Free College: A Mostly Dumb Idea

College students (and their parents) are the primary customers of American colleges and universities. They design their campuses and their curricula to provide American students what they want.

Contrast that with countries like Germany, where the government is the primary customer of their universities. Since government funds university education, it determines what it is willing to pay for and to a large extent, it requires “universities” to “enlist” and “manufacture” future workers according to its projected industrial needs (rationing).

In Germany and many other countries with similar models, students are tested and then the “state” begins to channel them into their future careers. Depending on its labor needs, students are channeled towards a college or vocational education. So the best and brightest are put into high schools designed to prepare them for Germany’s pubic universities and the least bright are channeled towards vocational training. Those in the middle go to a “middle option” that gives the state some flexibility based on emerging industrial demands. Students have a choice only with respect to those options the German government is willing to offer them based on their academic performance.

In recent years, the need for college educated students has increased and so more “slots” have opened at the college level and Germany has filled from the middle option or even foreign students. As vocational needs change, vocational and university education offerings adjust to fit those changing needs.

This system is designed to insure the “state” has a workforce to staff its needs. So the German government pays for what it wants, not what students want (though many students are able to qualify in the areas of their interest, others are not). Nothing shows this more clearly, than the far more spartan amenities in German universities relative to the US or the shorter far more streamlined course requirements (for example six instead of eight years to become a doctor).

It is not that the German government discourages people from exploring education outside of that needed to prepare them for their jobs, but rather it does not see that kind of education as their responsibility.

“In the U.S., it generally takes four years to earn a bachelor’s degree. However, undergraduate programs in a number of European countries are typically only three years long. The main difference is that U.S. programs include a lot of general education courses that many European programs don’t.

General education courses are often not directly related to a student’s major but are required to graduate. They tend to emphasize skills such as writing and critical thinking and expose students to a variety of subject areas.

American colleges regard general education as essential, and European universities do not, says Paul L. Gaston, trustees professor emeritus at Kent State University in Ohio. Gaston and other experts say European students are expected to gain this type of knowledge in high school and be ready to narrow their focus when they go to college.

This means that students in Europe have to decide on an area of study early on, often as they fill out their college applications.” (Source: US News Aug 11, 2017 “Compare U.S., European Bachelor’s Degree Programs” by Kelly Mae Ross)

In summary, the German government using “limited slots” to rationalize the output of skills by its universities and vocational schools and then stream lines the cost of education by narrowing the subjects a student studies to those necessary for them in their chosen field combined with far more spartan amenities to dramatically lower the cost of “manufacturing” workers with the right skills. As an aside, they help keep down the cost of the military by adding universal conscription so they can also “manufacture” soldiers. You get the idea, “free college” is really government manufacturing “soldiers and workers” to a specific plan. You are a valued “widget” in their social model.

Many people find this very comforting. They freely allow the government to channel them from birth to death into those areas the government requires “labor” in exchange for the government “maintaining” them with entitlements ranging from healthcare to education to retirement benefits, etc, if they comply. They don’t even have to worry about what to do with half their money as the government takes it and spends it for them.

Everything about the American system is messier including our education system. Historically, we placed our faith in capitalism and the so called “invisable hand” that works to allocate resources to respond to demand. Under this theory government does not need to channel people, because people would not pursue educations that they could not afford. Those that sought expensive educations generally had parents willing to fund it. Those who pursued vocational or community college associate degree educations could do so affordably. Our system was less “planned” than the German system and included far more amenities like sports teams, clubs, that added to the college experience, but were not necessary core to the educational investment.

Before student loans, “capitalism” worked at the society level (though not necessarily fairly for all individuals especially the poor) by forcing people to pay (in most cases their parents paid or they worked their way through college) for the education they got. This caused universities to respond to “cost sensitive” consumers. To attract customers, colleges had to be affordable.

Then we began “funding” college through the government student loan program. The good news in theory was, that more people would be able to afford an education and since that education would result in them earning more than without it, they could pay back their loans with out much effort. Theories are good, but not always right. Universities saw students had much more “cash” to spend on their education (remember universities are a business). “Affordability” was not as important as it was in the past instead “the experience” would determine who got the “student” customer.

