The
Three Big Expenses: College Education
GrassTopsUSA Exclusive Commentary
By Gennady Stolyarov II
08-28-07
It seems that
we live in an age of abundance. Ample, inexpensive, high-quality
food is virtually ubiquitous, and no American involuntarily starves
to death. A few days’ work at a typical wage enables a person to
afford numerous outfits of clothing. Electronic equipment keeps
improving in quality while falling in price. Entertainment is
everywhere, and the Internet makes much of it almost free. A
high-quality piece of furniture might cost a few days’ typical wages
at most. Even automobiles are well within the reach of virtually
every working family – and most families now own two or three cars.
Why then, do such a tremendous number of Americans – including many
hard-working, disciplined, conscientious ones – still experience
serious financial difficulties in their lives?
The vast
majority of Americans’ expenses can be traced to three broad
categories: higher education, heath care, and real estate. In each
of these categories, prices keep rising much faster than most
Americans’ wages – forcing many to enter unsustainable debts while
erecting colossal obstacles in front of young people just starting
out on their own. None of these three kinds of goods or services
have any inherent properties that necessarily render them as
astronomically expensive as they currently are. Furthermore, certain
prior periods in history had been marked by more reasonable prices
in each of these three areas.
The reason why
education, health care, and real estate are unaffordable to many
Americans – and why involuntary financial suffering continues to
exist in this country – is massive government intervention.
Americans concerned about this genuine economic crisis would do well
to examine each of these three categories and discover the
tremendous damage government policies inflict on ordinary citizens’
finances and prospects. Here, we will consider the rising costs of
college education, while costs of health care and real estate will
be examined in subsequent essays.
Prior to the mid-20th century, a small fraction of Americans
attended college – not because they could not afford it, but because
most employers did not require a college education from their
employees; a college degree was not seen as the certificate of
overall competency that it currently is. Rather, it was a gateway to
professions in research and academia, as well as jobs requiring
extensive application of advanced theories. Indeed, the designation
“college student” was widely viewed as an honorific and a mark of
distinction. The people who did go to college were typically the
people who genuinely wanted to be there – as opposed to virtually
anybody and everybody today. All things being equal, if demand for a
given good or service is lower, so is its price. Thus, the price of
a college education for the truly serious and motivated students was
far lower than it is today – and it was often augmented by a
plethora of private merit scholarships to the deserving.
This changed after World War II, when the federal government
introduced the G. I. Bill to massively increase college attendance
and demand for a college education above natural free-market levels.
Through financial subsidies, the government artificially stimulated
returning veterans’ demand for college educations, thereby leading
to an increase in the price of college for everybody. The subsidized
veterans could, of course, afford college – as could wealthy
families, but the intelligent, aspiring middle- or working-class
students were put at a great disadvantage. The federal government
was not entirely oblivious to this problem, but it decided to
correct a prior harmful intervention through another yet more
harmful intervention – federal aid, mostly “need-based,” to
students. Today, this aid is immense and increasing in the form of
Pell Grants, student loans, and a variety of scholarships – most of
them not based on academic merit or personal accomplishment.
Federal aid to “needy” students further artificially stimulated
demand for a college education, leading virtually everybody to seek
one – even when personal interests and career goals did not
correspond with such a path. This significantly reduced the quality
of student bodies at most colleges – as many students used college
as simply an excuse to “party” and delay assuming serious
responsibilities for four or more years. It also raised the tuition
prices colleges could charge.
Not only does an increase in demand lead to an increase in the
market price of a service, but many colleges also recognized the
source of the demand increase as government aid and thus figured
that the subsidized students could afford to pay a little more out
of their own pockets as well. What resulted was an almost fifty-year
upward spiral of tuition prices. The government increased its
subsidies to students, thereafter colleges hiked tuition rates,
thereafter students again began to feel that college was
unaffordable, thereafter the government again increased its
subsidies. The unsubsidized students – mostly highly accomplished
young people from moderately prosperous middle-class families who
did not qualify for aid – suffered the most, as the number of merit
scholarships declined and tuition burdens threatened to bankrupt
families with even six-digit annual incomes.
But even the subsidized students ended up worse off than they would
have been in a completely free market. This is because much of the
federal government’s educational aid comes in the form of
low-interest loans. While these loans enable many people to go
through college, they also burden college graduates with debts that
take many years to repay. In a system devoid of government aid,
tuition prices would have been much lower to begin with – enabling
most students and their families to pay the tuition outright, not
having to deal with paying any interest on debt – however low the
rates might be.
Furthermore, in a fully free-market system, taxpayers’ money would
not have gone to providing the federal aid and administering it via
a cumbersome bureaucratic behemoth. Thus, Americans would have kept
more of their own money and been able to use it to pay for education
– among other goods and services. In addition, the non-existence of
federal aid would have enabled a far more extensive array of private
aid sources to exist – mostly based on academic merit and the
expectation of solid student performance in college. Just as
government welfare crowds out private charity and public education
crowds out private education, so does government aid to students
crowd out private merit scholarships.
Most Americans would like to see college tuition costs decline. To
accomplish this, two courses of action must be taken. First, more
private colleges need to be pressured to reject all forms of federal
aid. Outstanding educational institutions like Hillsdale College and
Grove City College – which do not accept government money – also
have far lower tuition rates than federally-subsidized colleges of
comparable caliber. Second, politicians and policy makers need to be
pressured to curtail federal aid to colleges and college students,
thereby permitting both college attendance and college education
prices to fall to their natural, free-market levels. As a result, we
can also expect a change of employers’ attitudes toward college
degrees. Instead of being seen as an obligatory permission to work
in any industry, such degrees will come to be perceived as genuine
marks of distinction and outstanding merit. Furthermore, many
Americans will recognize that they can do just fine in life without
attending college – and the unwarranted stigma currently directed at
those without college degrees will be diminished.
Everybody does not need to attend college, just as everybody does
not need to know calculus or automobile repair. But, given the
current level of prosperity, it is possible for everybody to pursue
the educational opportunities and interests of their choice, if only
the government would keep out of the way.
Gennady Stolyarov II is
Editor-in-Chief of
The Rational Argumentator, a magazine championing the principles
or Reason, Rights, and Progress. His works have been published by
Le Quebecois Libre,
Enter Stage Right Magazine, the
Ludwig von Mises Institute,
Rebirth of Reason, and other organizations. Mr. Stolyarov can be
contacted at
gennadystolyarovii@yahoo.com.
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GrasstopsUSA.com 2007
