Ray Davis at the Valve calls the debt-heavy funding of higher ed a pernicious social policy, and Brad DeLong replies:
As an economist, I have to look at student loans differently. College educations are expensive things–colleges are expensive to run. A generation ago your average college-educated American earned an average salary 30% more than that of those with just a high-school diploma. Today this college-high school wage-and-salary gap is 80%.
A policy of no debt–a policy of publicly-funded college education for all–thus looks to us economists like a policy of taking from the relatively poor (the working classes who don’t go to college do pay taxes) and giving to the relatively rich (the middle classes who do go to college) who earn much higher relative wages now than they did a generation ago.
For those horrified by this sentiment, there are some excellent rejoinders in the comments of his post. But the idea should be taken seriously: some social group is gaining whenever we make decisions to subsidize certain activity (or take away existing ongoing subsidy). Reducing the loan burden in favor of outright grants and subsidized tuition would in fact be a net gain to future college graduates. And given the necessarily broad base of our income tax, much of the burden will fall on non-college educated, often less well-to-do taxpayers.
The one thing that gives me great pause before fully accepting his argument is the historical record. As Andrew Delbanco writes in a New York Review of Books piece on the fate of college funding,
The recent history of elite higher education is usually told as a glorious story of democratization. But future historians may look back and see something different: a restrictive age of old money (1900–1950), followed by an interregnum of broadened access (from the 1950s into the 1980s) and then a period (circa 1990–?) in which new money poured in.
I’m open to counter-evidence, but it strikes me that while in theory a debt-burden system shouldn’t impact working class families adversely (because it comes from future earnings of the student), in practice the system has meant less education-based class mobility for the very class DeLong is championing: the income-tax-paying working class. Furthermore, a public policy favoring student debt has coincided with a drastic rise in the cost of higher education, particularly in the private university. It’s true that colleges are expensive places to run, yet debt-funding seems to have made them more expensive, as tuition inflation exceed inflation by a factor of 2. Undoubtedly other factors are at play, but public funding did seem to restrain costs. Private prestige universities in this country strike me as lopsided in their emphasis on the experiential component of a college education and their administration-heavy spending. I’m also wondering if debt-burden funding has fed a changing culture of undergraduate living standards. It’s hard not to feel that college kids today have a cushier student life than I had and certainly more than students a decade or two before me.
Not to treat the argument ad hominem, but our political instincts in this matter may vary by our own history in relation to university education and state-funded or private schools. As someone with a public university alma mater - who wouldn’t have been able to afford even the cheapest of state schools without scholarship - I’m inclined to be a booster of state-subsidized higher ed. But maybe that’s treating my particular stake in these matters as a universal claim on what’s best for society.
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