The Chicago Tribune on college student loans:
Congress has reached a one-year deal to keep interest rates on federal student loans from doubling for millions of Americans. Republicans and Democrats said all along they wanted a deal to happen, and so did we. It would have been arbitrary and unfair to double loan rates all at once, especially with interest rates in the private sector at record lows.
This should prompt debate on a critical question, though: Do low-cost, government-guaranteed loans drive tuition and fees higher? Would college be less expensive if loans weren't so cheap?
The research to date has not proved a causal connection between easy money and skyrocketing tuition. But that would be logical: When demand rises and supply does not, prices rise. Government-assisted loans boost the buying power of students, but the benefit to students is limited if those loans prompt college tuition to rise.
This much we know: Demand has risen. America invests billions of dollars in financial aid every year. Student loan debt has grown to exceed credit-card debt. Young lives are being forever altered by the burden of rising education costs.
In 1987, then-Secretary of Education William Bennett shook up the higher-education orthodoxy by asserting that government financial aid helped to push tuition higher. The "Bennett hypothesis" is invoked in media coverage and policy debates today.
It is difficult to isolate the effect of government-based aid, in part because there are so many higher education options and price points.
The balance sheets of Princeton and Harvard, with their huge donor-supported endowments, have little in common with those of the least-selective private schools. . . .
Some states are exploring alternative ways to finance an education. California, for example, might allow students to pay for their schooling by pledging a portion of their future earnings.
Congress, for now, has avoided a jolt for students with the deal on interest rates. It could help students in the long run make better decisions if it pushed for transparency by educators and a loan system based on genuine demand.
* Editorials reflect the opinion of the publisher.
