America’s ridiculous federal student-loan program keeps making things worse for the country’s fiscal health.

As Preston Cooper explains in today’s Martin Center article, the long “pause” in requiring payments on student debts during Covid has resulted in such low repayments now that we are past the supposed crisis that the system is unsustainable.

Cooper writes:

Since most student borrowers had not made a payment on their loans for over three years, the logic of a one-year on-ramp was to allow borrowers time to make financial arrangements to recommence payment. Missing a payment or two would be no big deal. After a year, the logic ran, most borrowers should be comfortably paying their loans every month.

That ideal couldn’t be farther from reality. At the end of 2019, prior to the payment pause, 3.1 million borrowers were more than 30 days behind on their loan payments. As of March 2024 — the latest month for which data are available — the number of delinquent borrowers had reached 7.3 million.

Back when the Obama administration decided to federalize the student-loan system, we were told that it would save taxpayers money. Not exactly. The Congressional Budget Office now forecasts a loss of $400 billion in the coming decade.

What to do? Cooper has some ideas:

Beyond changes to repayment, more fundamental reforms to student loans are necessary to prevent such a crisis from happening again. Congress should implement lower limits on student borrowing and require colleges to cosign the loans they foist on students. Privatization of the federal student-loan system (or at least portions of it) is also worth considering, as private lenders will make an apter assessment of prospective borrowers’ capacity to repay than does the federal government.

If the U.S. is ever to regain fiscal health, one of the things that must be done is to get out of the business of subsidizing college.