"It's just not right that Donald Trump can ignore his debts and students and families can't refinance theirs," Hillary Clinton said in her acceptance speech last night.
Eric Boehm of Reason writes that the line stood out for him because it united two goals of the speech–an attack on Donald Trump and Clinton's embrace of progressive policies (i.e., free college).
Before explaining how much free education will cost and who it won't benefit, Boehm points out that the Trump comparison doesn't make sense to anyone with an understanding of economics:
The attack on Trump here is something of a non sequitur. Sure, Trump may have overused and even abused America's bankruptcy laws, but there's actually an important reason why student loan debt can't be wiped out in bankruptcy court while the debt of poorly run casinos can.
When a person or business goes through bankruptcy, there are physical assets that can be sold and used to pay lenders. The bankruptcy process is meant to bring both sides to the table to work out a middle ground. Lenders get something back, and borrowers have to pay what they can.
There are no physical assets in student loan debt. A college grad with $100,000 in unpaid loans can't slice off a portion of their knowledge or experience and sell it, any more than they can hand over a portion of the better economic opportunities they have because of a college degree.
The College Board has found that the cumulative student loan debt for the 2012-13 academic year came to $25,600 for students at public institutions, while it was $31,200 for students at private colleges or universities. No surprise that "free" college sounds like a winner.
But we should be wary of programs to reduce college debt:
But attempts by state and federal government to lower the cost of college have contributed mightily to the high cost of attending post-secondary school. Government subsidies have hidden the price of college and broken the market forces that would naturally keep tuition costs down, allowing universities to charge pretty much whatever they want.
Clinton is doing more of the same here, because it turns out that "free" college tuition is actually pretty expensive.
Under Clinton's proposal, a student from a family making less than $85,000 a year would receive free tuition at public universities. The base would go up to $125,000 by 2021.
Taxpayers would be stuck with a bill for $35 billion a year.
As for Clinton's ham-handed Trump analogy:
It seems unfair that Trump can use bankruptcy to dodge his mistakes while college grads struggle to make ends meet and pay their loans—but it would be more unfair to make everyone pick up the tab for a college tuition program that adds billions in new government spending, further obfuscates the actual cost of attending college and will do nothing to stop rising tuition costs.
But it might pull in a lot of Sanders voters.