SATURDAY, APRIL 19, 2008
COM
Why government ought not
By Kiley Austin-Young
The total cost of my undergraduate edu-
cation, at an arguably overpriced private
university, will eclipse $200,000. This esti-
mate includes full tuition, summer classes,
textbooks, housing, food, kegs of Natural
Light, and spring break vacations to Aruba.
Due to my selection of an expensive
school, and my overindulgence in certain
extracurricular activities, I will enter the
labor market saddled in debt. None of my
tuition will have been reduced or subsidized
by the federal government, nor does it need
to be, because the shocking price tag of my
privately financed bachelor’s degree will
some day be worth every penny and more.
On the campaign trail and in
Washington, there has been a lot of talk
recently about the federal government’s
stepping in further to help combat the high
and increasing costs of a college education.
The most prevalent solution offered by
politicians, including Sen. Hillary Clinton
and Sen. Barack Obama, is also the most
appealing: Increase government subsidies of
tuition to make college much cheaper or free.
As conventional wisdom goes, because
the cost of a college education has risen so
rapidly - outpacing the rate of inflation year
after year - it has become a bad investment,
and there is a need for federal assistance by
way of subsidies and regulation. But as it
often is, the conventional wisdom is more
folly than fact.
It is true that there has been a substantial
rise in university tuition since 1980 (in con-
stant dollars, it has more than doubled). It is
equally clear that higher tuition rates have
made it hard for many students and their
families to finance a college education.
But the net benefits of attaining a degree
have risen far more rapidly than the costs.
Taking into account the higher income
gains realized by the completion of a
degree, college has become more afford-
able in recent decades. Higher education
subsidize tuition
has never been a better deal.
The numbers are clear. An average bach-
elor’s degree worker will earn almost $1
million more over the course of a lifetime
than a worker with only a high school diplo-
ma. An average professional degree holder
will realize an additional $2.3 million in
income. Even those graduates who earn far
less will overcome their educational costs
with the added income. Because of these
dramatic added gains, students can finance a
college education by borrowing against
future income.
Let us assume that an average college
graduate has shouldered the full costs of an
education at one of the priciest colleges in
the nation. Say, also, that the student has no
parental assistance, no cosigner, and no
credit, and so his or her private loans are
granted at wildly unfavorable rates.
Even in this most extreme mythical
case, the $1 million in added income would
slowly but surely render the massive accu-
mulated debt a wise economic decision. As
Nobel Prize-winning economist Gary
Becker concluded recently on his blog: The
debt of a student who borrows a lot by the
standard of what the average student bor-
rows is still usually not large relative to the
earnings most students receive after work-
ing for several years.
Thus, there is no reason for government
to subsidize a college education that is
already eminently affordable.
Of course, students who intend to enter
relatively low-paying fields cannot borrow
against a future salary they will never earn.
An efficient market determines that
accountants are more valuable, and should
be compensated more, than caretakers.
Doctors are more valued than vegan cater-
ers. In most cases, the economic allocation
of labor makes practical sense.
WWW.PHILLY.
As conventional wisdom often forgets,
government subsidies are expensive and are
funded by taxpayers. Ironically, those truly
disadvantaged citizens who are unqualified
to attend college end up footing part of the
bill in taxes for the education subsidies that
will make better-off Americans much better
off. The opportunity cost of the education
subsidy money is that the public dollars,
which are supposed to be helping those who
cannot afford economic advancement, are
often not doing that.
Luckily, progressive-minded colleges
have stepped in to offer their own market
solution in the form of price discrimination,
or as it is known in the industry, financial
aid. The policy has allowed students from
poorer families with solid academic records
to attend good colleges while paying little
tuition. These students have the benefit of
leaving college with much less debt.
These financial-aid policies and the rise
in average return on the college investment
have naturally led to more degree-holders.
The growing education level of the popula-
tion has led to better wages, increased pro-
ductivity, and higher living standards over
the last century.
If the many benefits of a college educa-
tion continue to outpace the costs, subsidies
are not needed. Precious public funds are
better spent increasing opportunities for the
disadvantaged, those who - from a flaw in
the educational system or a broken family
life - will not even finish high school.
Real change will be difficult, for extend-
ing the rapidly rising rewards of higher edu-
cation to the individuals who need it the most
will take much more than a pie-in-the-sky
subsidy proposal and a FAFSA form.
E-mail Kiley Austin-Young, a sophomore at
Penn majoring in English and economics, at
kileyaustinyoung@gmail.com.