January 21, 2016
This week, Republican presidential candidate and former Florida governor Jeb Bush released his plan to reform higher-education finance. It is a welcome and serious departure from the "free college" proposals of President Obama and Bernie Sanders. The plan has received praise by analysts ranging from those at the Brookings Institution to those at National Review.
For the most part, this approbation is deserved. Bush addresses one of the central problems in the finance of higher education: the lack of collateral. When a homebuyer takes out a mortgage, he puts his house up as collateral, which allows the lender to foreclose should the borrower default. However, for obvious reasons, a student cannot do the same with his college education — so, absent some other form of insurance against default, lenders will be more reluctant to lend to students whom they see as riskier bets.
Several decades of attempts to get around this issue have led the federal government to take over most of the market for college finance. Taxpayers lend to students and cover the losses should they default. Essentially a blank check for colleges and universities, this system has driven a massive increase in tuition over the past few decades. Bush's plan would abolish the federal student-loan program and institute a new system.
Read the full article at RealClearPolicy.com: Bush's Higher Ed Plan Is a Great Start