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Why is college expensive?

posted Apr 29, 2019, 12:43 PM by Andrew Tichy
By: Jared Zimmerman

We’ve all heard/seen the ads and speeches about how certain politicians want to make college “free”. And it's no surprise why, student debt has reached a whopping $1.4 trillion and with many college students understandably upset at this, “free” sounds pretty good. However, nothing is free and in a previous article for this paper, the scam of “free” college is outlined. A more important question that no one seems to be asking is, how did we get here? As in why is college is so ridiculously expensive.

The answer to this is simple, government subsidies. In fact, the higher education industry is paid 70% by State and Federal government subsidies. Meaning only 30% of the industry is paid for by the private sector (as in us). The problem with this is according to famed economist Richard Vedder, Ph.D. is that “Where entrepreneurs in a free, unsubsidized market seek to cut costs and lower their prices to lure new custom­ers away from businesses that are raising theirs, there is very little of that in higher education.” What this means is that due to the government subsidies, colleges can charge what they want as they know the government will foot the bill. Dr. Vedder found further that if the government ended all subsides back in 1978, college would be around the $5,000 mark.

The government student loan system is also a major problem. In fact, the government approves over 90% of all loans it gives back. Do we really think 18-23-year-olds know how to take out a loan, much less pay it back? And an overwhelming number of student loans and scholarships according to Dr. Vedder, “have benefited those in the upper half of the income distribution more than those in the lower half.” Why? Because those in the upper classes know the system and know how to take advantage of it.

Let’s say student loans and subsidies were to say disappear, as in no longer be a thing, then the price would drop rapidly. How do we know this? It’s economics 101. People respond to price/cost meaning if things are too expensive then people will not buy them. Colleges are a business and in order to make a profit, they must compete amongst themselves. People will go to the college with the lowest/lower price, meaning that college will make a profit, encouraging other colleges to do the same.

It should also be noted that the quality of education would most likely increase as well as colleges would now be forced into the market full immersion style, meaning colleges are going to have to be held accountable for why their prices are so high.

So juniors and seniors, when you’re looking at the sticker price of colleges remember they could be tremendously lower if we kept government out of the way of free enterprise.

PS: 2020 is just around the corner.