Fixing higher education
The title of this blog is "Stating the Obvious," and that's what I'm going to do. There's been a lot of talk lately about the increasing cost and decreasing quality of higher education, but most of it misses a key point: the law of supply and demand applies to education.
I went back to college at the beginning of 2009 in order to finish my bachelor's in computer engineering, and I couldn't help but notice that there's an awful lot of money being thrown at students in the form of financial aid. Both the loans and grants are absolutely huge (at least to someone whose past paychecks have come from Wal-Mart, an auto parts factory, etc.) and I doubt that the average freshman has any real intellectual grasp on the numbers involved. Without having worked a few years in a factory or a cubicle, how can one really understand how much of one's life is being used up to pay off educational loans or to pay the taxes that fund federal grants like the Pell and SMART.
And that's where supply and demand come in. The more money that chases a given set of goods, the more expensive those goods will tend to be. Financial aid (at least in the forms in which it's currently provided) is part of the problem, not the solution. At first, I didn't see any way to solve this conundrum. I consider it desirable to shift a moderate amount of money to the young for educational purposes in order to level the playing field between those whose families have earned substantial wealth and those who come from poorer families, and I also think it would be politically untenable to do away with financial aid entirely. So eventually I had an idea.
What I propose is to do away with all current financial aid programs and direct funding of schools, replacing them with a system of individual educational accounts. The money that currently goes to subsidies and financial aid would then go to fund a new financial aid system for each student. Each student would be allocated a certain amount of aid to pay for each level of education (two years, four years, graduate/professional, etc). When a student receives a degree or certificate, any left over money for that level of education would then be given to the student, tax free.
My rationale for doing it this way is that we need to structure financial aid in such a way that students are motivated to consider the cost-effectiveness of the education they choose, exerting a downward pressure on prices. At the same time, the removal of subsidies should make schools more accountable to students.