It was surprising to hear the word “surplus” on Capitol Hill on April 7th, having grown accustomed to the usual news about deficits. But the Cato Institute pin-pointed one surplus that is, because of the mismanagement of government funding, harming the system. The surplus is in college graduates. Financial aid for higher education has become an unjustified burden on taxpayers, encouraging unprepared students to attend schools where they do not acquire necessary skills, and has caused our educational system to become outdated and disproportionately expensive.
Andrew Gillin, of the Center for College Affordability and Productivity, prefaced his remarks by pointing out that about 40% of young college graduates are working jobs that do not a require a college degree. To make matters worse, the areas that are growing most rapidly that require advanced degrees, like computer software engineering and mental health counseling, employ relatively few people.
Gillin’s chief argument was that financial aid actually makes college less affordable. Because government subsidization of education has become so widely available, universities know that they can charge higher prices and get away with it. At the same time, more students, often unprepared, are filling expensive universities on the taxpayer’s dollar, when they would not do so if it meant taking out high-interest loans or spending saved money.
Government financial aid is fueling this cycle of rising prices and low outcomes, Gillin said: “the end result being that the government is providing more money…but that increase in money is accomplishing less in terms of making the financial burden on families manageable.”
He goes on to explain that the problem with financial aid, and the effect it has of driving university prices up, is that it is impossible to reliably quantify the value of a college education. The prices are distorted, and the financing comes from so many places including federal aid, outside scholarships, and personal wealth, that universities thrive on prestige rather than the skills they teach.
For example, the dean of admissions at Harvard, William Fitzsimmons, recently said, “At Harvard we get terrific students and we turn out terrific students later. Is that due to Harvard, or is that due to the students to begin with? Who knows?”
Neal McCluskey, of the Center for Educational Freedom, Cato Institute, agreed that financial aid has distorted our system of higher education. He explained that “any government student aid, and aid to colleges and universities, distorts the priorities of individuals.” His point was that individuals prioritize their time and money differently depending on personality and position. Some place higher importance on buying clothes, others on their car payment, and others on starting or running a business. With federal financial aid, however, the government is essentially distorting the priorities of millions of potential students by making college an easy first priority.
For most people it is easy to understand that for society to operate, it is necessary to have a large force of blue-collar workers. But explaining this to a teenager from a family who cannot afford to send him to college is much harder. Making college a first priority is good in theory, but it has unintended consequences. As discussed earlier, nearly half of students do not go on to careers in which their college degrees are required anyway, meaning that their college education was a poor use of public funds.
An even greater cause for concern is that students are entering college sensationally underprepared. Statistics show that of students pursuing a 4-year degree, only around 50 percent complete their schooling within 6 years. On top of that, at least one-third of students entering colleges need remedial courses, which is a further drain on taxpayer dollars when these students are federally funded—especially when a large portion of these students never end up graduating.
There are not only practical, but moral concerns with offering financial aid for higher education. “There’s no moral justification for providing free money to somebody so that, first and foremost, they can increase their earning potential over time,” said McCluskey. He continued, explaining that it is morally reprehensible to take the tax money paid by someone who did not go to college, and offer it to someone who seeks to make more money for himself over time through higher education.
The ultimate problem with this use of taxpayer dollars is that it leads to economic inefficiency. The current process essentially takes money from people, who presumably know how to spend that money in order to satisfy their own needs. It then gives that money to students and institutions which use the money ineffectively, not having worked for the money or necessarily gained an appreciation for it.
The late Chris Warden, a respected Troy University professor, summed up the “tuition explosion” and ineffectiveness of government-sponsored education masterfully. At the National Press club last July, he said that the government, by handing out free money, is “insulating the consumer from the price.” So to the recipient, the education is suddenly a desire because it is free, “but somebody has to pay for it at some point.” His suggestion at the Accuracy in Academia (AIA) event for solving the problem was to have a very strict income test, one which presumably does not include the middle class, do away with loan programs, and let higher education institutions compete in the marketplace.
Warden authored AIA’s upcoming textbook, Voodoo Anyone? How to Understand Economics Without Really Trying.
A report by Andrew Gillin called Financial Aid in Theory and Practice, which demonstrates the actual impact of financial aid, can be found online at: http://www.centerforcollegeaffordability.org/uploads/Financial_Aid_in_Theory_and_Practice.pdf.
Daniel Allen is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.
