Affordable college funding…

An idea stolen from a progressive country but I can’t remember which one. In other words, don’t accuse me of taking credit for this idea even if some of the tweaks are mine, the gist is not.

With progressive liberals arguing that government should pay for college and with me having responded what a dumb idea that would be, it is important to keep an “open mind” to good ideas. I do think it is important that everyone have access to an education. All of us benefit when individuals can earn a good living even if the individuals benefit the most. But I think “free” college has so many problems with it, that it is not the answer.

So let’s seek to obtain the goal (access to education) in the lowest cost way possible. First let’s redesign the loan program. The government should determine what is a fair cost for a given education. Clearly the cost of becoming a doctor is higher than the cost of becoming a plumber (even if the plumber may earn more some day… sorry a doctor joke from my health care days). So step one, the government would cap the amount of money a person can borrow based on the expertise they are pursuing and a fair cost for the skill.

Second, if the taxpayers are going to be on the hook at all, then they should demand any educational institution accepting students on government loans be responsible for providing the necessary education at or below the government cap. So someone borrowing for medical school will in fact be able to get their medical education at a “fair” cost. Finally, schools should be on the hook. Colleges who accept a student must allow them to continue as long as necessary to get the required “government funded education”. Once the cap is reached, the must provide the remaining education free.

So if it takes five years, then perhaps the college has to “eat” the cost of the fifth year, if they have exhausted what the funding provides for that degree or certification. You could even vary the cap based on the track record of students attending the university, better success as measured by their future income tax returns would lead to higher approved tuition caps, call it an incentive not to pass students that have not mastered the material.

Anyway, you get the idea. Limits on government spending for both a specific skill and a lifetime limit per person (in case they want to pursue more than one type of expertise). Limits on educational costs by institutions accepting government money having to cap based on degree or certificate. And finally obligations on the part of the student to pay back the money in the future. So everyone has a reason to not waste money.

Now here is where the cool stuff happens…

First, the government loans you the money at no interest (there is a “default” charge added to loans annually that helps to establish a reserve for defaulted loans). There is no payment schedule. Instead your annual payments are determined based on your previous year’s earnings and family size. Call it a designated tax added to your income tax, that works kind of like an income tax surcharge except the surcharge goes to reduce your loan and when it is paid off, you are done with the surcharge.

The surcharge is based on what someone earning a given amount of money ought to be able to pay towards their educational loans and there should be a means to appeal the amount based on “hardships”. If you earn below a certain amount there would be a zero surcharge for that year. The debt does not go away until paid off or you die. If you die, the government collects from your estate first and the balance is used to determine the default rate for the reserve. But there is no compounding interest or late charges except when you don’t pay the “surtax”.

It is entirely possible that some people will get degrees and certifications from which they will never earn enough for them to pay back their loans. Okay. But as a society we did benefit from their education if they worked during their lives and they did pay when they could afford to. And in the end, all that happened was a little bit more money was infused into the economy and the incremental inflationary impact of that would be peanuts, since the “default” charge hopefully is adequate enough to offset the unpaid balances.

The government should not “borrow” to fund this program, just print extra money and when the money is paid back (retire the money). This minimizes the government’s cost. In effect, the government is adding liquidity to the economy to fund education and taking it back hopefully as the benefits of that education play out in economic growth.

So everyone has access to advanced education as long as there is a school prepared to educate them for the government targeted tuition level. And the individual who benefits the most from their own education does pay it back if they earn enough to without squeezing them if they have a bad year or having interest and default charges pile up.

Liberal or conservative we should all want greater access to education and training and we should all want accountability and personal responsibility. The outline of this program seems to achieve those goals without putting one goal ahead of the other.