This is how I want you to understand the college affordability crisis.
As taxpayers, we understand, and largely accept, that a good deal of the taxes we pay will go to causes that will not benefit us directly. It is highly possible that you will live your entire life without ever calling the fire department to save your burning house. But you would not want to live in a world without firefighters because, well, stuff happens. Ditto police protection, welfare services, and unemployment compensation. As well as public parks, museums, and roads.
Elementary and high school education certainly falls into this category. Even if you do not have children, or you do and send them to private school, you help pay for public education. As with all of the above, it’s a public good. That is, most people accept, at least on a general vague-ish level, that society should have these amenities and that everyone should help pay for them.
But what if we only offered the protection of firefighters to people who specifically paid for it? If you know your history, then you will know that this was the prevailing model for hundreds of years. Until we figured out that even if we paid for protection ourselves, we would be in a bad spot if our next-door neighbor or our employer didn’t. And of course, to keep a fire crew at the ready isn’t cheap, so you need a critical mass of people willing to sign up for the service. If not, the price becomes exorbitant for the few who do. Bottom line: It really didn’t work out that well.
And now I am ready to talk about the problem of student debt.
Higher education, just like firefighters, is a public good. We are all much better off if someone out there knows all about physics or medicine. But unlike firefighters, we are rather ambivalent about the “We’re all in this together” ethos. As taxpayers, we fund colleges and universities from the general budget but only up to a point. After that, we are like 17th-century firefighting companies that only responded to calls from houses that could afford to pay their dues.
According to the State Higher Education Executive Officers Association (SHEEO), in 1980 the share of colleges’ revenue that came directly from students as tuition and fees was about 21%. In 2022, it was almost 42%. That is, as taxpayers who elect representatives to do our bidding at budget time, we have decided that higher education is less of a public good than we previously thought and that if you want a higher education, you should pay for it yourself. It’s not so much that Americans attach less value to a college education for ourselves; we just no longer value it as much for everyone.
And so, inevitably, student loans enter the picture. Federal student loans facilitate the tuition-as-user-fee model of higher education. Through our policy choices, we have created a system whereby we increasingly choose to subsidize the cost of higher education on an individual house-by-house basis through the federal student loan process, rather than through ongoing budget appropriations.
But just as we discovered with firefighting, when we fail to value a public good and instead leave its provision up to individual discretion, we are all worse off. Not just the individual households who find that the “subsidy” to pay the user fee is inadequate, leaving them with onerous debt. But everyone who values living in a society that is educated and able to hold its own with its global partners and competitors.