When Bernie Sanders proposed free
tuition at public colleges and universities, Hillary Clinton responded with her
rival plan, The New College
Compact.
“Students should never have to
borrow to pay for tuition, books, and fees to attend a four-year public college
in their state under the New College Compact,” she declared, adding, “students
at community college will receive free tuition.” The purpose of her proposal is
to ensure that “costs aren’t a barrier to college.” She closed her announcement
video stating that a college education is “a right.”
There are many problems with her
proposal. First, establishing higher education as a right really means that
some people must pay for goods and services to be consumed by others. It
doesn’t make sense that costs shouldn’t be “a barrier to college,” because
prices are barriers against excess demand and wasteful consumption. That’s as
true for college education as it is for pizza, movie tickets, or anything else.
If students don’t pay for college, many of them will put minimal effort into
learning.
Clinton also complains about the
large increase in tuition, with costs rising by 42 percent in the decade 2004
to 2014. She fails to see that federal aid in the form of grants, and
particularly in loans, is the major reason for tuition increases.
There is plenty of empirical
evidence for this effect.
A recent paper by the Federal Reserve Bank of New York noted that yearly
student loan originations grew from $53 billion to $120 billion between 2001
and 2012, and found similarities to the expansion of credit that led to the
housing bubble of 2008. Suppose the federal government subsidized loans to
millions of Americans, to enable more people to own iPads.
Elementary economics tells us this
would result in an increase in the price of iPads. The Federal Reserve report
unsurprisingly found that tuitions rose in response to the federal loan
programs. The study found the Federal Direct Subsidized Loans generated a 65
cent-on-the-dollar increase on college tuition, while Pell Grants generated a
50 cent-on-the-dollar increase on college tuition.
Another problem Clinton proposes to
address in her New College Compact is the decline of state aid to higher
education. According to her site, “The recession accelerated the trend of state
disinvestment in higher education, with states spending…20 percent less per
student on average than they did 7 years ago.” A Center for Budget and Policy
Priorities paper, which found that 47 states spent less per student in 2014
than before the recession, supports that assertion.
Reduction in state spending,
however, is a logical result of the aid that Clinton proposes. State
legislators must decide whether to spend more on K-12 education or higher
education. When the federal government provides billions of dollars to higher
education tuition in the forms of loans or grants, state lawmakers are inclined
to dedicate more dollars to K-12 education than higher education.
Thus Clinton’s proposed expansion of
federal subsidized loans will lead to the unintended consequences of higher
tuition costs and less state spending on higher education.
Another problem is that the Clinton
proposal would lead to what Nobel laureate economist Friedrich Hayek called
“mal-investment.” That is, whenever government makes something artificially
less expensive, people will change their behavior. Consumers demand more, and
investors put more resources into fulfilling that demand.
Consider how free or nearly free
college affects young people who decide what to do after high school. Many
choose to go to college, even though they would benefit more from going into
other areas such as skilled trades. It is well documented that there is a
shortage of skilled labor, particularly in the construction industry. For
example, a recent industry
survey found three-quarters of
homebuilders reported difficulty in finding new employees.
At the same time many college
graduates end up in jobs that do not require a college degree. A Federal
Reserve Bank of New York study found that in 2012, 44 percent of recent graduates were
“underemployed”—defined as working in a job that did not require a college
degree. For students who are lured into college when they’d do much better
learning skilled crafts, their degrees are a mal-investment.
In their 1970 book Academia in
Anarchy: An Economic Analysis,
James Buchanan and Nicos Devletoglou argued that students who were not
qualified for college, or who didn’t have a strong interest in pursuing
education, were induced to attend college by subsidized or free tuition. In the
decades since the problem of poorly prepared and weakly motivated students in
college has grown far worse. Clinton’s proposal will only exacerbate it.
One result of marginally interested
students is lower quality of education, as we saw in a recent national survey by the American Institutes for Research. It found that 30
percent of students who earned two-year degrees, and remarkably, 20 percent of
students who completed four-year degrees, possessed only basic quantitative
literacy skills. That means they’re
unable to estimate if their car has enough gasoline to get to the next gas
station or calculate the total cost of ordering office supplies. That’s not
much learning for the huge cost of college investment.
Without acknowledging many students
learn very little in college, Clinton’s program would require colleges and
universities to “be accountable for improving outcomes and controlling costs to
ensure that tuition is affordable and that students who invest in college leave
with a degree.” That sounds good, but the government can no more
guarantee outcome improvement than it can guarantee anything else. Dictating
better results while at the same time undermining student motivation is bound
to fail.
Finally, Clinton states on her Web
site: “Too many colleges are loading up students with debt for programs that
don’t let them climb the economic ladder. And when things go wrong and students
default on their loans, it is students and taxpayers who end up holding the
bag.” That’s pretty accurate.
Unfortunately her proposed solutions
will not solve the cost and value problems in our higher education system, but
will instead make them worse.
Comments
Government
needs to get out of the Education Business to let the price of education be
subject to the law of supply and demand.
Schools need to take the inflated cost out of education and let the
market determine the price. Student
should take responsibility for their own education and get off this
unsustainable gravy train.
Norb
Leahy, Dunwoody GA Tea Party Leader
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