Free College Is Too Expensive

There’s a reason why old clichés tend to hang around for decades. The reason is they’re based on fact.

Example: “There’s no such thing as a free lunch.” When someone says that a critically-important product or service is “free,” it isn’t. Everything costs money. Everyone who performs a service or delivers a product gets paid, as well they should. The only question is, by whom?

A popular recent theme is free college, which joins free preschool and free healthcare as the latest thing they say we’re “entitled” to for free, that we “deserve.”

Everything provided by other people costs money, in the form of salaries, rent, transportation, etc. -- every aspect of a delivered product or service is paid for by someone. If the government is going to provide something to the population for “free,” then the Government has to raise the funds to do so, by collecting taxes. The government has no “money;” it’s not like there is some big bank account that the government can tap when they need something extra and just write a check the way you do to cover rent or a car repair or a new refrigerator.

Quite the opposite: not only doesn’t the government have any money, it’s always spending money it doesn’t have. It’s like continually charging on a credit card where the credit limit is always raised and the card never gets refused. The continually-rising unpaid principle is our national debt, not to be confused with the annual deficit, which may shrink from time to time. (The government -- regardless which party is in power -- knows that the vast majority of people don’t know the difference between the national debt and the annual deficit, so they tout periodic deficit reductions as being accomplishments of great import, knowing that most people will interpret that as a major debt reduction, and thus feel that “all this confusing talk about ‘the money our children will have to pay back tomorrow’ is overblown” and taken care of.)

Free public college. (Ostensibly, people would still voluntarily take on the enormous financial challenge and responsibility of paying for enrollment in a private university.) Everyone gets to go to college if they want to, regardless of their personal financial circumstances.

Lots of European countries offer this. Germany, for example, pays for it with a 17% payroll tax (compared to our 6.2% payroll take) and a 19% national sales tax, called VAT (Value Added Tax) that is part of every product and service at the time of transaction. Germany also has lots of other taxes, but these are the main sources of their public largess. This is approximately a 25% tax premium over and above what we’re currently paying in payroll and sales taxes. An additional 25% net paycheck reduction here in the U.S. would be catastrophic for many people. Absolutely catastrophic.

The folly of raising taxes for free college is that only about 40% of college-aged American kids go to college, and not just because of their financial circumstances. Many don’t qualify academically; others want to work or have other social options and simply don’t want to go. But “free” college will encumber 100% of the consuming/working public with burdensome, onerous taxes to fund a benefit that only 40 or 50% of the college-aged population will use.

The best way to make both the ever-more-expensive state/community colleges and the stratospherically-expensive private colleges more “affordable” is to restructure the entire financial landscape so that colleges are in direct competition with each other for the students’ business, the way any retail or other competitive business vies for their customers’ attention and buying dollars.

The current government loan/grant/financial aid scenario distorts and masks the true cost and competitive potential of the higher education industry. Since all colleges -- including “public” colleges -- realize that a very significant swath of their students get artificially low-rate loans and generous grants/financial aid, the colleges themselves simply jack up their tuition, salaries and fees -- at a rate far in excess of inflation -- secure in the knowledge that the Government will be doling out free money for the students to pay for a major portion of it.

Lavish resort-quality dorms, overpaid, questionably-qualified tenured ‘professors’ who are free to spout any non-academic drivel they please, college sports programs unhinged, etc., are all indications of the over-priced, inefficient conditions at many (but not all) colleges, where rigorous, verifiable, accountable academic study seems almost incidental to a college’s existence.

Remove the artificial crutch of the government’s typical 40% or so share of the $62,000 cost at Union College in upstate NY, and virtually no one would be able to afford to go there. Nor would anyone but the wealthiest be able to attend Boston University or Northeastern for $65,000/year. If government-subsidized financial assistance was removed from the equation, anyone could figure out what happens next: once colleges, public and private alike, are forced to furiously compete with each other in the open market for their customers’ (students’) hard-earned, scarce cash, prices will come down, services will increase, “deals” will materialize -- in short, the product gets better and the value increases, as the “companies” (colleges) get leaner, meaner and more competitive.

This is the free market at work. The exact same rules that govern your business would be at work in the college market. That’s what needs to happen. Will it ever be possible to remove or severely limit the politicians’ deep-seated ability to “buy” votes with financial aid programs and thus negate Government’s ability to exercise undue influence over a huge segment of the electorate (the families of college-aged students)?

It will take creative thinking, courageous lawmakers to do so. But the societal and economic benefits of a higher education system whose affordability and quality is based on the efficiencies brought about by the ruthless improvements imposed by competitive free-market principles would be permanent and undeniable.

