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February 16, 2012

Let the Free Market Set College Tuition

When President Obama talked about unaffordable college tuition, he failed to point out that federal subsidies are responsible for much of the unaffordability. In his State of the Union message, he said, "If you can't stop tuition from going up, the funding you get from taxpayers will go down." However, since tuition is dependent on federal aid, it cannot remain stable or go down unless federal aid is reduced.

Presumably the president is intent on campus-based aid when--only when--universities set responsible tuition policy. But what precisely does that mean? For private colleges and universities, the tuition rate is fixed based on the competition. NYU is likely to set tuition increases near the Yale rate and Yale is likely to set its tuition at the Princeton rate and so the beat goes on.

Now if there were real interest in "providing good value" as the president noted, there would be longitudinal studies on graduates. But what would one say about Bill Gates, Steve Jobs, Ralph Lauren and others who were college drop-outs? Moreover, what does it mean to talk about "good value" when students can design their own course of study avoiding mathematics, chemistry, American history, even Shakespeare?

If the government denies assistance to colleges, many would collapse. Would that be a bad thing? It is if one of the colleges is your alma mater, or if your son or daughter goes there. But President Obama is not really serious about reducing aid, and most university officials know that the award for Pell grants is likely to rise and eligibility to loosen.

Many parents are caught in an ideological dilemma. On the one hand, they want to reduce the size and influence of federal authority; on the other hand, they realize that without Pell grant and other federal subsidies, they may not be able to afford tuition for their children.

Universities should tighten their ever-loosening belts by refusing government aid. This might encourage curriculum reform, a return to basics instead of the present curriculum which includes the fashionable and the trifling. In my experience there isn't a major university in the United States that couldn't cut 10 percent of its budget without in any way adversely affecting the delivery of programs and services. These cuts might also serve to catalyze institutional reform such as on-line programming and independent study projects.

The trick is to unleash market forces. Let curriculum reform dictate marketability. Let online courses serve as a credible alternative to classroom study. Let some universities fail--some certainly should. And let parents and students make choices based on the trade-off between taxes and tuition.

The President could make a difference if he said it is time for the federal government to get out of the way so that market forces can flourish. There was a time when tuition rates were affordable for even working class people, but that was before federal intervention. It may be time to turn the clock back to that period.

Comments (5)

Muvaffak GOZAYDIN:

If people are uninformed then they buy bad quality goods. They also buy bad if there is no choice.
Education like health is the duty of governments in the world. Today there is a solution for high education in the world. ONLINE from best schools like MIT, Stanford, Yale, Harvard, Princeton, Berkeley and some more.
Thru technology these schools can reach to whole world not only USA and have the people learn, assess them and give them degrees at a small fee such as $10 per course. Technology is that good. Obama should be aware of that and support this technology and schools immediately.

Muvaffak Gozaydin:

Very practical solution to reduce cost of college. Today there are 20 million full time equivalent students in USA. They take 10 courses per year. That is 200 million courses per year. If only 1 course is taken by all students online cost of college would drop 10%, if 2 then 20%. Cost of online is nill if taken by many people. If your college does not offer an online then get it from another college and transfer the credit. Imagine if 5 courses are taken then cost of college drop 50% and everybody can afford it, including the government.

Steve:

Free/cheap education is coming. As sure as newspapers are dying so to will the traditional methods of educational delivery. There are a lot of buildings and highly compensated educators/administrators to be paid in the meantime.

Christian:

I don't understand why people are paying 45,000 a year to go to college That seems so absurd to me. Get accepted into a state school, around 10k a year for tuition, and work hard in high school to get local scholarships to pay the difference. It can be done, debt-free, and without parental assistance. The key is working hard and I'm at my state's law school now paying 4k a year with scholarship, when the average law school costs 40k in tuition. My undergraduate education was entirely free at a top25 public school. Good grades buy your debt And your future job, and that's the truth.

JWB:

You say aid drives tuition higher, but state college tuitions are significantly lower than most private schools, and many of both have billions in endowments. That's not the government's fault...

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