MACLANE: Conservative solution to college tuition
Opinions Column: Conservative Hot Corner
College tuition has been growing at a tremendous rate for the past several decades. Average tuition rates from 1995 to 2015 at private national universities has grown 179 percent, 226 percent for out-of-state tuition at public universities, and 296 percent for in-state tuition. The national student loan debt currently sits at $1.48 trillion and growing. This has propelled calls for tuition-free public college from Democrats such as Sen. Elizabeth Warren (D-Mass.) and Sen. Bernie Sanders (D-Vt.). Clearly, there is a problem that needs to be addressed, but is taxpayer funded college really the solution? As P.J. O’Rourke said, “If you think health\care is expensive now, wait until you see what it costs when it's free.” Although he refers to healthcare in this quote, the same principle can be applied to college.
The problems with rising tuition costs stem from the Higher Education Act of 1965 (HEA). The government passed this act in order to help low and moderate income households receive student loans by granting them government insured loans regardless of their financial situation. Looking at this from a purely economical standpoint, the government artificially inflated the demand for college education by creating these subsidized loans. With the increased demand, universities were incentivized to raise tuitions and, since 1978, the average price of college tuition has skyrocketed 1,120 percent, according to Bloomberg, and has vastly outpaced the rate of inflation. Also, every time the amount of government subsidies are increased, it causes tuition rates to increase even more and colleges are able to exploit the financial aid increase. Andrew Gillen, researcher at Inside Higher Ed, wrote in 2012 that “Because competition among colleges is based on their relative standing, those colleges that exploit the opportunity to raise tuition when financial aid is increased will be able to improve relative to those that do not by hiring better professors, offering more aid to attract meritorious students, building state-of-the-art laboratories, etc. To avoid falling behind, even those colleges that initially resisted are forced to follow suit and raise tuition.” To sum it up, increasing the amount of financial aid creates a snowball effect that causes tuitions throughout the nation to rise.
So, we can all agree that rising college tuition costs are a problem — but if government intervening in the payment process created the problem, why would more government be the solution as Sanders and many Democrats have proposed? Maybe it’s the idea that we have not done enough and just more government would prevent these problems. The way I see it, the real solution should be the privatization of the loans and even encouraging universities to grant their own loans. Government subsidized loans incentivize universities to just focus on giving their students a degree and not focusing on their success upon graduation since they have no financial stake in the student’s future success. This type of loan is already being tried at major universities such as Purdue. Purdue has begun offering income-share agreements. Instead of requiring a specific amount to be repaid, the student will agree to pay a percentage of their future earnings to the university in order to repay their debt. Purdue, now having a financial stake in the student’s success, will better encourage future alumni help in their career success.
Another solution is the privatization of loans. If a private third party, not the government or the university, grants loans the company would need some type of assurances that the loan will be repaid since there is no collateral requirement as there is in a car loan or mortgage. This could mean a private contract drawn up between the student and the third party. Since the company is taking a risk with no governmental subsidization, they could potentially dictate specific terms of the contract, including the study of certain majors and the maintenance of an above average GPA. This would then have two effects — it would decrease the demand for college, which would drive tuition rates down, and it would also increase the percentage of college graduates being employed after graduation. For example, a student planning to major in architecture, which has a 13.9 percent unemployment rate for recent college graduates, would be less likely to receive a loan than a student who is planning to major in engineering which has a 7.5 percent recent college graduate unemployment rate. Although, with this plan, students might have less flexibility with choosing their field of study, but that is not a strong enough argument to burden the taxpayers with the cost of college.
Typically, the government creates more problems than it solves, as is clearly evident with the current student loan debt crisis. Let’s take the situation that the government has created and allow the private sector and universities to chart their own course for the academic and financial success of future generations.
Daniel MacLane is a School of Arts and Sciences junior majoring in political science. His column, "Conservative Hot Corner," runs on alternate Mondays.
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