How would the free market make college cheaper?

[LiveFree79]

If we got rid of the Dept. Of Education and federal loans how would that change higher learning in America and how would the free market take the place of federal loans and free money?

[jclay2]

bump for interest...

[Acala]

The massive government subsidy in the form of grants and loans is what has driven the cost of education through the roof in the first place. When you talk about getting rid of those subsidies, you are not creating a problem, you are getting rid of the cause of the problem.

Competition keeps prices down and quality up in every free market. Why would it not do the same for education?

If every prospective college student had to pay his own way without loans, the demand for college education would drop dramatically. And in response, the schools will drop their prices dramatically. They will also become more responsive
to the needs of their customers. That's how it works. Supply and demand.

Of course there still might be people who want to go to college but can't afford it. Or can't afford it without working their asses off at the same time, which is hard. If you feel that they should get some help, YOU can donate some of YOUR money to a college fund charity.

Then the country will have EXACTLY the amount of higher education going on that the people really want.

[heavenlyboy34]

The massive government subsidy in the form of grants and loans is what has driven the cost of education through the roof in the first place. When you talk about getting rid of those subsidies, you are not creating a problem, you are getting rid of the cause of the problem.

Competition keeps prices down and quality up in every free market. Why would it not do the same for education?

If every prospective college student had to pay his own way without loans, the demand for college education would drop dramatically. And in response, the schools will drop their prices dramatically. They will also become more responsive
to the needs of their customers. That's how it works. Supply and demand.

Of course there still might be people who want to go to college but can't afford it. Or can't afford it without working their asses off at the same time, which is hard. If you feel that they should get some help, YOU can donate some of YOUR money to a college fund charity.

Then the country will have EXACTLY the amount of higher education going on that the people really want.

Well said. Plus, since in reality not everyone needs a college degree to succeed(and not everyone is cut out for college), new avenues for education will arise-i.e. trade schools. This way, only useful degrees/education tracks will make it. The useless crap (like all the flaky degrees that colleges put together to make money) will collapse under their own uselessness. /end rant

[anaconda]

Competition would probably streamline things greatly. Industry would probably have to bear some of the costs since they get trained people for free at present. Perhaps college education might become more internet reliant (I just completed 2 intensive UNIX courses online through the local community colleges..please note: these are courses that either are, or were, taught in the classroom setting). Also, I suppose that it won't make it easier to get an education if we stop stealing property tax money from people that don't consume education. Fascinating issue. I'm sure there must be some sophisticated analysis of the education market by good economists. I am just musing and guessing.

[krazy kaju]

Supply and demand. Federal education loans increase demand for higher education, thereby driving college costs up. In a free market, education would probably more rely on academies that focus on specific subject areas and on on-the-job training.

Articles about education:
http://mises.org/story/31

http://mises.org/story/1159

http://mises.org/freemarket_detail.aspx?control=397

http://mises.org/story/2750

[anaconda]

The massive government subsidy in the form of grants and loans is what has driven the cost of education through the roof in the first place. When you talk about getting rid of those subsidies, you are not creating a problem, you are getting rid of the cause of the problem.

Competition keeps prices down and quality up in every free market. Why would it not do the same for education?

If every prospective college student had to pay his own way without loans, the demand for college education would drop dramatically. And in response, the schools will drop their prices dramatically. They will also become more responsive
to the needs of their customers. That's how it works. Supply and demand.

Of course there still might be people who want to go to college but can't afford it. Or can't afford it without working their asses off at the same time, which is hard. If you feel that they should get some help, YOU can donate some of YOUR money to a college fund charity.

Then the country will have EXACTLY the amount of higher education going on that the people really want.

Well said. And, I believe if industry finds itself with a shortage of college trained engineers, mathematicians, physicists, chemists, programmers, etc. then they will have to bear more of the cost. We may see things like a "Westinghouse Academy" where they train you or maybe even offer an accredited degree in exchange for several years of employment with them. Kind of like the military academies. Or maybe a "Microsoft Scholarship" to do the same but through an accredited private university.

Labor costs would be expected to increase, and therefore the cost of these companies' products. Currently, these education costs are an externality to these companies and born by the taxpayers.

