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College affordability has emerged as a top issue in the 2020 presidential election.
Democrats running for president promise to reduce or eliminate costs paid directly by students, and several candidates want to relieve student debt burdens. The most ambitious such plan, proposed by U.S. Sen. Bernie Sanders, would eliminate undergraduate tuition and cancel all $1.6 trillion of student debt, even for people who are wealthy or gainfully employed.
Will these plans stabilize overall education spending or generate economic returns? Depends who you ask.
Sanders' plan is estimated to cost $2.2 trillion over 10 years. U.S. Sen. Elizabeth Warren, who also has an ambitious college accessibility plan, calls for $1.25 trillion over 10 years. Both would require additional spending by state governments.
For comparison, the federal government spent an estimated $55 billion to support primary and secondary education in 2015, according to U.S. Department of Education figures. Sanders wants to spend four times that much on college tuition each year.
Some of that spending can reasonably be expected to pay dividends in the form of economic stimulus and workforce advancements. The rest is justified because 'higher education should be a right,” as Sanders puts it.
Higher education as a right represents a shift from the past several decades, when student aid programs have been considered an investment in the economy and workforce. Businesses and institutions need trained workers, and well-educated populations tend to be more prosperous.
The federal government's first major education loan program was championed by President Dwight Eisenhower as part of the National Defense Education Act. It had a specific objective - to improve 'teaching quality and student opportunities in the interests of national security.”
The Soviet Union had launched its first space satellite the year before, and U.S. policymakers worried the nation would fall behind in the Cold War technology race. It was seen as pragmatic spending.
Since then, Congress and state governments have repeatedly expanded aid programs, typically as a response to real or perceived economic needs.
Importantly, some of the policy proposals, like Sanders' and Warren's, would provide little incentive for students to choose career paths in particularly high-demand fields. All Americans would have access to free public college, no matter what they study.
The next frontier for top Democrats - providing no-cost college to everyone, irrespective of their field of study or likelihood at career success - cannot be properly understood as an investment.
In part, the government would be paying a large subsidy to sustain the academy, liberal arts, semiprofessional sports teams and young adults' socialization. It might even be considered a consumer service - something people do because they enjoy it, not because they expect it to have a return on investment.
Maybe you consider all this, and still conclude it's a good idea to massively increase federal higher education spending. After all, humans are not cogs in the government's economic machine, and perhaps the academic culture is worth supporting for its own sake.
But I also worry about something else that is changing in the policy discussion over higher education - many politicians now have little interest in policies that contain tuition rates. Tuition at public four-year institutions has more than doubled in the past 30 years when adjusted for inflation, according to the National Center for Education Statistics.
The concern now is about who will pay, instead of how much it costs.
Unfortunately, shifting payments from students to the government is unlikely to halt the rising cost of college.
For the past few decades, policy scholars have debated the 'Bennett Hypothesis.” It is named for Reagan-era Education Secretary William Bennett, who observed that financial aid enabled colleges to raise tuition more quickly, confident that loan subsidies would cushion the increase.
Many researchers have sought to quantify the effect. A 2017 study from the Federal Reserve Bank of New York estimated a dollar increase in subsidized loans led to a tuition price increase of about 60 cents, and also a decrease in grants offered by institutions.
That is a significant impact.
While it's impossible to say how the Sanders' plan to eliminate individual tuition payments would affect institution's expenses, this evidence suggests it could make overall costs skyrocket. His expected price tag, already very high, could prove to be woefully inadequate.
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