It sure sounds like a wonderful idea – free tuition for all who want to attend college. But the thought of making college tuition-free in the United States has been batted around and rejected more than once. None of the legislative proposals to make college free for students has been based upon sound economic principles. That’s because, simply put, colleges cost money to run. A lot of money, actually. One person’s “free” education is another person’s tax bill.
Free Tuition Proposals
Take for example the past year of political promises, particularly those that originated from Bernie Sanders and Hillary Clinton – two politicians who attempted to make free college tuition cornerstones of their campaigns. Hillary’s proposal originally aimed to make in-state tuition at public universities free for students whose families’ incomes were under $125,000. This would have made free college a possibility for over three-quarters of American households.
Her campaign estimated this would have cost $450 billion over the course of a decade. Those billions have to come from somewhere, and that somewhere would be taxpayers – most likely, the tax bills of the remaining quarter of American families whose children wouldn’t qualify for free tuition. But even those who did qualify would almost surely see a corresponding rise in their tax bills to pay for the program.
Why Free Tuition Would Not Work
If we’ve learned anything from government intervention in the cost of college, it’s that the more the government interferes the worse off students are. In the last two decades or so, as the federal government has increased loans, grants, and subsidized work-study programs, as well as tax credits and college-related deductibles, the ultimate cost of tuition has only skyrocketed. From the early 1970s to today, the overall price to attend college in the U.S. has increased an astounding 1,300 percent. This cannot be attributed to inflation, which doesn’t even come close to accounting for the rise in cost.
What does account for the rise in costs is the staggering amount of federal funds that our government has poured directly into public and private colleges’ pockets through federally made student loans. When students can borrow as much as they need to pay rising tuition costs, schools have no incentive to compete with each other to keep prices down. And students, most of whom are of an age where they don’t yet have a firm grasp on debt concepts, just continue to borrow up to their limits with no thought of how and when they will pay back the enormous student loan debt they’re acquiring in just four short years. A debt load that their own parents didn’t have to take out to receive four years of higher education.
The solution to the student loan crisis may not be shifting the burden of overpriced tuition to American taxpayers, it may be reverting back to a private lending system for student loans. If students have to be more careful and conscientious about where their tuition money is coming from, schools will be forced to adapt and lower their costs in order to compete with each other for tuition money.
This is something they have not had to do in many years, but it’s the only economically sound way to reverse the crisis of historical proportions that is affecting student borrowers. Basic principles of supply and demand are involved, but many politicians don’t seem to understand them. When the money is flowing in without limits, prices will rise. When there is a stopper put on the influx of money, prices will shrink accordingly. The last time tuition across the country reflected its true value was prior to the introduction of federally backed student loans.
Not only would universities be forced to lower their prices if students didn’t have unlimited funds, but students would also be forced to more carefully consider what options are available with the funds they can obtain. When students are more discerning, the schools will adapt by becoming more efficient with what they offer for various prices. Students may make very different financial decisions when their money is coming from a private lender instead of flowing nearly endlessly from the government.
Lastly, making college tuition free will encourage students to waste the opportunity of a college education. It’s been proven in many studies that people consistently undervalue those things which come free or low-cost, and overvalue those things which they have to work hard to achieve. In the end, we aren’t doing tomorrow’s students any favors if we shift the burden of tuition away from them. The focus should be on lowering the outrageous and unjustified cost of tuition, but not eliminating it entirely. If we do so, we risk going soundly from one unwanted extreme to another.
Author: Jeff Gitlen
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