I have in a prior post alluded to the fact that an economy that is specialized with respect to scientific, financial, and technological innovation cannot afford institution of free education at the College Level. The reasoning is fairly straightforward, which is, the loss of innovation incentives that typically is portended by free education induces equilibriums that are detrimental to economic development in countries whose comparative advantages reside in realm of innovation.
If America is outsourcing traditional manufacturing jobs overseas, can it afford to lose it’s edge with respect to scientific, financial, and technological innovation — the current sources of economic development?
But there yet exists a student centered rationale for avoidance of free education at the College Level.
Suppose a capitalist educational system, and suppose Student A comes from a family which cannot afford a University of Michigan education. Student A, however, is brilliant, such that in context of competitive entry into the University of Michigan, he or she is able to secure a full ride scholarship. Suppose Student A goes on to graduate ‘Summa Cum Laude’. On graduation, the fact that Student A secured a competitive full ride scholarship and graduated Summa Cum Laude induces interest from employers, makes it easier for Student A, whose parents lack network connections in the formal private sector, to secure a good job.
Now suppose an economy characterized by free College education. Within such an economy, there is not any longer any competition for scholarships within publicly funded universities. So then, Student A remains brilliant, but there no longer is opportunity for demonstration of such brilliance in context of securing of scholarships. All Student A has left are his or her SAT scores. Suppose then that Student A again graduates Summa Cum Laude. Now, rather than having 3 metrics for success: SAT scores; Scholarship; and Summa Cum Laude attainment, he or she has only 2 metrics: SAT scores, and Summa Cum Laude attainment.
With the illustration in tow, it is straightforward that demand for Student A from employers of labor will not be as intense in context of free education, as it would be in context of a capitalist educational system.
How is this the case?
Consider Student B who competes for and secures a scholarship for attendance at Harvard University. Student B is characterized by 3 metrics for success: SAT scores; Scholarship; and Summa Cum Laude attainment. In presence of 3 metrics for Student B, and only 2 for Student A, it is normative and rational that relative to a capitalist context, demand for Student A experiences some attrition.
But it is exactly because of Student A that a country considers institution of a free College Education system. Yet, it is exactly Student A who is disenfranchised in labor markets by introduction of such a system.
Which then is more expensive for families who cannot afford a college education? Huge loads of debt and access to the best jobs, or disenfranchisement within labor markets?
Institution of free college education decreases labor force competitiveness of students who cannot afford or gain entry into private university education. Free college education creates a class based society, exactly the antithesis of what the United States of America needs to become in reality, exactly the antithesis of supposed objective of free college education.
What then about the growing cost of education for students who are unable to afford College Education? What then to do about huge loads of debt that can accrue in context of a capitalist educational system?
In so far as this quandary is concerned, I have proferred a workable capitalist solution in my post titled, Resolving the Students’ Loan Dilemma The Right Way. Amongst other qualities, the capitalist solution that I proffer possesses the following desirable qualities.
A person who attends Harvard University and racks up US$150,000 in student debt studying Finance can afford to go work for an NGO because this is what he or she finds fulfilling. Affordability is outcome of legislation that he or she is required to pay no more than say, 10% of his or her income for servicing of student loans. In presence of such stipulation, such a person pays off as much of his or her debt as actual income earned allows. If he or she is faithful in his or her payments for as long as they have income, if there is a balance of US$60,000 left on retirement, this balance is paid off by the Government of the United States.
A student who attends Harvard University and racks up US$125,000 in student debt studying music can afford to work odd jobs while attempting to come up with a musical or literary hit. He or she pays on the debt only on basis of income that actually is earned. If he or she is faithful in his or her payments, if there is a balance of US$60,000 left on retirement, this balance is paid off by the Government of the United States.
The Fail Safe?
No one works lower paying jobs if in reality they desire and can obtain higher paying jobs, meaning those who on basis of their choice of jobs and profession are able to pay off their loans do not get to shirk the burden on the Government of the United States.
Since everyone pays the same percentage of their earnings for servicing their student debt, those working higher paying jobs do not experience any discrimination. Regardless, those earning more who seek to reduce their interest costs can voluntarily choose to service their student debt with higher proportions of their income.
A student loan program in context of which payments are based on actual incomes, such that the Government pays off only portions of student debt that income structures subsisting within the economy render non-payable combines the most important benefits of free college education — capacity for choosing to do what one enjoys the most post graduation — and the best merits of paid college education, which is, maintenance of the incentive for innovation, maintenance of the incentive for creation of new wealth.
Since students do not determine costs of attendance at College, or remunerations that accrue to jobs post College, the proposal that I put forward inherently is just, demands from graduands only that for which they can be held responsible, which is, monetary benefits that accrue directly from College education. Simultaneously, the decision to pay off portions of student loans that remain outstanding at retirement of graduands reflects the belief of government that every person has the right to attempt to make the most of themselves — essence of institution of free college education. Conditioning of the governments’ role on willingness of graduands to faithfully pay down student debt on basis of their incomes ensures graduands do not freeload on the government.
Graduands who ‘feel free’ in their choice of professions post College, who do not have to pick professions or jobs on basis of how much they owe, are more likely to produce innovations in whatever space into which they choose to plunk themselves.
If the United States of America seeks a pragmatic solution to the financial morass that subsists in context of College Education, my proposal represents perhaps the closest that the economy can attain to in terms of a stable state and progressive equilibrium.
How do I know this?
Outside of inducing a dampener on incentives for innovation, one of the greatest problems induced by institution of free college education is inducement of inflationary pressures from government outlays for financing of education. Given such inflationary pressures cannot be benchmarked, this because government spending is demand driven, not optimized, such inflationary pressures are difficult to mitigate.
Within context of my proposal, whatever deficits are left on students’ loans can be prods for new policies, such as increases to remuneration of teachers in Elementary or High Schools because the data reveals their remuneration leaves a lot more of their student loans unpaid than any other profession. In essence, consequent on information generated in context of such a program, government spending on College education can be decreased or increased. Given any government funding for paying off of loans goes to lending agencies, as such does not go straight into the economy, the potential for inflationary pressure is naturally mitigated.
As to implementation, with data necessary for implementation and enforcement, such as tax returns etc. in digital form and easily conglomerated into databases developed for achievement of policy objectives, implementation is nothing but a cinch.
The best solution to the financial morass that has developed in the educational sector of the United States is not a proposal that either is to the right or to the left of the ideological spectrum. The best proposal is the one that works, that is pragmatic, that creates a stable, yet progressive equilibrium for all segments of society.