By now, millions of freshmen have become well acquainted with collegiate life, including the part when they start racking up debt. With outstanding student loan debt surpassing the $1 trillion mark this school year, the debate over the cause of rising costs continues to grow. Lavish spending on everything from state of the art science labs to upscale residence halls that rival most hotels has become a widely accepted answer. But these are side effects, not causes of the problem. The true cause is much simpler: government grants and student loans.
The late Congressman Harry Browne was famous for saying that, “Government is good at only one thing. It knows how to break your legs, hand you a crutch, and say, ‘See if it weren’t for the government, you couldn’t walk.'” There are numerous of government programs that exemplify this, but student loans are quickly becoming a textbook example. Without the seemingly unlimited supply of government credit and cash given to students, it would be impossible for schools to charge an average of over $21,000 a year for tuition, fees, books, room, and board. Yet the analysis of the problem does not stop there. Student loans and grants are the key factor, but they are made possible with the help of the Federal Reserve. By inflating the money supply and keeping interest rates artificially low to help finance uncontrollable budget deficits, the Fed enables the government to spend $160 billion a year in student loans and grants.
If the Department of Education were to disappear tomorrow, the total cost of college would drop dramatically. Universities would be forced to cut prices or find themselves with no customers. Free market forces would compel universities to compete to offer the best education at the lowest price. Once upon a time, the government did not provide student loans and grants, thus in some cases it only took a summer job to cover the cost of tuition. Proponents of student loans may be correct in saying that fewer students would be able to attend college without student loans, though this argument ignores the harsh reality that many of today’s students are graduating with a mountain of debt, only to find employment (if at all) at places like Target (check out this video of college grads working on Bourbon Street). Since so many people have college degrees, the value of a college degree has been reduced. College degrees no longer offer an automatic premium over a high school diploma and a good trade once you account for a lifetime of paying off student loans.
The removal of government student loans and grants would go a long way in reducing the cost of college, yet only sound money can ensure that college becomes more affordable to more people over time. With gold and silver at the anchor, the cost of education will fall as innovations reduce costs, just as they did throughout the 19th century. There is no doubt that the Department of Education has good intentions, but the unintended consequences have achieved the opposite. Instead of making college more affordable, student loans and grants have made it unbearable.
Devin Roundtree received his M.A. in economics from the University of Detroit Mercy.