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TheStreet Open House

Forgiving Student Debt Won't Help Students or Fix Colleges

University presidents are politicians, not business managers. They understand who makes the choices -- students, who pay the bills -- parents, and who they must please in the Alice-in-Wonderland world of university governance -- faculty.

Rational they are -- instead of encouraging students to study useful subjects and containing sky-rocketing costs, they focus on fund raising and lobbying government officials to facilitate more student loans.

Tuition jets into the stratosphere, students amass huge debt, and universities produce a lot of high quality unemployment.

President Obama is rational too -- parents, students and former students all vote. Instead of radically refocusing national policy on skills acquisition through a dramatic expansion of vocational education in high schools and community colleges, he promises to increase the percentage of Americans with four-year diplomas.

Now he proposes forgiving billions in student debt with federal dollars. Borrowers in the program would make payments equal to 10 percent of their monthly income, after rent and basic living expenses, and after 20-years of on-time payments be forgiven of all debt--regardless of how much they had borrowed.

Debt forgiveness simply encourages young people and parents to continue poor choices and borrow too much, and colleges to push up tuition -- things the nation can't afford. It certainly won't help graduates find jobs.


To compete in the global economy and create good jobs at home, America needs workers with the right skills. That means limiting access to college to those who can genuinely profit from a university education, requiring professors to teach more and teach more that is useful, and redirecting more of what the nation spends on education into other channels of vocational training.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.
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