The U.S. government over the last 15 years made a trillion-dollar investment to improve the nation’s workforce, productivity and economy. A big portion of that investment has now turned toxic, with echoes of the housing crisis.Read the whole sorry saga. It is not enough to have good intentions. You need to know what you are doing and especially should be alert to making the problem worse.
The investment was in “human capital,” or, more specifically, higher education. The government helped finance tens of millions of tuitions as enrollment in U.S. colleges and graduate schools soared 24% from 2002 to 2012, rivaling the higher-education boom of the 1970s. Millions of others attended trade schools that award career certificates.
The government financed a large share of these educations through grants, low-interest loans and loan guarantees. Total outstanding student debt—almost all guaranteed or made directly by the federal government—has quadrupled since 2000 to $1.2 trillion today. The government also spent tens of billions of dollars in grants and tax credits for students.
New research shows a significant chunk of that investment backfired, with millions of students worse off for having gone to school. Many never learned new skills because they dropped out—and now carry debt they are unwilling or unable to repay. Policy makers worry that without a bigger intervention, those borrowers will become trapped for years and will ultimately hurt, rather than help, the nation’s economy.
No wonder there is so little trust among the citizenry of the federal government. Pathological altruism is not a good foundation.