What troubles me somewhat is that scientific discovery will all be in the domain of rich people of private companies. And, how much pure research will be done in things like abstract mathematics and grand unified field theory if it is not deemed to be immediately useful to industrial profits? These things may have profound value to society at some indeterminate point in time, but may not be pursued if the board of directors doesn't approve. I dunno..

[Chabsfromcanada]

Easy credit puts money into peoples hands. The more money people have in their hand, the more they can spend. The more they have to spend, the more schools can charge.

The current cost is due to the free market. The root cause of the high prices though is the easy money. Once there are less people who can afford school (via debt or cash), the prices will go down.

Housing is not the only bubble.

[Acala]

What troubles me somewhat is that scientific discovery will all be in the domain of rich people of private companies. And, how much pure research will be done in things like abstract mathematics and grand unified field theory if it is not deemed to be immediately useful to industrial profits? These things may have profound value to society at some indeterminate point in time, but may not be pursued if the board of directors doesn't approve. I dunno..

I understand your concern. But it is helpful to remember that there WAS research before government got into the game.

Einstein was not paid to develop the theory of relativity. Goddard developed the liquid fuel rocket in his spare time. Gustav Whitehead and the Wright brothers developed the airplane as a hobby. And Bell labs generated a HUGE amount of pure research even though it was a for-profit (although monopolistic) entity.

People will pursue pure science for the love of pure science. And they will probably do BETTER science as a result. For-profit businesses will pursue pure science as well, in the hope of stumbing upon something profitable, as a matter of prestige so they can attract better scientist to their profit-making work, and for the love of it. Private universities will sponsor pure science for the same reasons. And people like you and I will be willing to donate some money to support pure science. So it should work out okay.:)

Trusting liberty to meet human needs is really just trusting humanity itself. And NOT trusting humanity is a dead end because there is no other option.

[Zippyjuan]

Does a country benefit if more of its citizens have a college education? Does it allow the country to better compete in an international setting for quality workers?

Free markets say that employers pay their workers as little as they can so as to maximize their profits- keeping as much as they can for themselves. If you remove supports for those with currently less money who could potentially earn more money with an investement in an education then do you restrict higher learning to those who are already relatively more well off? If the government loans a person say $20,000 for their education, besides getting back the money with interest, would they also get a higher return in terms of taxes paid due to the person having a higher income with a college education than one without? Does this make it logical for the government to want to continue to offer loans and grants to people so that they can go to school? Does the country get a higher level of productivity by having a more highly educated work force?

On the other hand, the education system, just like the healthcare system, is capable of absorbing all the money you give to it. So long as they are able to attract enough students or patients with money, they have no reason to lower the costs of what they do. Inflation of the costs of both industries has been significantly higher than the rise in prices for other goods and services.

[icon124]

well said by everyone...

and just to add...because I do have a college degree...90% of the programs are not worth the price. I'm probably stating the obvious, but I do notice that when people hear that from someone who went to college they take it a little more serious than if it were said by someone who didn't go to college.

[jack555]

California State system info

http://209.85.173.132/search?q=cache:CHj0PPOEICQJ:coursecat.sdsu.edu/GB0405/CSU.pdf+2009+csu+total+taxpayer+cost&hl=en&ct=clnk&cd=2&gl=us


$12,000 a student. It seems like they must be being very efficient because its about half to less than half the cost of a private school.

You guys think if we had a free market all schools would be $12,000 or less?

[jclay2]

California State system info

http://209.85.173.132/search?q=cache:CHj0PPOEICQJ:coursecat.sdsu.edu/GB0405/CSU.pdf+2009+csu+total+taxpayer+cost&hl=en&ct=clnk&cd=2&gl=us


$12,000 a student. It seems like they must be being very efficient because its about half to less than half the cost of a private school.

You guys think if we had a free market all schools would be $12,000 or less?

The reason it is so cheap is because it is subsidized. I couldn't tell if you were being sarcastic or not.

[Epic]

To OP:

it would get cheaper the same way computers, dvd players, and any item get cheaper. Free-market competition.

