Rethinking public subsidies in higher education

Students walk across the campus of UCLA in Los Angeles.

David Lazarus: We're talking about the intersection of politics and personal finance this week, and here's an issue that's gotten voters' bacon sizzling over the last year: Student loans. Believe it or not, there's already more student debt outstanding than there are credit card bills. And this is the one type of debt you can't chase away with a bankruptcy filing. Meanwhile, tuition costs keep rising, with no end in sight. Commentator Andrew Kelly says it's time for states to rethink their relationship with public education -- and perhaps pass on a greater share of the costs to families.

Andrew Kelly: In earlier eras, the government had good reason to invest public funds in higher education to make it more readily available. For most of this nation's history, access to higher education was limited. That's because post-secondary learning was only available at a small number of physical campuses with highly educated professors, massive collections of books and specialized facilities. College was a scarcity. Students who wished to pursue higher education had to travel to these campuses to learn. Those in rural areas often lacked access, as well as those in more populous places where demand outstripped the supply of seats in the lecture hall. This is where the state came in. To make higher education more widely available, the state built hundreds of regional four-year campuses, followed by more than a thousand community colleges. To keep college affordable, the state has subsidized public institutions directly, and provided indirect subsidies to all institutions via student aid.    


See how much your state spends per student on higher education. Explore our interactive map.    


This heavily subsidized model made sense so long as higher education was a scarce commodity. But advances in technology -- like digital content and online delivery -- have made higher education available to a much wider audience, creating models of college that are far less expensive to provide. For the most part, traditional institutions of higher education have not embraced these innovations, continuing to operate as they did 50 years ago. Still, they expect the levels of public subsidy they grew accustomed to in the era of scarcity. But the world has changed and higher education policy must change with it. The state still has an interest in creating a highly educated work force. But technology provides us with far more cost effective means of doing so. Rather than plead for more money to subsidize an increasingly outdated model, colleges and universities must embrace the innovations that can make them more cost effective. If they do not, a slew of new providers who receive no public subsidy at all will be there to pick up the slack.    


Lazarus: Andrew Kelly is a research fellow in education policy at the American Enterprise Institute.    


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Andrew Kelly is a research fellow in education policy at the American Enterprise Institute.
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Seriously, Marketplace Money? You run an opinion piece from a the American Enterprise Institute as a "discussion" on higher education? That history lesson! Where would America be without the land grant universities? Where did your grandparents go to college? Yes, university education is less scarce than it used to be in some ways. If you like to consider for-profit colleges like the University of Phoenix, then there are many more open seats in university classrooms that there used to be. If you look a tiny bit closer, you'll find that when university education is a publicly-traded commodity, funded by the government on Pell grants, then you get pathetic educations for more than the cost of a state university tuition and a dropout rate upwards of sixty percent without the benefits to citizens (scientific research, public policy studies, extension programs, honeycrisp apples) that a publicly funded university provides. Higher education does not work on an "I give you five dollars and you tell me about Keynesian economics" supply and demand model. We need to subsidize it on the front end and we reap the rewards in a well-educated citizenry.

Part of the problem I saw when I was in college as an adult learner in the last two years was that the State Colleges were accepting anyone who applied even if they were not ready for College. The State and Fed would give the college funding to run 099/basic skill classes for students who failed the post admission testing. This allowed High Schools to not have to worry about being so strict on grades and graduate with honors kids who were unable to do basic math or write simple one page stories.

Why worry, the College will teach it. The College does not mind because now they get the student for an extra semester, more funding from the state, and if the student drops out, oh well. In the mean time professors are still poorly paid, but per student spending is massively up.

I took the number of hours in a semester I spent in classes and lab and divided that by my total cost of tuition, books, fees, and parking to come up with $23.78 an hour I was paying to learn. At the end of the semester, I could honestly say I had two classes that gave that value or more. The other four gave me no where near that value.

But the Fed Gov has strings attached to its money (as well as the State), if you take Fed money you have to require students to take classes that don't teach them anything they need for employment in their field of study. Get rid of the Fed/State money and you get rid of the strings which would let Colleges teach as they saw fit, not some agency in DC.

For Christy's comment, she is right that polarizing political viewpoints don't help anybody and those viewpoints come from both sides of the aisle. It is always OK to disagree with someone's point of view. But to deliberately condemn an organization's analysis because you don't believe in what you suppose to be their particular politics, also doesn't help anybody.

Hi Marketplace Money,

I typically love your show. But I've been disappointed recently that you've been featuring commentary from people affiliated with advocacy organizations that look at the world in a very slanted way - namely, the American Enterprise Institute and the Cato Institute. These are not widely recognized as respected research institutions, and having commentary on by their members gives these organizations a legitimacy that they don't deserve.

I would rather hear from people who use actual respected research to back their claims (or "regular" people with compelling stories and points of view) than from entities that many, including me, believe are simply advocates for a particular world view.

Your listeners are just everyday people who are trying to figure out what to do about personal finance. I need helpful personal finance information I can use. Polarizing political viewpoints disguised as commentary don't help anybody.


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