Should college be free?

During the 2016 Democratic presidential primaries, Bernie Sanders famously ran on the promise of free higher education, making him the hero of millions of college students. Free college will doubtless become an issue in 2020 as well, with Democratic Party candidates making big promises.

This raises the question: Should college be free?

The answer is complicated. When public resources are completely free, economists have found that a situation called, “the tragedy of the commons” arises. Free public resources are almost always misused and overused.

Moreover, there is nothing wrong with the basic notion that each of us has some responsibility to fund our own future development—and that of our children.

Students and parents should, therefore, have some skin in the game. So to state my conclusion from the outset, no, college should not be completely free.

But this does not mean that the present situation is fair, acceptable, or sustainable over the long term.

I graduated from college many years ago, but the children of many of my friends and relatives are presently going through the college application process. I’ve seen the sticker shock, and I don’t dismiss it. Suffice it to say that parents and students are being overcharged at a level that is borderline criminal.

But is the solution to socialize a corrupt and overpriced system? This is what Bernie Sanders and other progressive candidates of the Democratic Party essentially propose.

And on that one, I can’t agree.

 


 

Let me give you an old-timer’s perspective: I began my last full year of college in the fall of 1989. I attended the University of Cincinnati. My annual tuition, as a full-time student, was $3,000.

Yes, I realize that 1989 was a long time ago. There was no Facebook, we typed our term papers on electric typewriters, and dinosaurs roamed the wooded areas at the fringes of college campuses. No one expects anything to cost exactly what it did thirty years ago.

So I checked the inflation-adjusted amount on one of the many consumer-price index (CPI) calculators available on the Internet. When you bring three thousand 1989 dollars into the present, the figure you get is $6,075.

That means that a year of tuition for a full-time student at the University of Cincinnati should cost about about $6,100 per year, or $24,400 for a 4-year degree.

But full-time, in-state tuition at the University of Cincinnati does not cost $6,100 today. In-state tuition at the University of Cincinnati costs about $12,000 today. So students are paying about twice what I paid in 1989.

This makes absolutely no sense. In 1989, of course, we didn’t have the Internet. Everything was done manually, in-person, with lots of labor costs.

And I mean everything. I remember standing in line for hours outside the registrar’s office at UC in the hopes of signing up for a particular class. This involved not only thousands of students, but dozens of clerical workers, who manually entered changes to our schedules.

Our initial schedules, at the beginning of each quarter, were mailed in to the registrar’s office. This meant that someone had to open each envelope, and keypunch it into the school’s mainframe computer.

Today, of course, all of that is done online, largely without the need for any human intervention—or labor costs.

Almost all college students seem to be taking at least some online classes nowadays. This, too, was impossible in 1989. Every minute of instruction involved a real live professor, standing in front of a group of real live students, inside a physical space that had to be heated during the winter months, and air conditioned during the warm months. The lion’s share of those costs can be avoided when a course is conducted online.

 

 

College, then, should be much cheaper for today’s students than it was for the students of my day.

Let me retract what I previously said: College tuition in 2019 should cost what it cost in 1989—exactly what it cost in 1989: About three thousand dollars per year at the typical state university.

The question we should all be asking is not: “Who should pay the presently inflated tuition costs?” but rather: Why are universities so inefficient, that they can’t offer a product whose price reflects the efficiencies gained through the Internet and digital technologies?

College in the Internet Age should be dirt cheap, little more than a nuisance cost for most families. Instead it’s become a major investment—or in many cases, a major money pit.

 

Part of the problem is administrative bloat. Universities all have much larger administrative staffs today than they did in 1989. And I’m not talking about hourly clerical workers. I’m talking about professional, non-teaching administrators who haul down six-figure salaries.

Some of these salaries rival corporate CEO-level compensation. Let’s look at some concrete examples. During the 2016-17 school year, James Ramsey, then the president of the University of Louisville, made $4.3 million. The University of Cincinnati’s president, Neville Pinto, has an annual salary of $660,000. The president of Northern Kentucky University has a base salary of $440,000.

Speaking of NKU, in 2012 it was announced that the ex-president of that institution, Jim Votruba, would be paid $287,675 to teach only two classes. With additional benefits, his total compensation—for teaching two classes—totaled $371,000.

These are some pretty extravagant compensation packages, when you consider the scope of the student debt crisis. This also represents a transfer of wealth—from students, their parents, and taxpayers—to a small group of educational elites.

 

 

Universities also have a tendency to go on wasteful construction sprees. When I was a student at the University of Cincinnati, we used to joke that “UC” meant, “under construction”, because the university was always tearing down existing buildings, and constructing new ones.