[Zippyjuan]

You guys would not believe how much I paid for my college tuition. But it was quite a while ago. Instate tuition which means it was subsidised by either the state government (actually not much back then was spent for that) or by out of state students who were charged a much higher amount. Today my school has one of the highest out of state tuition rates of any public university (Michigan was #! last I heard). Not including books my first semester bill was $265. Minimum wage was $3.10 an hour. By the time I graduated it had passed $1000 a semester. non- resident this year is about $27,000 a year. Residents, $7,200.

[anaconda]

I understand your concern. But it is helpful to remember that there WAS research before government got into the game.

Einstein was not paid to develop the theory of relativity. Goddard developed the liquid fuel rocket in his spare time. Gustav Whitehead and the Wright brothers developed the airplane as a hobby. And Bell labs generated a HUGE amount of pure research even though it was a for-profit (although monopolistic) entity.

People will pursue pure science for the love of pure science. And they will probably do BETTER science as a result. For-profit businesses will pursue pure science as well, in the hope of stumbing upon something profitable, as a matter of prestige so they can attract better scientist to their profit-making work, and for the love of it. Private universities will sponsor pure science for the same reasons. And people like you and I will be willing to donate some money to support pure science. So it should work out okay.:)

Trusting liberty to meet human needs is really just trusting humanity itself. And NOT trusting humanity is a dead end because there is no other option.

All very excellent points. But remember, Einstein's relativity work was from thought experiments. He had no capital outlay. Now they are building massive particle accelerators for Ka-jillions of $$ to learn more about physics.

But I believe you have convinced me that the evolution in science will be just fine in a free market system. Perhaps optimal, even..

[Mahkato]

It is no coincidence that the two sectors of the economy which over the last few decades experienced consistent price increases above the general rate of inflation are the two sectors which receive the bulk of state and federal aid — education and health & human services.

Students and patients bring more money to the table when shopping for education and health care, and schools and hospitals respond by raising their rates. Institutional expenditures rise to meet the new income, and students and patients are right back where they started, while taxpayers are left with the bill.

[jack555]

The reason it is so cheap is because it is subsidized. I couldn't tell if you were being sarcastic or not.


I believe you are wrong. Tuition at the time was about $2000 it is now $4000. At the time about $9000 was coming from the government (I assume thats what you meant by subsidized). So the total cost was about 11-12,000 a year per student. Thats a super low cost right? if im wrong please inform me

[danberkeley]

I believe you are wrong. Tuition at the time was about $2000 it is now $4000. At the time about $9000 was coming from the government (I assume thats what you meant by subsidized). So the total cost was about 11-12,000 a year per student. Thats a super low cost right? if im wrong please inform me

No. Without government subsidization, the actually tuition would be higher. And that low tution is only for local students. Btw, Stanford University is free for students whos parents make less than $100K.

[Acala]

All very excellent points. But remember, Einstein's relativity work was from thought experiments. He had no capital outlay. Now they are building massive particle accelerators for Ka-jillions of $$ to learn more about physics...

Mega-projects like the space telescope and the massive particle accelerators would probably need to be funded by private donations. Would it be possible? I don't know. But it would be exciting to find out!


But I believe you have convinced me that the evolution in science will be just fine in a free market system. Perhaps optimal, even..


:D "Liberty is the answer, now what's the question?"

[Acala]

It is no coincidence that the two sectors of the economy which over the last few decades experienced consistent price increases above the general rate of inflation are the two sectors which receive the bulk of state and federal aid — education and health & human services.


Good point.

Along the same lines, note that the government labor stats for the last six months or so have shown a decline in employment in all sectors EXCEPT government, health, and education. Guess why?

[ladyjade3]

Government makes college affordable in much the same way they made homes affordable.

Fannie Mae, Sallie Mae = good at turning you into a debt slave. Bad at making things affordable.

[forsmant]

It would be cheaper because less people would go to college. Really, how many accountants, managers, and biologists do we need?

[Theocrat]

If we got rid of the Dept. Of Education and federal loans how would that change higher learning in America and how would the free market take the place of federal loans and free money?