There’s a reason why old clichés tend to hang around for decades. The reason is they’re based on fact.

Example: “There’s no such thing as a free lunch.” When someone says that a critically-important product or service is “free,” it isn’t. Everything costs money. Everyone who performs a service or delivers a product gets paid, as well they should. The only question is, by whom?

A popular recent theme is free college, which joins free preschool and free healthcare as the latest thing they say we’re “entitled” to for free, that we “deserve.”

Everything provided by other people costs money, in the form of salaries, rent, transportation, etc. -- every aspect of a delivered product or service is paid for by someone. If the government is going to provide something to the population for “free,” then the Government has to raise the funds to do so, by collecting taxes. The government has no “money;” it’s not like there is some big bank account that the government can tap when they need something extra and just write a check the way you do to cover rent or a car repair or a new refrigerator.

Quite the opposite: not only doesn’t the government have any money, it’s always spending money it doesn’t have. It’s like continually charging on a credit card where the credit limit is always raised and the card never gets refused. The continually-rising unpaid principle is our national debt, not to be confused with the annual deficit, which may shrink from time to time. (The government -- regardless which party is in power -- knows that the vast majority of people don’t know the difference between the national debt and the annual deficit, so they tout periodic deficit reductions as being accomplishments of great import, knowing that most people will interpret that as a major debt reduction, and thus feel that “all this confusing talk about ‘the money our children will have to pay back tomorrow’ is overblown” and taken care of.)

Free public college. (Ostensibly, people would still voluntarily take on the enormous financial challenge and responsibility of paying for enrollment in a private university.) Everyone gets to go to college if they want to, regardless of their personal financial circumstances.

Lots of European countries offer this. Germany, for example, pays for it with a 17% payroll tax (compared to our 6.2% payroll take) and a 19% national sales tax, called VAT (Value Added Tax) that is part of every product and service at the time of transaction. Germany also has lots of other taxes, but these are the main sources of their public largess. This is approximately a 25% tax premium over and above what we’re currently paying in payroll and sales taxes. An additional 25% net paycheck reduction here in the U.S. would be catastrophic for many people. Absolutely catastrophic.

The folly of raising taxes for free college is that only about 40% of college-aged American kids go to college, and not just because of their financial circumstances. Many don’t qualify academically; others want to work or have other social options and simply don’t want to go. But “free” college will encumber 100% of the consuming/working public with burdensome, onerous taxes to fund a benefit that only 40 or 50% of the college-aged population will use.

The best way to make both the ever-more-expensive state/community colleges and the stratospherically-expensive private colleges more “affordable” is to restructure the entire financial landscape so that colleges are in direct competition with each other for the students’ business, the way any retail or other competitive business vies for their customers’ attention and buying dollars.

The current government loan/grant/financial aid scenario distorts and masks the true cost and competitive potential of the higher education industry. Since all colleges -- including “public” colleges -- realize that a very significant swath of their students get artificially low-rate loans and generous grants/financial aid, the colleges themselves simply jack up their tuition, salaries and fees -- at a rate far in excess of inflation -- secure in the knowledge that the Government will be doling out free money for the students to pay for a major portion of it.

Lavish resort-quality dorms, overpaid, questionably-qualified tenured ‘professors’ who are free to spout any non-academic drivel they please, college sports programs unhinged, etc., are all indications of the over-priced, inefficient conditions at many (but not all) colleges, where rigorous, verifiable, accountable academic study seems almost incidental to a college’s existence.

Remove the artificial crutch of the government’s typical 40% or so share of the $62,000 cost at Union College in upstate NY, and virtually no one would be able to afford to go there. Nor would anyone but the wealthiest be able to attend Boston University or Northeastern for $65,000/year. If government-subsidized financial assistance was removed from the equation, anyone could figure out what happens next: once colleges, public and private alike, are forced to furiously compete with each other in the open market for their customers’ (students’) hard-earned, scarce cash, prices will come down, services will increase, “deals” will materialize -- in short, the product gets better and the value increases, as the “companies” (colleges) get leaner, meaner and more competitive.

This is the free market at work. The exact same rules that govern your business would be at work in the college market. That’s what needs to happen. Will it ever be possible to remove or severely limit the politicians’ deep-seated ability to “buy” votes with financial aid programs and thus negate Government’s ability to exercise undue influence over a huge segment of the electorate (the families of college-aged students)?

It will take creative thinking, courageous lawmakers to do so. But the societal and economic benefits of a higher education system whose affordability and quality is based on the efficiencies brought about by the ruthless improvements imposed by competitive free-market principles would be permanent and undeniable.