As part of National Education Week, I’ve looked at the deterioration of K-12 government schools and also explained why a market-based choice system would be a better
The good news is that we have a choice system for higher education. Students can choose from thousands of colleges and universities.
The bad news is that federal subsidies are making that system increasingly expensive and bureaucratic.
That’s today’s topic.
The underlying problem is “third-party payer,” which is a wonky term to describe what happens when students are buying education with money from somebody else. When this happens, they tend to not care about the price, which then makes it possible for colleges and universities to increase tuition so they become the real beneficiaries of the subsidies.
So nobody should be surprised that college costs are skyrocketing upwards, both in absolute terms and relative terms.
It’s a bubble, but one that probably won’t pop because of the ongoing stream of subsidies.
Jon Miltimore has a very good summary of the perverse incentives created by government.
In a study for the Mercatus Center, Veronique de Rugy and Jack Salmon compile numbers and analyze studies.
Here’s a chart from the study showing the explosion of federal subsidies.
By the way, Paul Krugman actually thinks taxpayers have been “starving” higher education.
Let’s get back to exploring the analysis of more sensible economists. Professor Antony Davies and James Harrigan make two key points in their FEE column.
First, subsidies are producing consumers who don’t make sensible education purchases.
Here’s a chart from their article, which looks at the value of various majors.
Second, the problems are caused by bad government policy.
We are in the midst of a college loan bubble for almost all of the same reasons that, a decade ago, we found ourselves in the midst of a housing loan bubble. …In both bubbles, the government interfered in markets in two critical ways. First, the government stepped in as a lender. Second, it shielded private lenders from the consequences of making bad loans. …Making college “free” will simply double-down on the very problem we already face. With “free” college, not only will colleges not have to care whether students can repay their loans, but the students themselves will also not have to care. Meanwhile, taxpayers will be on the hook for the numerous imprudent decisions by both colleges and students. It will bring about the worst of all possible worlds.Victor Davis Hanson of the Hoover Institution used to be a Classics Professor at California State University. So he’s well positioned to provide a then-now comparison.
Here’s what he experienced in his early years.
And here’s what it’s become.
What went wrong? …Politics increasingly infected courses as competence eroded—logical for faculty and students since the former required far less of the latter. Across the curriculum, race, class, and gender studies found their way into art, music, literature, philosophy and history classes. Deduction now replaced the old empiricism. Grades inflated… Universities emulated the ethos of loan sharks and shake-down businesses. The con was as simple as it was insidiously brilliant. Academic lobbyists pressed the government for billions in guaranteed student loans… The federal government-backed student loans. That guarantee greenlighted cash-flush universities to pay inter alia for diversity czars, assistant provosts of “inclusion,” and armies of woke aides and facilitators, to reduce teaching loads, and to open more race/class/gender “centers” on campus—by jacking up college costs higher than the rate of inflation. Student debt soared. …A new generation owes $1.5 trillion in student debt… One’s 20s are now redefined as the lost decade, as marriage, child-rearing, and home buying are put off, to the extent they still occur, into one’s 30s. …The result was reduced teaching, a bonanza of release time, administrative bloat, Club Med dorms, gyms, and student unions, and epidemics of highly paid but non-teaching careerist advisors, and counselors.So what’s his solution?
Universities should be held responsible for repaying a large percentage of the loans they issued and yet in advance knew well could not and would not be repaid. The government should get out of the campus loan insurance business.Amen.
As I said at the end of this recent TV interview, colleges and universities need to have some skin in the game.
Daniel Kowalski explains for FEE that government policy is causing ever-higher costs.
All this government-fueled debt has real consequences. Three economists from the Federal Reserve found it hinders home ownership.
For those interested, here are some of their empirical findings.
By the way, I discussed the negative interaction of student debt and housing in the second half of this TV interview.
Professor Richard Vedder explains for the Wall Street Journal that this subsidized system has resulted in an environment in which neither students nor faculty work very hard.
Unfortunately, many politicians respond to these government-caused problems by proposing even more government.
That’s what Hillary Clinton did in 2016 and it’s what politicians – most notably Elizabeth Warren and Bernie Sanders – are doing for 2020.
But that will make a bad situation even worse.
Paul Boyce, writing for FEE, explains that free college will lower standards and make college degrees relatively meaningless.
And the experience of other nations isn’t a cause for optimism.
Andrew Hammel, an American who taught for many years at a German university, is not overly impressed by that nation’s free-tuition regime.
I’ll close with an observation about inefficiency in higher education.
Here’s a chart I shared a few years ago. I’m sure the problem is even worse today.
The bottom line is that student debt, administrative bloat, and expensive tuition are all predictable consequences of federal subsidies.
P.S. If you’re worried about political correctness in higher education (and you have the appropriate subscriptions), I recommend this column in the Wall Street Journal and this George Will column in the Washington Post.
P.P.S. Here’s a video interview with Richard Vedder about high costs and inefficiency in higher education. And I also recommend this video explanation by Professor Daniel Lin.
P.P.P.S. It also turns that all these subsidies have a negative correlation with private-sector employment.
- EducationWeek, Part I: The Continuing Deterioration of K-12 Government Schooling
- EducationWeek, Part II: The Case for School Choice