Why Cutting Student Loans Won't Solve the Problem of College Tuition

One argument often put forward is that cutting student loans will solve the rising issue of college tuition. However, such a plan would only exacerbate the problem rather than providing a lasting solution. This article explores why reducing student loans may not be the effective approach to addressing tuition costs.

The Business Side of Higher Education

College is more than just a place of learning; it is a significant business entity. In higher education, the requirement for instructors to hold advanced degrees ensures a steady supply of well-qualified educators. Many of these faculty members could easily find jobs in the private sector, yet they opt to remain in academia due to the satisfactory financial compensation they receive. Professors endure lower salaries than those in the industry but still earn respectable incomes.

Administration roles are typically filled by individuals who have previously held teaching positions, hence they retain the same qualifications. These administrators are handsomely compensated, making the job more appealing. Many professors view administrative roles as a burden, often coerced into these positions through a sense of moral duty.

The Role of State Funding

Higher educational institutions are largely state-funded, with budgets determined by the state legislature. The state provides a portion of the total budget, leaving the remainder to be raised through other sources. This system ensures that state agencies maintain control over financial decisions, while also providing a framework for institutions to become more self-sustaining.

Impacts of Reducing Financial Aid

Reducing financial aid would make it significantly more challenging for financially disadvantaged students to attend college. The result would be a reduction in the number of students admitted to universities, with little to no impact on fixed costs.

Moreover, removing financial aid would not lead to a decrease in tuition. Instead, the costs would be redistributed. If a certain number of faculty members were laid off, tuition would likely increase for the remaining students to cover the expenses of the school, spreading the cost among a smaller group of paying students.

Unaddressed Core Issues

The argument presented here suggests that the primary issue is not financial aid but rather the economic inefficiency in higher education markets. When I began law school in the late 1970s, tuition was a mere $75 per semester hour. Fast forward to today, and the cost of tuition at the same institution has skyrocketed to over $50,000 per year. This is a direct result of too many students pursuing degrees for which the job market demands are limited.

This trend contradicts fundamental economic principles taught in introductory courses, such as supply and demand. While universities graduate three or more individuals for every available legal position, this overproduction only exacerbates the issue. The oversupply of graduates without corresponding job opportunities results in a market that is inefficient and unsustainable.

A Comprehensive Solution

To truly address the problem of rising college tuition, a multifaceted approach is required. This includes but is not limited to:

Improving the alignment between the education provided and the job market needs. Encouraging students to pursue careers where they can make significant contributions and will be in demand. Implementing policies that promote innovation and improve the overall efficiency of higher education institutions.

Reducing student loans may provide temporary relief, but it is essential to address the fundamental economic inefficiencies that drive up tuition costs in the long term.

By understanding the complex factors contributing to rising tuition and addressing them with a comprehensive strategy, we can move toward a more sustainable and equitable higher education system.