Once upon a time, kids could work through college and graduate debt free. And no, this story isn’t a fairy tail. It is how college used to be until the government started to intervene in tuition. The more “affordable” the government tries to make college the more expensive it gets. When government guarantees loans prices are going to rise dramatically.
For decades, Federal Financial Aid (FFA) programs have been implemented and expanded to make higher education “affordable” for students. The ostensible merits are obvious: loans, grants, and work-study schemes allow students to purchase education without much need for cash or other sources of private funding — a supposed benefit to students who otherwise might not be able to pay for college.
However, as Bastiat instructed, “It almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa.” Surely, to the credulous eye, the immediate consequences of FFA have solidified its standing as a model of successful federal intervention. Virtually all students who are admitted to college qualify for FFA, which has helped fuel a substantial increase in matriculation rates. This illusory victory is but a distraction from the later and disastrous consequences that Bastiat warned of.
The unintended consequences of FFA are numerous, indeed. Skyrocketing tuition, high default rates, and pathetic graduation rates — to name a few — are all byproducts of a system that incentivizes inefficiency, largess, and misguided decisions. Oddly, while many students aren’t legally permitted to take a sip of alcohol, they are systematically encouraged to contract into years of, essentially, indentured servitude. It is evident that the aggregate result of FFA is net harm.
Even statists, to an extent, are recognizing some of the negative effects of FFA. President Obama warned college officials in his recent State of the Union address that “If you can’t stop tuition from going up, the funding you get from taxpayers will go down.” While it is mildly encouraging that he implicitly endorses the Bennett Hypothesis — former education William Bennett’s assertion that FFA enables colleges to “blithely” raise tuition — his proposed solutions, including increasing campus-based aid to $10 billion and a bubblegum $1 billion “Race to the Top” competition, only offer ever greater federal intervention. In essence, he wants to reward the meth addict for switching dealers.
Naturally, the only solution to eliminating the harmful effects of FFA is to abolish the programs altogether. Of course, this logical proposal is sure to be met with a great deal of skepticism. Perhaps this is understandable. After all, if one were to assume that nothing would change in the absence of FFA — that college officials, students, and other primary actors would exhibit precisely the same actions as they do today — then skeptics might possess a façade of rationality.
Such assumptions, however, are simply fallacious. Abolishing FFA would, in essence, change the laws of physics as we know them in the world of higher education. As Mises wrote, “Rational conduct means that man, in face of the fact the he cannot satisfy all his impulses, desires, and appetites, forgoes the satisfaction of those which he considers less urgent.”
Each actor in higher education, therefore, would reprioritize its actions as it strives to, in Mises’s words, “substitute a less satisfactory state of affairs for a more satisfactory one.”
It is instructive to evaluate how college officials and students might adjust their actions to determine the effects of abolishing FFA. The effects of these actions, including lower tuition rates, increased institutional efficiency, and most importantly, better outcomes for students are overwhelmingly positive.