Should We Seize College Endowments To Solve The Debt Problem? 

The Biden administration is poised to enact student college debt forgiveness of upwards of $10,000 per individual and conservatives are rightly concerned about the American taxpayer ultimately footing the bill.

The students who took out loans should be on the hook for paying them back, the argument goes. At the very least, the government should stop providing federally guaranteed loans that allow universities to drive up the cost in the first place, a conservative might say.

Yet there is another idea about how to forgive student debt that would not necessarily burden taxpayers or excuse colleges from their own role in the skyrocketing cost of higher education. Some on the right believe that the federal government should tax, or outright seize, university endowments to enact massive forgiveness of college loans.

As explained by Investopedia, “University endowments are comprised of money or other financial assets that are donated to academic institutions. Charitable donations are the primary source of funds for endowments. Endowment funds support the teaching, research, and public service missions of colleges and universities.” These endowments are largely not taxed because they are supposed to be used to advance their college’s mission of providing a quality product. 

While the idea might sound like populist punditry contrived out of misplaced anger, one of the first progenitors of the idea was a man once described as President Ronald Reagan’s favorite economic thinker and author: George Gilder. 

Gilder is credited as bolstering Reagan’s belief in the power of supply-side economics with his best-selling book “Wealth & Poverty.” The 40th president believed in Gilder’s creed to capitalism so much so that he even handed out copies of “Wealth & Poverty” around to his friends and cabinet members for their enlightenment. 

Since then, Gilder has gone on to predict things such as the iPhone and other technological advancements, all while crafting his own theory about capitalism as an information system and fighting against the scourge of socialism. With a resume like that, his 2018 idea to tax universities’ endowments to cancel student debt should be given some more thought by advocates of limited government economics.

The premise for Gilder’s idea is that, for decades now, universities have perpetuated massive fraud on both the college student and taxpayer. Despite raising the cost of college tuition, there is little evidence that the quality of American higher education has improved at all, he believes.

At the same time, colleges like Havard and Yale have amassed $53 and $42 billion endowments respectively, while pocketing money from students.

In 2018, Gilder told The Wall Street Journal’s Tunku Varadarajan that “human beings have a propensity to believe in leftism”—in the idea that government can “answer all of their problems, guarantee their future, and relieve them of the challenges of life” which allowed this market manipulation to occur in the first place.Gilder explained that the idea of a “‘completely providential government’ arose in America, and a ‘whole generation of young people were given college loans in a fabulous national mistake, in which the Republicans participated.’” 

Gilder added that the federally-backed Guaranteed Student Loan Program, which launched under the Higher Education Act of 1965, was used by college administrators to “increase perks and tenured luxuries and ideological distractions”—all of which led to the “diversity campaigns and CO2 panics” that we see today across college campuses paid for by exorbitantly high tuition rates. 

Indeed, in 2019, CNBC reported that “From 1964 to 2019, the cost of tuition jumped just under 3,000%. Meanwhile, the cost of a four-year public school soared to just over 3,800%, from a mere $261 annually.” 

Gider added that this “vast blunder,” must be undone through massive forgiveness by extracting “the money from all the college endowments and funds that were used to just create useless departments and political campaigns.” 

There is evidence behind Gilder’s claim. For example, in 2018, a team of educators researched the impact of Chief Diversity Officers on institutions and found that, despite their job description and despite being paid hundreds of thousands of dollars, they largely did not diversify college education. 

The CDO job was popularized in the early 2000s, and by 2016, 65 percent of colleges in America had that position on staff.  But, researchers were “unable to find significant statistical evidence that preexisting growth in diversity for underrepresented racial/ethnic minority groups is affected by the hiring of an executive-level diversity officer for new tenure and non-tenure track hires, faculty hired with tenure, or for university administrators.” 

That means that students are taking out loans in part to fund lucrative positions for which there is no evidence they actually benefit the college as they are intended to do so. 

Other researchers, like Roger Geiger of Pennsylvania State University and Donald Heller of Michigan State University, have also found that “since 1990, in both public and private colleges, expenditures on instruction have risen more slowly than in any other category of spending,

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