key revenue generator of the contemporary internet. And with the ambient cultural mockery and often outright hatred that grad students engender, I think looking to blame them for one more thing — to call them a scourge of a budget for which they as a class generate large profits — is just too tempting.