Affordable Education Shouldn’t Be a Present from Plutocrats

Only a century after the birth of our nation, the rising cost of higher education began to shock the American conscience. An 1875 New York Times article lamented that “gentlemen must pay more for their sons in one year than they spent themselves in the whole four years of their course.” Such concerns have only worsened since: the average cost of tuition for four-year institutions has increased by five percent per year since 2000, making the approximately 44 million Americans who currently owe $1.5 trillion in student loan debt even more harrowing.

However, our government has done next to nothing to address the issue. In fact, it’s exacerbated it. Average state spending on a per-student basis has declined by roughly five percent over the last quarter-century, and funding for higher education remains 20 percent below pre-recession levels. Instead of remedying an issue that threatens to cripple the next generation of educated young adults hoping to realize their version of the American dream, our local, state, and federal governments have fallen back on billionaire philanthropy to resolve our students’ financial woes.

Last year, when investor Ken Langone announced that he would pay full tuition for every NYU medical student, a gift that cost him $100 million, he was lauded by figures across the political spectrum. Soon thereafter, former New York mayor Michael Bloomberg pledged $1.8 billion to Johns Hopkins in hopes of reducing students’ reliance on loans, earning his fair share of praise, too. More recently, when Robert Smith announced at Morehouse College’s 2019 commencement ceremony that he would repay the student loans taken by 396 men of the graduating class, his act of generosity was rightfully met with widespread gratitude. But this particular brand of billionaire-driven student philanthropy marks nothing less than a severe failure of public policy.

Despite having the highest average tuition of any developed nation, the U.S. has remained stagnant even as other countries push for more measures to make college affordable. Policymakers are satisfied with this insufficient substitution of philanthropy for public policy, choosing to ignore the hundreds of thousands of other college students who must shoulder the burden of their unrelieved debts as they stumble into their next stages of life. This phenomenon of government inaction necessitating philanthropy plays out in other realms, too, such as health care, where it has become commonplace for those in need to use GoFundMe to ask strangers for the money needed to cover the cost of treatment.

Rather than depending entirely on wealthy investors and benefactors to compensate for inadequate public investment in education, the government should address certain provisions of federal tax law. For example, the “carried interest loophole” currently allows for the revenue of private equity firms to be taxed as investment income—at a rate of no more than 20 percent—rather than earned income, which would be taxed at a rate of roughly 37 percent. This loophole is projected to cost the government about $15.6 billion in lost revenue from 2016 to 2025—money that could easily be spent making college more affordable.

Furthermore, restricting access to federal student loans may in fact incentivize universities to lower their tuition. Higher education does not operate the way typical markets do; instead of demand gradually decreasing as prices increase, federal student loans have allowed students to bridge the gap between what they are able to afford and the exorbitant price of many institutions. This has allowed demand to remain steady and in turn, allowed colleges to regularly raise tuition by thousands of dollars every year. In fact, in 2015, the Federal Reserve Bank of New York found that every $1 increase in subsidized loan amount maximums led to a 60 cent increase in sticker price tuition. The availability of student loans, it seems, has enabled colleges to increase tuition at rates that far outpace those of inflation. The government then has the opportunity to use its control over the federal student loan market to control costs. It could prohibit colleges from increasing sticker prices to levels higher than the Consumer Price Index under the threat of funding tuition out of their own endowments.

Though President Trump has failed to reform our college financing system as promised during his 2016 campaign, there lies hope in several Democratic candidates for president. Pete Buttigieg, for one, promises to create a state-federal partnership and expand the Pell grant, money the government provides to low-income students to attend college. Under his plan, public college would be debt-free for low-income students. Bernie Sanders, whose 2016 campaign brought the idea that students should be able to attend public colleges tuition free into the mainstream, vows to cancel all of the nation’s outstanding debt. Elizabeth Warren has backed a similar debt cancellation plan, specifying that borrowers earning $250,000 or more wouldn’t receive any debt relief. Though their sweeping proposals beg feasibility evaluations, their prioritization of college affordability proposals speaks to their willingness to address the issue.

Opponents of such reform posit that lowered tuition and government aid would compromise the quality of education. But in doing so, they neglect the benefits reaped by other countries with comparatively low tuitions and various support programs. In Canada, for one, where college is seen as a right and not a privilege, college students receive much more government support than their U.S. counterparts do. Funding comes from both the federal and provincial levels, resulting in significantly cheaper tuition, such as the $8,000 annual price that students pay for Brandon University in Manitoba, Canada. And the country has been rewarded for its education investment. With nearly 58 percent of citizens receiving a tertiary level education, Canada boasts the world’s most highly educated population.

If the aforementioned candidates were to follow through on their proposals, the U.S. has the potential to follow suit, providing opportunities to a greater quantity without compromising quality. They have the ability to herald a new era, one in which philanthropy would no longer need to serve as the band-aid solution it currently does.