Another latent effect of sustaining federal student loans is that it makes it more difficult for people without college degrees to find work. Because more students can go to school by borrowing the funds from the government, that means more people will finish school with degrees, although they'll be in heavy debt.

Businesses and firms meet this turnout by raising their hiring requirements to favor those with degrees to get paid more than those without degrees, even though the latter may be more responsible by saving up money and paying for their schooling as they go while looking for good paying positions.

Thus, it seems those who get their degrees on the "fast track" of getting student loans get the decent paying jobs before those who can't afford school but still can do the work required by businesses and firms. Those who can't afford the high costs of college (because of the rise in prices due to the rise in supply of federal loans) still have to pay for the college education of those who are not willing to save money for school themselves.

Because these student loans are generated by taxpayers' dollars, it punishes those who want to go to school but can't afford the high costs at the expense of those not willing to save money. It also punishes responsible savers in the job market because the decent jobs are going to those with degrees and debt. In a free market, this would not be the case.

[Acala]

Government makes college affordable in much the same way they made homes affordable.

Fannie Mae, Sallie Mae = good at turning you into a debt slave. Bad at making things affordable.

I love this. Perfect!

[Acala]

Another latent effect of sustaining federal student loans is that it makes it more difficult for people without college degrees to find work. Because more students can go to school by borrowing the funds from the government, that means more people will finish school with degrees, although they'll be in heavy debt.

Businesses and firms meet this turnout by raising their hiring requirements to favor those with degrees to get paid more than those without degrees, even though the latter may be more responsible by saving up money and paying for their schooling as they go while looking for good paying positions.

Thus, it seems those who get their degrees on the "fast track" of getting student loans get the decent paying jobs before those who can't afford school but still can do the work required by businesses and firms. Those who can't afford the high costs of college (because of the rise in prices due to the rise in supply of federal loans) still have to pay for the college education of those who are not willing to save money for school themselves.

Because these student loans are generated by taxpayers' dollars, it punishes those who want to go to school but can't afford the high costs at the expense of those not willing to save money. It also punishes responsible savers in the job market because the decent jobs are going to those with degrees and debt. In a free market, this would not be the case.


Great observation. It is analogous to the creation of the housing bubble hysteria. Easy credit drove up housing prices and then rising housing prices caused people to over-value housing and seek out easy credit to pay for it. A spiral of rising prices, debt, and over-valuation. What you have described in education is much the same. A rising spiral of government subsidies, higher tuition, and overvaluation of a college education.

This is an awesome thread!

[Zippyjuan]

Most of the money used in government student loan programs comes from people with the loans paying back what they borrowed. It gets recirculated in new loans to someone else so it really does not receive much in the way of tax dollars.

[danberkeley]

Most of the money used in government student loan programs comes from people with the loans paying back what they borrowed. It gets recirculated in new loans to someone else so it really does not receive much in the way of tax dollars.

Sure. But it makes it more expensive for you if you do not received money from the government.

[forsmant]

Most of the money used in government student loan programs comes from people with the loans paying back what they borrowed. It gets recirculated in new loans to someone else so it really does not receive much in the way of tax dollars.

Wouldn't that necessarily create a loan deficiency in which the government is not able to loan enough money to the new students? And why is that the governments job anyway?

[Theocrat]

Most of the money used in government student loan programs comes from people with the loans paying back what they borrowed. It gets recirculated in new loans to someone else so it really does not receive much in the way of tax dollars.

I was of the impression that most of the money for federal student loans came from the taxpayers.

[Acala]

Most of the money used in government student loan programs comes from people with the loans paying back what they borrowed. It gets recirculated in new loans to someone else so it really does not receive much in the way of tax dollars.

I haven't seen anyoone complaining about the cost in tax dollars. The observations here have been in regard to how Federal support (in the form of loan guarantees and grants) raises prices.

But since you brought it up, government loan guarantees operate to stimulate the creation of debt (and therefore expand the money supply creating inflation and reducing the value of everyone else's money). And they divert accumulated capital from the more productive uses a free market would fund into the artificially favored use of higher education. This creates inefficiencies that we all pay for.

So there is a very substantial cost.