US College Costs

This is a remarkable piece of work. Truly.

Holders of bachelor\’s degree earn 70% more than their high school counterparts, and those with advanced degree earn 130% more. In a 40-year career a bachelor\’s degree means an added $903,320, and a graduate degree $1,670,360.

This is used as an argument in favour of further government subsidy, the use of grants to students, rather than their taking out loans to pay for it.

No, seriously, that you\’ll earn §1.6 million extra is evidence that you shouldn\’t pay for it. We should tax the garbage collector so that you can earn that extra $1.6 million.

This is from a professor of American Studies at Sarah Lawrence College:

Small coeducational liberal arts college located in Bronxville, NY that recognizes the creative and performing arts as integral to a liberal arts education.

Not all that keen on logic there then.


12 thoughts on “US College Costs”

  1. Well spotted. Tuition fees must be the way to go. I’m perfectly happy with students getting the Citizen’s Basic Income, though. PS, I had to pay for my own (admittedly still subsidised) university fees (long story), it was worth every penny.

  2. Playing devil’s advocate: if university does carry a $700k (£350k) lifetime earnings advantage then – even ignoring any tax paid at higher rate – the government raises more than £80k extra per student. So paying c.£20k per student to subsidise their tuition is a good investment for the government to make…

    [nb I reckon the university earnings premium is largely signalling-based rather than improved-human-capital-based, and hence don’t hold the view above, but it’s not an obviously stupid point-of-view…]

  3. John’s right. In fact it can borrow at 5% interest, which is not unreasonable for a government, I think it can justify up to about40% of the expected extra tax, so in John’s example up to £32,000.

  4. Of course, if one issued a CI to all citizens at birth and kept half of it in a trust fund, by the time they reached 18 there’d be about enough in there to pay for a university education, or for the potential student to decide that they could do something more useful with the cash, like buy a deposit on a house, or live for 3 years at zero-income whilst they tried to break into publishing or media or suchlike.

  5. If the government were to pay £20k to subsidise a student who then spends three years in the bar, there’d be no return on the ‘investment’. If you really must use taxpayers’ money to fund other people’s education, make it a loan, repayable no matter what.

  6. Not really. If those graduate extra earnings figures are an average, and represent greater productivity (and as with John, I am sceptical, although I don’t believe it is all signalling) then it doesn’t matter – that’s the beauty of an ‘aveage’. It includes those who fail their degrees (which is what I assume you mean by ‘spends three years in the bar’).

  7. I believe all education should be funded by loans.
    Before 18 the cost of education should be loaned to the parents.

    If the government were a major lender rather than a borrower it might take the fight against inflation rather more honestly.

  8. It does take the fight against inflation seriously – this can be seen in the interest rate demanded by the financial markets on the 30yr Treasury (or is it 50yr?) bond.

  9. Perhaps not (also depends on what you mean by ‘accurate’; obviously CPI is relevant for some concerns and RPI for others).

    The people who buy 30yr bonds clearly do believe that inflation will remain under control, and they can reasonably be expected to have more idea what they’re doing than random libertoonians on teh interwebs.

  10. In the US, money for university is lent by the government itself, subsidized (i.e. interest deferred until graduation) up to a certain amount, but with the remainder unsubsidized (i.e. begins collecting interest immediately). The interest rate in question tends to be around 3%. Repayment of all such governmental loans can be deferred almost indefinitely, and certainly until one is in a position to begin paying the (modest) minimum monthly payment. In addition, the government provides need-based grants, which for the many reasonably-priced universities means that there is often no need to borrow at all.

    Given that information, for a university professor to complain that the government does not provide enough subsidy for tertiary education is disingenuous, to say the least. Perhaps it’s because at Sarah Lawrence College, the price is not reasonable, nor do its students come from the sort of families who qualify for need-based grants.

  11. So Much For Subtlety

    The interesting thing about this is that clearly in America student choice produces added value. It is, I admit, kind of obvious if you think about it but there is a clear relation between studying more and earning more. That is not true in all Higher Education systems. The Australian government estimates that every Liberal Arts student loses about 7 percent of future earnings by starting a BA. It increases the more postgrad they do as well. In my experience of the British Higher education system, I would expect that to be true as well – at least for everyone outside the older Universities. Europe is likely to be worse.

    So to answer the question about government earning more in the long run, spending my money on myself is, pace Milton Friedman, a much better idea than them spending it for me. It is more likely to purchase a valuable degree rather than utter junk.

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