End Student Loans: A Case For Free Market Education
As the Occupy Wall Street protests continue into their second month, they are becoming a political force that can’t be ignored. Protesters' frustrations and anger are understandable, especially for the millennial generation. Only 55% of Americans between the ages of 18 and 29 were employed last year, the lowest since World War II. In the last decade, the incomes of Americans between 25 and 34 have dropped by 12%. And barely 14% of 20-somethings are optimistic about the future.
The protests have drawn opposition from both liberals and conservatives, but these critiques fail to address the root of the problem by ignoring the damaging effects of interventionist government economic policies in education for young Americans.
Under the guise of providing education, both liberals and conservatives have encouraged the expansion of easy credit, federal student loan guarantees, and subsidized university education, resulting in the exact opposite of what they were intended to do; costs have skyrocketed, while the quality of education has gone down.
Instead of “reform,” a drastically new approach is needed in education that is based on individual liberty and the free market. Instead of paying property taxes to fund their education, families and individuals should have the freedom to choose their path in the assortment and competitive prices that the market provides.
Since the creation of the GI Bill in 1944, the federal government has encouraged millions of people, through the combination of loans and subsidies, to go into debt in order to attend college. The Federal Reserve made the borrowing easy with interest rates below market levels, and federal institutions guaranteed the loans. In the same way that the housing sector was distorted by a Fed-induced boom that eventually burst in 2008, this has similarly created an education bubble. Now about two-thirds of all college students graduate with student loans, and the average college student graduates $25,000 in debt. Tuition has risen by 900% since 1978. Combine these factors with a stagnant economy, and it is no wonder the “Occupy” protests are spreading through this country and around the world.
Thanks to government subsidies, many graduates hold “cheap” degrees that have little market demand. Because of this, over one-third of all college graduates end up taking jobs that even don’t require a degree, like waiters, cashiers, and janitors. Without the pricing mechanism of the free market to guide the education sector, colleges lack the proper incentives to prepare students for the future. As Michael Ellsberg argues in the New York Times, “American academia is good at producing writers, literary critics, and historians. It is also good at producing professionals with degrees. But we don’t have a shortage of lawyers and professors. America has a shortage of job creators. And the people who create jobs aren’t traditional professionals, but start-up entrepreneurs.”
The alternative to this lies in the free market. Without government subsidies and loans, multiple years of college would be only for scientists, engineers, and doctors who need certification and intensive training. The rest of the education sector would provide trade schools and institutions with courses aimed at providing people with practical and marketable skills and talents. Any loans or assistance would be completely voluntary, thus keeping costs low. A free market in education allocates resources in order to build entrepreneurs, wealth, jobs, and prosperity in order to attract future customers (students) and build their reputation. No longer would students have to bear the burden of debt that many OWS protesters claim they carry.
This means we need an end to federal student loans, grants, and subsidies. The competition of the market would bring costs way down, decentralize education, and allow much more diversity to a system that for too long has been dominated by a failing one-size-fits-all policy.
The frustrations felt by the OWS protesters are real, and the problems they highlight will no doubt continue to be with us. But whether it’s an albatross of debt, bailouts, or crony capitalism, the best possible solutions lie in the expansion of individual liberty and the free market.
Photo Credit: disrupsean