Saturday, September 09, 2006

"Free" College Education

There are many arguments for free (taxpayer-funded) college education. (See, Diane Heldt, "An 'F' in Affordability; Report Says Iowa Families Devote 'Very Large Share' of Income to College Costs," The Gazette, September 7, 2006, p. 1A.)

1. Americans have historically placed great value on education.

Of course, what "education" referred to evolved over the last couple centuries. Originally a third or fourth-grade edcation was sufficient to gain enough skill at "reading, writing and arithmetic" (referred to as "the 3 R's" -- obviously by those who had a little difficulty with spelling) to work on a farm or at one of the trades.

But over time this was expanded. When and how it was expanded depended on the state, and whether the schools served large urban centers or more sparcely populated rural areas, with their "one-room schools."

Sometimes the minimal education standard has been expressed in years of schooling; other times in terms of years of age of the student -- or some combination of both.

Over time, and with greater industrialization (for one of the primary driving forces behind universal education as always been to serve commerce) the assumed minimum went to six or eight years of schooling, and finally to what we today call "K-12."

The presumption has been that a well-educated citizenry and workforce is of sufficient benefit to all citizens and taxpayers that it is reasonable for all to be assessed the cost of education.

The K-12 minimum has not been further expanded in spite of all the changes in our culture, economy and basic technology during the past 50 years. Today graduate training beyond the four year college degree is required for many jobs. The jobs formerly available for high school graduates -- relatively good paying union jobs in manufacturing -- have been lost to automation and globalization. Taken together, it is not irrational to suggest that -- just as we expanded from 1-8 to K-12 -- the time has come to fund a "K-16" minimum for all: "Free" College Education.

There are many issues and problems with this idea, but I'll discuss a couple of them here -- along with proposed solutions.

2. (a) It will be harder to make the argument that the taxpayers who would be paying for everyone's free college education will receive as much benefit from those expenditures as they do from what they pay to create a community where everyone has the minimum of a K-12 education. (1) The costs are greater per student. (2) The avoidance of the negatives from an uneducated population (i.e., those who do not have a K-12 education; poverty, crime, health care) is a much greater benefit than eliminating the negatives resulting from the absence of a college-educated population. (3) Whereas kids in K-12 have no option to live, and become educated, elsewhere, high school graduates headed for college do have such options. Therefore, the local citizens paying the taxes may never see the direct benefits from the additional education provided to some of the college students who have come from outside the area, and go elsewhere once they graduate.

(b) Everyone benefits economically, personally, from their own education; the more education, on average, the greater the benefits. Thus, while society also benefits from a college-educated population, as it does from a high school educated population, the proportion of that total benefit going to the college-educated student is greater than the benefit going to the high school student. Thus, there is a greater argument for assessing the college student a significant portion, if not all, of the cost of their college education.

3. Precisely because of the increased mobility of students 18 years of age or more, the old K-12 model no longer applies to college. It was not that long ago that many Americans were born, raised, worked and died without ever venturing far from their home county. Those paying for the education of others' children were the social beneficiaries of those tax dollars.

This is not true for college. The "market" for college education is at least regional, and for the most part national.

Thus, it becomes harder to rationalize why the citizens of, say, Iowa should be taxed to pay for the education of students from Illinois. Indeed, given the national job market as well, it doesn't make a lot of sense to even categorize, or think of, students as from "Iowa" or "Illinois." They are, and may even think of themselves, as "from America." They may have grown up in more than one state. They may end up having worked in a half-dozen or more states before they retire.

Given the differences between K-12 and college education, and given this radical change in Americans' mobility, the old "land grant college" model that was such a brilliant innovation in the 19th Century, makes increasingly less sense in the 21st Century.

It is time, once again (as we did with the post-WWII "GI Bill" college education benefits for veterans of that war) to think of college as a national benefit and responsibility. The GI Bill provided the foundation on which America built one of its most impressive periods of economic growth. Free high school education was our strength in the last century; college education can do it again in this century.

4. OK, you say, but how do we fund all of this?

(a) How do we fairly apportion the benefits and costs of an individual's college education? Until the case is made for a more rational allocation, how about 50-50? Here's how it might work. (1) The college education would be "free." (Issues to be resolved: tuition only, or something toward room and board, books, and living expenses as well? Four years maximum, or five and six if necessary to get the degree? Graduate education, too, or just undergraduate?) (2) However, the costs would be tracked, not unlike student loan programs today. (3) One-half of those costs would be paid by taxpayers (as their share of the benefits).

(4) Now for the other half. The other half would come from a revolving fund. That fund would be created and replenished (after an initial "pump-priming" deposit of federal funds) with payments from those who benefited from the program with a free college education. How would the "benefit" to them of that education be calculated and collected? From their report of "adjusted gross income" to the IRS each year. Their contribution to the revolving fund would be a percentage of thier adjusted gross income. This formula eliminates the need to make value judgments about their contribution to the "public welfare." They can take any jobs they please. Someone who becomes teacher for $27,000 a year will pay back less over the course of their lifetime than someone who gets a job in the financial district in Manhattan that pays well over $100,000. No one need take a job that "pays more" just to pay back their student loans; if they earn less they pay less.

