Thursday, March 28, 2013

The High Cost of Higher Education: Is Government the Solution or Problem?

            by KEVIN CZARZASTY

            As the cost of college rises year after year, we should wonder:  What is the best way to ensure the maximum quality of services provided by universities, while minimizing ever-growing tuition?

            This and recent administrations believe that access to government loans will enable more students to attend college, earn a better living, contribute to society more productively, and in turn, everyone will presumably become better off.  However, are there unintended consequences of government providing easy credit to so many 18 year olds?

            One argument against government stimulating education is that, by enabling so many to attend college by means of debt, universities have no incentive to keep their prices down.  That is, as government provides student aid to combat high college costs, costs increase even more.  Consequently, the government provides more student aid, prices go higher, and the cycle repeats.

            Another issue created by government intervention is, if prices continue to rise while the amount of students able to attend also rises, eventually a massive student debt bubble will form�if it has not already formed.  The recent mortgage crisis saw far too many individuals receive easy credit and low interest rates to purchase homes with government assistance.  This same trend is currently threatening the higher education market.  If easy credit is continually provided to prospective students, oversaturated job markets and high monthly loan repayments will likely lead to disaster.

            Lastly, and perhaps most importantly, does allowing the government to stimulate supply of higher education dilute the value of a college degree?  When government prints more money, the money already in existence loses value because it becomes less scarce.  The same is true for college diplomas.  As government policies increase the amount of students attending universities, colleges print more and more diplomas, and the edge that comes with having a college degree becomes increasingly dull.  This is not opinion but rather economic law.  When more students get a diploma, the return on investment of a diploma diminishes.  The product becomes devalued, because it is less scarce.

            How will the education debacle end?  Will the now one trillion dollar bubble burst, or does our government have everything under control?  The future is uncertain, but we can still shape the present policies.  Perhaps we should continue allowing government to enable individuals to attend colleges that they otherwise could not afford.  On the other hand, perhaps we need to allow the free market to function.  At the end of the day, it is up to you.

            You are, after all, Free to Choose.

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