“Free” college is a terrible solution that fails to recognize the real issues

On top of today’s depression epidemic, strong political division, and pandemic, millions of young adults across the country have a struggle of their own to add to the list: student debt. As of 2020, 45 million borrowers collectively own $1.6 trillion in student loan debt. Democrat politicians such as Senators Bernie Sanders and Elizabeth Warren have proposed cancelling student debt and making college free for everyone. At the moment, many are calling for President-elect Joe Biden to do so by executive order on the first day of office. As appealing as it sounds, making college free is a terrible proposal on many levels and ignores the real root of the problem.

The college debt crisis was not always the huge issue it is today. From 1965 to 2007, the national college debt grew to $500 billion. From 2007 to 2013, it grew to $1 trillion, and only five years later, it grew to $1.5 trillion.

This has occurred in large part by government intervention through student loan aid. A 2015 report by the Federal Reserve Bank of New York found a correlation between increases of student loan borrowing and increase of tuition. The report found out that for every dollar colleges or universities get in subsidized federal loans, tuition increases by 65 cents. The same effect is seen with Pell Grants (55 cents) and unsubsidized loans (30 cents). Unsurprisingly, there has been Congressional legislation concerning student loans that have been passed between 2007 and 2013, the first huge spike in student loan debt. Congress passed the Ensuring Continued Access to Student Loans Act (2008), centralizing student loans, and the Health Care and Education Reconciliation Act (2010), which allowed direct government lending for student loans.

Although forgiving student loans may seem like a viable solution, it creates a larger set of issues and worsens the ones Americans have now. Believe it or not, free college doesn’t mean the government conjures up money out of thin air and magically makes tuition free for students. Nothing is free. Students still have a price to pay and that comes in the form of tax hikes. There is a documented negative relationship between income tax rates and economic growth. On top of that, high marginal tax rates lead to outward migration to other states. According to a Forbes article, “from 2010 to 2017, some 2,520,022 native-born Americans on net moved into the nine zero state income tax states from the 41 others with such taxes. It is no wonder zero state income tax states like Texas, Florida and Tennessee tend to economically outperform high income tax states like California, New York, and New Jersey.” Using an index with four economic measures (economic growth, employment growth, the poverty rate, and the unemployment rate), all three aforementioned zero state income tax states rank higher economically than the ones with the highest income tax rates.

With federal student loans, the government artificially removed the incentive for colleges to lower prices, undermining the fundamentals of capitalism and supply and demand. Free college would simply exacerbate this issue, allowing colleges and universities to raise their prices as high as they wish since they know that the government will pay regardless. At least with current student loans, universities do not have limitless power to raise tuition costs to obscenely high levels since it would not be profitable.There’s no telling how greedy colleges will be with this newfound power, knowing that the government would artificially make demand virtually infinite. In the end, students will still pay for free college, just through the IRS instead of student loans. Except this time, they have no say in how much they’re willing to pay.

The truth is clear: the more the government tries to fix the student debt crisis, the worse the problem becomes. Instead, Americans should call for the government, who control about 92% of the student loans, to step out of the spotlight in the student loan business and allow private lenders to take control. Some critics have called this out, saying that private lenders would prefer “safe” investments rather than “riskier”, low-income students. The reality is that lenders already take newer risk assessment tools that “take into account the student’s future earnings potential” according to the Heritage Foundation. Higher paying majors like engineering would receive lower interest rates than philosophy and gender studies majors, regardless of current family income. Consequently, this would encourage students to pick better majors that pay more, which would make college an even better investment in the long run.

Another major factor is the stigma around college that keeps the demand for it so incredibly high. Just in case if it is not clear by now, having a degree from an expensive institution is not indispensable to having a prosperous life. Just because one does not have a college degree does not mean that person is a failure in life and incapable of success. Like it was previously mentioned, students have options beyond the four-year university. There are plenty of careers that do not require one to bury themself deep in debt. In fact, a lot of skilled trades pay people for being an apprentice and as soon as they finish, they can get a job that pays anywhere from $50,000 to even $80,000 a year with very little, if not any debt at all.

Some fear that trade school is not profitable or running low on demand due to automation. The numbers point to the contrary: the drop off in salary between trade school graduates and college graduates is very small ($90,000 over the course of 30 years) and there are a plethora of jobs for trade school graduates that have a projected higher-than-average employment growth (5% or more) and are expected to have more than 5,000 job annual job openings between 2019 to 2029.

The most important thing that people should remember is that college is not for everyone. Everyone is made differently and everyone should have different aspirations. This is part of the reason why so many people drop out of college. This incredibly high demand for four year universities also puts no pressure on universities to lower prices at all, knowing that people will register regardless because of the stigma. Students must evaluate their options carefully and choose a route that allows them to get a career they enjoy and not feel strangled by college debt. If people who do not belong in college take a different path in large droves, it can be a large step towards forcing universities to lower prices and emulate the free market atmosphere that they should be in.

Free college fails to solve the heart of the problem and dodges it, which would create unintended side effects that many do not expect. Societal stigma and government interference has allowed colleges to play outside the rules of the free market and thrive, so in order to take steps to solve the college debt crisis, people should promote a culture that is open to options outside of a four-year university and let private lenders take control of the student loan business. Free college is merely a slogan that sounds pretty on the surface, but is a step backwards in the hunt to fix the college debt crisis. Diagnose the roots, not the branches, and the issue can be solved.