So universities began to role out more goodies to attract more customers willing to spend more money: nicer dorms, better food, bigger stadiums, etc. While the German government sees little value in these things, students do and are willing to pay (or borrow) more money for their “richer” college experience. Now imagine “the experience“ under a taxpayer funded approach without the controls the Germans have to “ration” spending or any requirement to pay it back!

This is the take home message for you the reader… in Germany where the nation pays for college, education really is an investment… in the US where students, parents, and soon taxpayers will be paying for college, education, it is “an experience” with some element of investment inside. The “experience” will expand to absorb all the funds available to pay for it and that could spell disaster as politicians will pursue finding more money from taxpayers rather than controlling cost of the “experience”.

Both the German system and the US system (before student loans) had built in controls… Germany used “government rationing and expense management”… the US used capitalism and the willingness of parents or students to pay in advance for what they got…

But after student loans were introduced, we got an educational system where some students, who take a very “business” approach to their education were able to secure loans to get skills to do jobs, they otherwise would have not had any opportunity at (a very good thing). But, we also got millions of students with no idea of what they wanted to do, what a job pays, or what the demand for a given set of skills would be “demanding courses” with marginal economic value and graduating in tremendous debt (a very bad thing) and in many cases defaulting. We lost the controls capitalism imposes on spending and did not replace them with other controls like those used in Germany where education is government funded.

Now we have several Progressive Democratic presidential hopefuls that are proposing to corrupt the system even more. They are proposing we forgive students of their student debt and we make future college education free. Our educational model is simply not designed for “free” and it will blow up in a terrible way. Students are being given control of the taxpayer’s checkbook and universities will respond by selling them everything including the kitchen sink.

Before I end this, let me make a couple of points. America continues to produce excellent professors and these individuals deliver excellent educational content and it is not the cost of the professors, that has caused education costs to skyrocket. I am also not suggesting we go back to the “pay as you go” capitalism model as it would deny access to college educations to many qualified “poor”. What I am suggesting is that “taxpayer funded education” introduces the need to “manage” educational costs to produce a specific educational outcome and not provide an expensive experience.

Perhaps we should take some lessons from the Germans. I am not a big fan of how they ration education since I think many “late bloomers” are doomed in their model. But I do think we should begin to look at “skinny” degree bundles, where students can graduate with a BA/BS degree in three years instead of four or five and have the necessary education to pursue post graduate degrees or professional certifications.

I think we should stick with the loan program, but have it government operated with floating interest rates equal to the annual CPI rate (so the debt is really fixed in present value dollars). University accepting money from students using government debt to finance their education must do so at a prescribed maximum cost per credit hour. Students must be given the option of living off campus and would not be required to “purchase” any university services (like activity cards), housing, food, etc. from the university. Also, loans would not extend to cover expenses not necessary for a degree.

Finally, both universities and vocational schools can lose their eligibility for students receiving college funding based on the default rate of their graduates. If the default rate of a given vocational school or university exceeds a targeted level, the government may “claw back” some of the money be assessing that university a fee to share the cost of the defaulted loans. If it drops below a “minimum” level, they are simply excluded as not do the job, they are supposed to do (prepare young people for careers). Vocational schools and universities need to determine not only can a student “perform” but what are the career opportunities in their chosen field of study before they simply pocket taxpayer money.

I don’t want the German system; but, I think we can learn a lot from it and use some of their controls in the US. We need to avoid the corrupt “free college” proposals being used by Progressive Democrats to lure/buy voters at the expense of taxpayers. It isn’t fair to taxpayers. I laugh with irony, that Elizabeth Warren, who insisted on tight controls over banking so taxpayers would never have to bail out the banks, seems to have no idea that she is creating the next “funding” crisis with her “free college” proposals for the taxpayers to have to “bail” the government out of…

What I want is a system, where students have the best chance to succeed in life and part of that includes access to funding for vocational schools and universities and part of that includes “experts” assessing whether the student’s chance of succeeding in their chose field is likely. Those that can afford to thumb their noses at taxpayer money should have the right to spend their parents money or their own as they choose, but those that want to spend borrow other people’s money, should have oversight by those in a position to assess their probability of success.