There was once a time in American history when funding for higher education came almost entirely from the state. Today, students bear the enormous burden of ridiculously high tuition, which has been met with lamentable levels of predatory lending. America is one of the only industrialized countries in the world to not provide a free college education for its population. Even largely capitalist countries such as Germany, Finland, and France provide an excellent, virtually free college education.
But who is to blame for this extraordinary spike in tuition prices?
One major contributor to the rise of tuition was the rapid increase in demand for a college education that began in the early 1970s, which came as a result of fundamental changes within the United States labor market. As many low-skill jobs were being shipped overseas, where labor was significantly cheaper, new jobs were created in industries that required complex problem solving and communication. Technological advancements also played a crucial role in increasing the demand for a college education by creating new industries that, by their nature, required young, bright college graduates.
This increase in demand was not met with new government programs to help students in an economy that was becoming more in need of college graduates, leading to students inheriting substantial financial burdens. Government inaction also led to predatory practices by malicious banks and lenders, who sought to exploit the situation.
Student loans are infamously known for the fact that they are incredibly difficult, if not impossible, to be discharged when filing for bankruptcy. The reason for this is because of the powerful bank lobby, which pushed through special exceptions for student loan debt in the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. These exceptions, now written in the law, opened the floodgates for predatory lending in student loan debt. Lenders no longer had to take into account the employability or projected income of students in their loans, instead, they pile on thousands of dollars of debt with high-interest rates on students who are unlikely to repay these loans.
The process of predatory lending which has become highly prevalent in student loans can best be described as a microeconomic version of how French and German banks lent money to bankrupt countries, such as Greece, leading up to the 2008 financial crisis. Lenders simply do not care about issuing loans worth enormous amounts of money to those that they know can not repay them because it is usually not their money, and if the borrower is legally obligated to pay that debt back, even when facing bankruptcy, there is no reason not to loan as much as possible to make robust profits on already high-interest rates. This system of predatory lending is suspected to have played a role in enabling exponentially increasing tuition costs, but, at the very least, it is an unethical practice that must be stopped with proper regulation.
So what can we do to stop increasing tuition?
Eliminating all tuition for public colleges and universities is estimated to have an annual cost of $79 billion. A hefty price, but still less than the $89 billion the United States federal government already spent in 2016 towards policies that have subsidized higher education. So where did all of this money go?
Around $37 billion was spent on tuition tax credits and other tax benefits, which have disproportionately benefited wealthy families who have sent their kids to college anyway. Another $13 billion was spent on subsidized interest payments on student loans for students enrolled in college. And $41 billion went towards aid for federal aid for low-income students and veterans.
If this funding was simply readjusted, America can very well manage a system of free tuition for all public universities with a minimum burden on the taxpayer. While this solution does not solve all of the problems in higher education programs, it will substantially improve the lives of millions of future students who simply want to study what they love without worrying about crippling amounts of debt.
It is also reasonable to assume that tuition-free colleges will encourage many children from middle and lower-class families to pursue higher educations, which can help reduce the shameful amount of wealth and income inequality present within the United States.
The case for free college not only holds a strong ethical argument but is also financially sound and inexpensive. America’s habit of subsidizing industries that are better off being paid for entirely has forced ordinary Americans to pay more for less, and now is the time for us to change that.