South By North Strategies, Ltd.

Rortybomb wonders if people should stop describing student loans as “financial aid.”

Student loans are a way of mitigating a credit constraint, which is different than providing aid. Here it reflects not subsidized demand, but actual demand smoothed over a long time period. That’s going to put a lot of demand into play. It shouldn’t surprise us that demand is very high when credit constraints are removed. Higher education is one of the most important mechanisms of social and economic mobility we have, and it is also one of the primary ways we have for people to fully develop their talents and capabilities.
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If actual demand overwhelms the supply of the system, that’s a problem of supply, not demand. And the obvious solution is to increase the supply. Throughout our country’s history we’ve done that in landmark bills that do it through public provisoning paid for by taxation, bills like the Morrill Act and California Master Plan. Now, as that system is left to crumble, we are looking to the private, for-profit sector to fill that gap. I fear that will only exacerbate the cost problems we’ve seen so far, and the data is looking that way too.