Before we pay down student debt, consider this

As federal leaders ramp up plans to have the public pay down student loan debt, we must be vigilant as taxpayers to demand clear actions to ensure continual scrutiny and accountability.

The first order of business is to ensure that those who are paying their loans are rewarded by a bailout. Any bailout cannot simply be a payment between taxpayer and lending institution to cover debt that many students cannot or, just as often, will not pay. This program should first reward the student borrowers who are actually struggling to pay their debts.

Despite the broad “victimization” of the student loan borrower, virtually everyone goes into these agreements fully aware of the obligations and consequences. In fact, the only true victim of this escalating debt is the student borrower or co-signer who pays off their debt. They are victims because they are compelled to pay very high rates, often more than double or triple the prime lending rate, to cover losses incurred by student borrowers or co-signers who default.

Second, if we are to pour in billions more public dollars to sustain the artificial economy of our higher ed system, then we need to duplicate the controls associated with public dollars spent on health care. A huge driver of health costs has been sub-specialty services and technology “arms races” that have developed in every major market in the U.S. Competing hospitals A, B and C, virtually within sight of each other, do not necessarily need to offer the same sub-specialty services, or have on staff the same types of specialists, or possess the same technology. What we’ve ended up with in many markets is hugely expensive excess capacity — which means taxpayers paid for far more than needed. The nation’s health system, primarily through consolidation, is rightsizing to correct this problem. In any student loan bailout scenario, colleges must undergo the same rightsizing to eliminate the corrosive effects of regional duplication and excess capacity.

Third, health providers’ reimbursement (the majority of which is taxpayer-funded via

The only true victim of escalating student debt is the student borrower or co-signer who pays off their debt.

Medicaid and Medicare) is directly based on unending volumes of hyperspecific clinical outcome and patient satisfaction measures. If your service and quality are poor, you get paid less, and sometimes not at all. It should be no different for colleges that would benefit from public largess in any taxpayer-funded loan bailout — let’s not forget who the ultimate payees are in all of these arrangements. Any bailout must include similar controls to measure and penalize colleges for poor student outcomes.

Bear in mind, the colleges are the only party within this insidious milieu that are essentially uninjured. Even as they drive virtually all cost escalation, they seem to always get their tuition, fees and room and board (sometimes even when they don’t provide the latter due to COVID-19 restrictions). The lenders get pinched by the defaulters, but they make that up in higher rates for those who actually pay. It’s the responsible borrower who assumes all the risk and cost. That must end.

If taxpayers are going to pay down this debt, then we must no longer fund competing collegiate excesses, and student outcome and satisfaction metrics must become foundational reimbursement elements. Otherwise, we are just encouraging colleges to sustain and even expand their institutional vanities and gargantuan appetites.