Rethinking public subsidies in higher education

Reuters

A student reads on the campus of Columbia University in New York, October 5, 2009.

David Lazarus: We're talking about the intersection of politics and personal finance this week, and here's an issue that's gotten voters' bacon sizzling over the last year: Student loans. Believe it or not, there's already more student debt outstanding than there are credit card bills. And this is the one type of debt you can't chase away with a bankruptcy filing. Meanwhile, tuition costs keep rising, with no end in sight. Commentator Andrew Kelly says it's time for states to rethink their relationship with public education -- and perhaps pass on a greater share of the costs to families.

Andrew Kelly: In earlier eras, the government had good reason to invest public funds in higher education to make it more readily available. For most of this nation's history, access to higher education was limited. That's because post-secondary learning was only available at a small number of physical campuses with highly educated professors, massive collections of books and specialized facilities. College was a scarcity. Students who wished to pursue higher education had to travel to these campuses to learn. Those in rural areas often lacked access, as well as those in more populous places where demand outstripped the supply of seats in the lecture hall. This is where the state came in. To make higher education more widely available, the state built hundreds of regional four-year campuses, followed by more than a thousand community colleges. To keep college affordable, the state has subsidized public institutions directly, and provided indirect subsidies to all institutions via student aid. 

This heavily subsidized model made sense so long as higher education was a scarce commodity. But advances in technology -- like digital content and online delivery -- have made higher education available to a much wider audience, creating models of college that are far less expensive to provide. For the most part, traditional institutions of higher education have not embraced these innovations, continuing to operate as they did 50 years ago. Still, they expect the levels of public subsidy they grew accustomed to in the era of scarcity. But the world has changed and higher education policy must change with it. The state still has an interest in creating a highly educated work force. But technology provides us with far more cost effective means of doing so. Rather than plead for more money to subsidize an increasingly outdated model, colleges and universities must embrace the innovations that can make them more cost effective. If they do not, a slew of new providers who receive no public subsidy at all will be there to pick up the slack.

Lazarus: Andrew Kelly is a research fellow in education policy at the American Enterprise Institute.  

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