Senator Elizabeth Warren's campaign for the presidential nomination of the Democrat Party took a turn from theatre to absurd as she proposed to wipe out student debt. Under her plan, up to $50,000 in student loan debt would be completely erased for Americans with a household income under $100,000. Instead of forgiving student loans, perhaps a more equitable approach is to require colleges and universities to share the burden of these loan defaults instead of placing it on the taxpayer.
Over the last 10 years, U.S. student debt has ballooned by 163.9%, or almost five times the pace of growth of the overall economy. These "loans," which now amount to $1.5 trillion or $33,000 for each of the 44 million student borrowers, have enabled colleges to raise tuition at a rate almost three times that of overall consumer prices over the same decade.
What accounts for this excessive growth? Not instructional support!
Over the last five years, the number of college administrators has expanded at a pace more than three times that of college professors. For example, the University of Michigan has added almost 100 diversity administrators. Colleges have not only exploded the number of administrators, they have expanded the bureaucracy to the point where the 2018 average salary of college administrators was 35.7% above that of college faculty members.
Ultimately, a high share of the benefits of student loan forgiveness programs will incentivize higher tuition, which will result in more bloat in college bureaucracy. Colleges and universities should be on the hook for a large share of loans and loan defaults.