There’s no such thing as a free education

About the Author

Alexandre Padilla is a professor in the Department of Economics at Metropolitan State University in Denver. He obtained a bachelor’s degree, a master’s degree and a doctorate in economics at the University of Law, Economics and Sciences of Aix-Marseille III in Aix-en-Provence, France. He teaches microeconomics, law and economics, applied economic policy and the political economy of immigration. His most recent research on immigration and populism has appeared in Constitutional Political Economy, Independent Review, International Trade Journal, Journal of Economic Behavior & Organization, and Journal of Private Enterprise. Alex Padilla is also the director of the Exploring Economic Freedom project. Its primary mission is to educate students and businesses and the wider community on the role of economic and political freedom in promoting entrepreneurship, economic growth, prosperity and peace and to provide a forum for interdisciplinary discussions on issues widely debated in academic, intellectual and public circles. political circles.

Glenn L. Furton is assistant processor of economics at Metropolitan State University.

The price of college is too low. It’s true – college is too affordable for students who, when the books finally balance, can’t afford it. Unfortunately, making it “free” by canceling student debt will only serve to exacerbate the ills of higher education.

Since elementary school, nearly every adult has told students that ticking a particular set of boxes (graduating from college, ✓) would guarantee their success. Parents, educators, and college administrators became proselytes.

And why wouldn’t they? Bachelor’s degree holders earn on average 84.7% more than workers with only a high school diploma. Nationally, bachelor’s degree holders earn an average salary of $92,608 while workers with a high school diploma earn an average salary of $50,151. In Colorado, workers with a bachelor’s degree earn an average salary of $92,777, or 71.4% more than workers with a high school diploma ($54,117), according to figures from the Thomas Fordham Foundation, which the Associated Press describes as a “conservative lean”. organization.

Numbers don’t lie, do they? Maybe. But we tell this story using medium, and averages hide important details, like variation — a crucial part of this story, because graduate salaries vary widely depending on where they graduate and what majors they choose. Labor market outcomes like unemployment rate, underemployment rate (holding a job for which your degree is not a prerequisite), and income growth also vary. Disciplines considered difficult – engineering, computer science, finance – are less popular among students, but bring in higher average earnings, while less difficult majors – arts, humanities, education – enjoy greater popularity, but lower wages. This variation can skew the wage distribution such that a small number of high earners raise the average and mask the frequency of lower earners.

IN DEPTH : Current and former Colorado students weigh the pros and cons of student loan forgiveness

Currently, financial aid contributions do not take these variations into account. Whether a student plans to study Philosophy or Engineering, aid is awarded based solely on the need and cost of the student’s education. Any link between the price of education today and that which will have to be paid tomorrow is broken. Graduates only realize the full cost of their education years after the investment when they are locked into specific skills that may or may not be valued by employers.

The growing disconnect between the expectations of students entering college and those leaving college is evident in a recent survey that shows college students overestimate their starting salaries by an average of $50,000! Graduates struggle to pay. And those who do can still see debt rise, because fixed interest rates and flexible repayment plans don’t mix (who would have guessed?).

The ballooning debt should come as no surprise. Easy access to loans is fueling demand for college degrees, prompting universities to raise tuition fees. More aid, higher prices, more debt.

With loans on pause until August 31, the future of higher education is fraught with uncertainty. President Biden and other Democrats have suggested the panacea of ​​canceling student loans — a proposal that is gaining traction among voters.

Although not everyone reacts in the same way to incentives, we should expect a policy of forgiveness to generate the following consequences:

  • Higher university attendance: More students will attend college than they otherwise would have, leaving “the path not taken” less valued, even though many students are perfectly suited to create successful careers without the hassle of a degree of four years.
  • Higher tuition fees: The increased demand for university attendance will increase the price of tuition. Larger budgets will disproportionately fund campus administrators and amenities (as opposed to education) as schools try to attract more students.
  • Confused labor markets: If students don’t pay the full cost of their decisions up front—or if they expect future policies to ease their financial responsibility—then they will choose majors with myopic profligacy. This will leave labor markets irreversibly disordered and will require corrections, as skilled workers do not appear in the blink of an eye and will not emerge from the tip of a legislator’s pen.
  • Future expectations: Future cohorts will come to expect absolution, leaving the details unresolved to unrelated current systemic issues. When future graduates find their educational investments undervalued, they will form an effective political interest group, with similar demands on the taxpayer – but this time they will be armed with a powerful precedent.

Over the past 50 years, we have witnessed a system full of questionable incentives, where unwise choices are rewarded, despite their consequences. Forgiving students doubles down on this dysfunctional system by further reducing the cost of debt. And when debt gets cheaper, we shouldn’t be surprised to see more of it.

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