I recently drove by the UC campus. I noted that at least two of the buildings constructed at great expense during my student days had since been torn down and replaced.

Now, granted, I am aware of my age, and aware that thirty years have passed. Nevertheless, there are buildings in Europe that have literally been inhabited for centuries. An academic building constructed with taxpayer and tuition dollars in 1988 or 1989 should still be perfectly serviceable.

 

 

Why are university administrations so wasteful? Mostly, because certain factors have shielded them from market forces.

Universities have, first of all, a monopoly on credentials. Some people do attend four years of college for the experience, and the actual education…such as it is nowadays. Most, however, are there for the sheepskin. Or rather, the doors that the sheepskin can open. If you want to land a professional job, you have to hold a diploma from an accredited, four-year university.

In this regard, things haven’t changed since my younger days. But the situation has gotten even worse. Colleges are now aggressively peddling worthless degrees in subjects like, intersectional gender studies, for example. Degree inflation, and the belief that college confers magical powers of competence on otherwise wet-behind-the-ears eighteen year-olds, has sent even more young people through the doors of these institutions over the past thirty years. The result is that it is now common to meet a twentysomething waitress or hourly Home Depot employee who has a four-year degree.

 

 

What can be done about this? About twenty years ago, there was a movement toward private sector, profit-based educational institutions that might break the university monopoly on credentials. You’ve heard of at least some of these, like the University of Phoenix, and Capella University.

That didn’t work out so well. Why not? Not because these institutions were doing anything wrong, necessarily, but because corporate employers, mired in their allegiance to the monopolistic university system, refused to recognize degrees from for-profit institutions. The net result was that thousands of students invested money in degrees from for-profit colleges that turned out to be worthless.

Perhaps for-profit educational institutions aren’t the answer. Nevertheless, we should be exploring ways whereby a person can earn credentials without the involvement of a traditional university.

One possibility would be a series of standardized tests. These have long been employed in fields like IT certification. The basic idea is, if you pass the test, you have the credentials. This obviously wouldn’t work for all fields. (No one wants to be treated by a self-taught brain surgeon.) But it should be possible for degrees in fields like business administration. And since so many universities are conducting their courses online anyway nowadays, self-study wouldn’t really be that much different from what you now do at an accredited, four-year university. Oh…except you wouldn’t have to take on tens of thousands of dollars worth of debt to study on your own for a standardized test.

 

 

But perhaps the most corrupting factor in the university system is the presence of third-party payments. I’m talking, of course, about government-backed student loans.

Third-party payments always increase costs. (This is why medical care is so overpriced in the United States, too.) University administrations realize that they don’t have to provide a product at a cost that the average 18- to 23- year old can afford. The reason is, they know that college students will ultimately be relying on government- (i.e., taxpayer-) backed loans. This means that the universities have access to an almost unlimited pipeline of ill-gotten money. Why should they worry about reducing their costs, or taking advantage of efficiencies brought about by the Internet?

Ironically, the corrupting influence of these third-party payments is exactly what the Democratic Party wants to increase in the system.  If college were to become completely free (completely government-funded) university administrations would become even more inefficient and wasteful than they presently are.

 

 

A far better approach would be to ask ourselves: How can we incentivize more economically efficient behavior on the part of universities, so that tuition might be affordable for the average college student?

The answer is the exact opposite of what Bernie Sanders has proposed. But no one ever said that Bernie Sanders has a grasp on economics. We should, on the contrary, phase out all government money in the university system. Require them to make do only on what they take in from their customers: students and their parents. If they can’t provide an affordable product, they’ll lose their customer base. That reality has a way of incentivizing efficient behavior.

This is exactly what automobile manufacturers, Amazon.com, and all other private-sector businesses do. They structure their operations so that they can provide products and services at prices that their customers can afford.

But we have succumbed to the myth that educational instruction is so sacred and complicated, that it can’t possibly be subjected to market forces. We believe this, even though what universities do is considerably less complicated than what Toyota or Amazon.com do. This is a myth that has been eagerly perpetuated by the higher education aristocracy. They have no desire to be subjected to market forces, just like everyone else.

I know: Many of you will consider this a radical proposal. Admittedly, it might not be doable overnight. But we could take baby steps in this direction.

We might start by changing the focus of the higher educational debate. Rather than squabbling about who is going to be taxed to support the inefficient and corrupt practices of university administrations, we all need to ask ourselves: Why is their product so overpriced to begin with?

This question, and our insistence on asking it, will be the first step toward making college affordable for students and their parents… as it should have been, all along.