OPINION: Higher education is about to get even more political

Debate has swirled over President Joe Biden’s student loan-forgiveness plan, but there has been relatively little consideration of some of its longer-run ramifications. Whatever you think of the initiative itself, it may herald a turning point for U.S. higher education.

Critics of the policy see it as rewarding Democratic supporters and interest groups, including university faculty and administrators but most of all students. This perception, regardless of whether it’s true, will influence political behavior.

Republicans, when they hold political power, are likely to strike back. They may be more interested in draining the sector of revenue. The simplest way of doing this would be to limit tuition hikes in state universities. De facto tuition caps are already common, but they may become tighter and more explicit, especially in red and purple states. Such policies might also prove popular with voters, especially during a time of high inflation.

A second set of reforms might limit the ability of public universities to spend money on hiring more administrators, including people who work on so-called DEI issues. Given the fungibility of funds, and the ability of administrators to retitle new positions, such restrictions may not be entirely enforceable. Still, they would mean less autonomy for public universities as policy in many states tried to counteract their current leftward swing.

Another possible reform could tie funding for a school or major to the future earnings of graduates. That likely would penalize the humanities, which already tend to be one of the more politicized segments of the modern university.

Overall, the trend could look like this: Government policies toward colleges and universities have been largely predictable for the last few decades, with steadily falling levels of aid in most states, due to rising budgetary pressures. That slow decline could be replaced by more open forms of political warfare -- and by more drastic budget cuts for the universities that do not stake out a more centrist position. Republican leaders might decide that, since so few of their voters see universities as politically neutral, it makes no sense to treat them that way.

As Declan Leary, writing in The American Conservative, puts it: “Cut off the government dole to universities as fully and quickly as possible.”

The Supreme Court may enter the picture as well; there are two pending cases on affirmative action in universities. It is hard to predict how far-ranging a decision might be, but after the overturning of Roe v. Wade, a radical outcome hardly seems out of the question. Keep in mind that, when polled, about 74% of Americans oppose affirmative action.

In short, Republicans can do plenty of things that might make them more popular, or at least won’t make them less popular.

Longer-term, a future Republican administration might decide to restructure the entire system of federal student loans. How about making student loans dischargeable through normal bankruptcy proceedings? That might sound like a pretty unremarkable idea to most voters, and many economists, including Larry Summers, favor it. It would also allow for some measure of debt relief without extending it to the solvent and the well-off.

Still, the long-term consequences of this reform would probably lead to a significant contraction of lending. Most enrolled students do not in fact finish college, and many of them end up with low net worth yet tens of thousands of dollars of debt. (By one estimate, the net worth of the median American below age 35 is $13,900.) So the incentives to declare bankruptcy could be relatively high. This would make federal student loans a more costly and less appealing proposition. Private lenders would be more wary as well. Higher education would likely contract.

The net effect of the president’s loan-forgiveness initiative - which is an executive order and thus does not have an enduring legislative majority behind it - could amount to a one-time benefit for students, no impact on rising educational costs, and the intensification of the culture wars over higher education.

It’s possible that the high cost of this policy, and the surrounding bad publicity, may bring a needed wake-up call to higher education. But as someone who works in the sector, I am not hopeful. Universities have had more than their share of drama in recent years. Biden’s student-loan initiative will only make things worse, and that too will prove part of his legacy.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. He is coauthor of “Talent: How to Identify Energizers, Creatives, and Winners Around the World.” This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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