College 1: Regulated Purchase, Unregulated Price
This post is meant to convey the problem with financial initiatives intended to make college affordable.
The statistics of the United States’ higher education system and the toll it takes on the country is staggering. 13.8% of Americans currently owe money on student loans, totaling $1.41 trillion in debt. In the past decade alone, college tuition & fees have increased 63%. It would likely take over $70 billion per year to implement free public college in the United States, which is a daunting figure.
Health insurance sets an example as to why college affordability won’t be so simple.
As a result of low consumer price sensitivity, there seems to be a repeating concept within the U.S. of what is arguably the worst combination of regulation. The healthcare system is a prime example at a level easily observed within policy (as opposed to social factors); the government necessitates health insurance whether purchased by an employer, individual or even the government itself. At the same time, the government largely doesn’t regulate what health insurance providers charge. The result has been excessively high prices for insurance, necessitated by excessively high prices for medical care, necessitated by excessively high prices for a facility’s expenses such as medical devices and even doctors (whom, through the similarly overpriced American education system, need the high salary). Every participant in this system can reasonably pass blame onto the next level within the vertical for their high prices, leaving no participant incentivized to make changes.
Though it isn’t as clearly visible as blanket legislation necessitating health insurance, there is a problem to the growing requirement in society — and even more importantly, the increasing ability — to be college-educated.
Individuals, given the current stigma around college, rightfully fear life without a degree. College enrollment is higher, despite a 63% increase in tuition & fees this decade. We severely lack price sensitivity to a college degree, for reasons both cultural and financial.
Applying this information leads to the conclusion that further subsidization will result in further price insensitivity, resulting in even higher prices. Some suggest that this won’t affect public colleges as they’re government-controlled, however all that’s required is companies further in the vertical (i.e. Pearson) having knowledge of the decreased price sensitivity.
Part II coming soon with a potential solution (involves societal acceptance of another form of institution, or a much different ‘college’ > lower college enrollment > incentive for colleges to lower tuition or become an institution solely for academics and the wealthy)
Data
https://www.forbes.com/sites/zackfriedman/2017/02/21/student-loan-debt-statistics-2017/
https://www.bls.gov/opub/ted/2016/college-tuition-and-fees-increase-63-percent-since-january-2006.htm
https://www.aei.org/publication/how-much-will-free-college-cost-new-study-suggests-colleges-respond-to-more-financial-aid-by-increasing-tuition/
http://www.hamiltonproject.org/papers/major_decisions_what_graduates_earn_over_their_lifetimes/