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September 22, 2022

Liberal Arts College is First to Oppose Biden’s Student Loan Relief Plan

Moscow, Idaho–New Saint Andrews College, one of only a handful of colleges across the US to refuse federal money, is taking a stand against the White House’s attempt to cancel federal student loans and is calling on more schools to speak out against Biden’s plan. 

“Redistributing federal student loan debt to taxpayers reinforces poor financial decisions, ruins the public’s trust in higher ed, exacerbates our current inflationary economy, penalizes colleges that decline to take federal funding, and prolongs higher education’s game of hide and seek with financial realities,” said Dr. Benjamin Merkle, president of the Idaho-based Christian liberal arts college.

“I’ve been referring to this as our ‘Big Ed’ problem,” Dr. Merkle said. “I believe more and more parents and students have added higher ed to a growing list of other “big” businesses that abuse power to get easy money.”  

Dr. Merkle added that many political leaders on both sides of the aisle can see the road this is taking us down and how it drives higher ed to an even more precarious position than it's already in.

Dr. Merkle gave three reasons why more colleges should oppose this new program. 

  • First, Biden’s plan doesn’t really cancel student loan debt. It just redistributes it to other taxpayers – many of whom did not attend college or have already paid back their debt. Adding more taxes to already over-taxed households to cover someone else’s bad debt is not equitable, fair, or right. 
  • Second, moving the debt from the students who signed up for the student loan payments in the first place to the taxpayers who didn’t will create a series of ripple effects that will be hard to reign in. Our nation’s young people will learn that loans  don’t need to be paid back and taxpayers will grow more skeptical and bitter toward higher ed. Further, each successive generation will expect the federal government to bail them out of their higher ed debt. 
  • Third, the more that higher education participates in these federal loan programs the more it becomes dependent on federal handouts. If the federal government is the primary funder of postsecondary education in America, then colleges and universities are disincentivized to perform better or to offer improved services to their primary consumers: students and parents. Essentially, we are fostering yet another industrial-complex where American industry and the government are embroiled in a “too big to fail” mindset that fosters highly irresponsible financial behaviors. Meanwhile, colleges that decline to take federal funding must work even harder to compete for students against institutions that are artificially propped up by the government and where the true cost of education is obscured by a loan cancellation program.

“Like the Inflation Reduction Act, the Student Loan Relief program will primarily act to increase taxes and will likely cause more schools to raise tuition,” said Dr. Merkle. “This will create more debt, not less.” 

Dr. Merkle believes it is hazardous for colleges and universities to support this plan because of the likely outcomes:

  1. This program prolongs our battle with inflation. This will be a top concern of the electorate in the next two elections and any forces that are driving inflation up will receive the ire of the voters.
  2. The American economy will receive yet another hard-to-dial back tax burden. Federal student loans have already cost taxpayers $334 billion more than originally estimated. This new attempt to cancel those loans will cost taxpayers about $519 billion. Every American taxpayer will see their federal tax burden increased by a minimum of $2,000.
  3. Higher ed will use this new program to justify its already high tuition. As enrollment declines and there are fewer students coming up through the K-12 system, schools will need to respond by scaling back. But increases in federal spending will only cause schools to keep tuition the same, or, more likely than not, increase tuition because of the massive amount of new federal dollars that will be pumped into the schools. 
  4. A new generation of students will be more likely to get into debt with the hope that their debt will be canceled too. This will be destructive on the rising generation. How will the federal government say “yes” to canceling the debt of one generation and “no” to the next? 
  5. Debt redistribution will further erode the public’s trust in higher ed. Trust in American colleges and universities is already at an all-time low. According to a 2019 Gallup survey trust in the postsecondary system eroded more than any other US institution (including Congress, the criminal justice system, and the media). Recent evidence suggests that this trend is getting worse. This program will receive sizable pushback and further erode trust. 
  6. Federal money privileges some colleges and discriminates against others. By taking federal money, colleges are bound to the political, cultural, and societal bias of the federal government, even if those ideas run counter to the guiding principles of the college. For instance, religious institutions that accept federal dollars will have to adhere to whatever religious or political philosophies the federal government endorses. Religious institutions that reject federal funding can remain true to their principles, but must work harder to prove their value to students.

“Sadly, most colleges and universities appear to be far more focused on getting easy money to fund their expanding administrative staff and expensive amenities rather than on being financially responsible, developing rigorous and high value programs, or preserving the fundamental principles that made our institutions great in the past,” added Dr. Merkle. “This is not how the federal government or higher education should be treating hard working American families.”

When asked about how to solve this problem, Dr. Merkle added that the higher ed business model is broken. Schools need to take a hard look at what they are doing and start to wean themselves off of taxpayer dollars. “Getting out of the Big Ed mentality is very difficult, but if we can do that, it means more freedom to operate in intelligent ways. By avoiding the easy money, we can become more responsive to market signals. This is the best way to bring down the cost of higher ed so we don’t strap another generation of students or taxpayers with massive debt.”