5. And the "national" support of higher education? Again, arbitrarily, until a more precise formula can be ascertained, let us say a 50-50 split. (a) A cost per student per year for a college education could be calculated; perhaps the median cost for all state-supported institutions, perhaps something slightly higher than that. (b) One half of that cost would be paid by the revolving fund, described above. (c) The other half could then be split, 50-50, between (1) the state (as its share of the "benefit" to society as a whole within that state) and (2) federal government (as its share of the "benefit" to the entire nation).

6. In Nicholas Johnson, "Choice: 'Tax and Spend' or 'Borrow and Spend'?" September 4, 2006, I tried to make the point that it is more productive to think, analyze and talk in terms of "programs" rather than "taxes." If a tax-supported program pays back, or saves, multiples of what it costs it would be truly foolish not to raise and invest the taxes to produce that gain -- all because of some ideologically-driven aversion to "taxes." If a program costs more than it returns financially, but produces social benefits (say, a "safety-net" program) supported by many, we then have a political issue rather than an economic one; if a majority of the electorate, and their elected representatives, vote for it the program will exist; if not, it won't.

Clearly, everything mentioned in this blog entry requires research, data, best practices, analysis and so forth. I've been specific, not to argue for the specifics I've used, but only to make more understandable the general proposition.

That proposition, if true, is that the benefits of education so far exceed their costs, and the times and needs have sufficiently changed, that Iowans can no longer afford to receive: "A 'F' in Affordbility."


Anonymous said...

It is claimed (with good reason in my opinion) that one of the best investments is to provide good health care for preschool children and pregnant women. The main reasons are that preventive medicine is very cost effective an it results in long term benefits (one is that a health child is more likley to do well in school).

There is data that supports this view and if we are going to spend public funds to improve the quality of life for our citizens I would like to see the child and pregant women health program done first.

Anonymous said...

There is a fair question about whether a college education (particularly in liberal arts) provides any value other than to differentiate the college graduate from the non-college graduate. If so, then educating everyone through college provides no actual benefit and may actually harm the informational benefit of the current system.

I believe that everyone should have access to sufficient credit to permit anyone who can to enter college. Unfortunately, the current heavily subsidized funding mechanism has the effect of substantially increasing the demand (ie people will buy the same thing at a higher price) without improving education.

Consequently, I don't think a K-16 system of federally funded education makes sense. Of course, it will be a nice subsidy to Universities and their professors, but that should not be the purpose of publicly funded education.

Nick said...

John: I would not necessarily disagree with you. But a comparative benefit-cost analysis among competing social programs is another, and very substantial, undertaking. I was limiting my inquiry to "(a) Do the benefits from higher education warrant the costs? and (b) If so, what is the most equitable way to allocate those costs among students, state, and federal sources?" - Nick

Nick said...

James: (1) To the extent what is in this blog assumes "facts" it is relying on inferences, assumptions and memories -- another name for "guesses" -- which can easily be dismissed by providing reliable data showing them to be wrong.

(2) There are oft-repeated (but possibly wrong, or self-serving) representations (often used as an argument why K-12 students should study hard and get into college) showing the average lifetime earnings of individuals with various levels of education. They indicate a rough correlation between increases in years of education and lifetime earnings. If true, that would challege your assertion that there is doubt that "a college education provides any value."

(3) And, of course, whether through your analysis or mine, we are just talking about monetary value, "employment," and "economic development." Most educators (e.g., the UI at the moment) would argue that is not the purpose, or at least not the exclusive purpose, of "education." Education, they would say, contributes to a richer, fuller, life of understanding, appreciation of culture, better interpersonal relationships, and so forth -- values and returns that are somewhere between difficult and impossible to measure in dollars. (

(4) Your proposal about "sufficient (unlimited?) credit" goes directly to my point. If -- that is "if" -- there is a societal benefit from a college educated person, above and beyond the personal benefits to that individual, and if there are a significant number of individuals who, but for financial aid would not be able to attend college, that would constitute some reason to provide some "subsidy" to some students -- rather than putting the entire financial burden on the individual who is already assuming the work burden of going through the process.

(5) I guess one place where I would actually disagree with you is your suggestion that "credit" solves all. It is not the absence of credit that discourages some students from college. In fact, it is precisely the opposite. It is that the debt burden with which they leave college -- for some law students in the range of $50-$100,000 -- is more than they think they will be able to handle along with other expenses. Credit merely postpones costs, it does not eliminate them -- as we are about to find out with the $2 trillion tab we are putting on our credit card for the Iraq war (and then borrowing from the Chinese to pay)

(6) I do not, of course, disagree that subsidy lessens focus on cost saving efficiencies (nor that there are numerous ways in which we could improve our K-12, or K-16, outputs while actually reducing their costs).

(7) Nor do I disagree that -- aside from the personal "quality of life" and "indicia of civilization" arguments -- that subsidizing "universities and their professors" cannot be justified with the "argument" "because they are there." -- Nick

Nick said...

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