Overview

The Department of Education spends about $30 billion a year on subsidies for
higher education. The bulk of that funding goes toward student aid programs, with
the balance going toward grants to educational institutions. In 2008, grants to
institutions cost $2.3 billion and aid programs cost $27.6 billion, which included
$17.4 billion for student grants, $9.6 billion for student loans, and $0.6 billion for
administration.1
In the next section, we explore the origins of federal subsidies for higher education
and its rapid growth since the 1960s. Following that we focus on the harmful effects
of higher education subsidies. Those effects include education cost inflation,
increased regulatory control of colleges and universities, and huge fraud and waste
in student aid programs.

Origins and Growth of Subsidies

Federal subsidies for higher education began in 1862 with the Morrill Act, which
provided grants of federal land to the states. The states were supposed to use the
proceeds of land sales to create colleges focused on agricultural and mechanical
studies, but "many states squandered the revenue from this endowment." 2 In
1890, a second Morrill Act began regular appropriations for the land-grant colleges.
In 1917, Congress passed the Smith-Hughes Act, which funded the salaries of
vocational education teachers. The Act imposed a range of detailed rules on funded
schools, which created an early precedent for today's huge burden of federal
regulations on state and local education systems.
The first major subsidy for students in higher education was the Servicemen's
Readjustment Act of 1944the G.I. Billwhich allowed World War II veterans to
attend college at no cost. The G.I. Bill is widely admired legislation, but like all
subsidy programs it led to substantial wasteful spending and abuse. Some colleges
and universities used federal funds for extraneous purposes, such as swimming
pools and stadiums, while others increased tuition rates charged to
veterans.3 There were also cases of outright fraud by schools aimed at garnering
extra federal funds.
In 1958, the National Defense Education Act was approved in response to the
Soviet Union's launch of Sputnik, which spread fear that the communists were
getting ahead of Americans in technical skills. The Act authorized funding for higher
education loans and fellowships, vocational teacher training, and programs in the K12 schools, including math, science, and foreign language activities.
The year 1965 was a landmark for federal expansion into both the K-12 schools and
higher education. The Higher Education Act of 1965 is the basis for many of today's

postsecondary education subsidies, including student loan and grant programs,

college library aid, teacher training programs, and other subsidies.
Since 1965, the federal government has provided increasing amounts of funding for
higher education as grant and loan programs have been expanded, and new
programs added. Federal aid for higher education soared from $10 billion in fiscal
2000 to $30 billion in fiscal 2008.4
Of the total $30 billion in 2008, $2.3 billion went toward higher educational
institutions, including large shares to Gallaudet College and Howard University. The
remaining $27.6 billion went toward student aid: $5.5 billion for direct student
loans made by the government, $4.9 billion for federally guaranteed loans made by
private lenders, $15.7 billion for grants, and the rest for federal
administration.5 Note that the figures for loans are the net amount of federal
support, based on assumptions about loan repayments. The gross amount of loans
is much largerin fiscal 2008, the gross amount of loans was $110 billion. 6
In recent years, Congress has expanded subsidies for higher education. The College
Cost Reduction and Access Act of 2007 cut interest rates on federally subsidized
loans in half, thus encouraging more student borrowing. The Ensuring Continued
Access to Student Loans Act of 2008 increased the borrowing limits on certain
student loans and gave the Department of Education new authority to fund student
lending. In 2008, Congress increased Pell Grant maximums from $5,800 to $8,000
over time, authorized forgiveness of up to $10,000 in federal loans for people
working in an area of "national need," and expanded other subsidies.
In 2009, President Obama proposed to eliminate all student loans through private
financial firms guaranteed by the government, and thus make all federal loans
"direct loans" from the Treasury. He also proposed to increase Pell grants and to
budget for them as an "entitlement" program, thus putting spending on automatic
pilot and not needed annual budgeting action from Congress.
Outside of the Department of Education, the federal government offers other aid
programs for higher education, such as tuition assistance for military personnel in
the Department of Defense. Also, the federal government funds more than $30
billion of research at the nation's universities through various departments. 7
Finally, a growing part of federal support for education comes through the tax code.
In 1995, there were just 7 special breaks in the income tax code for K-12 and
higher education. Today, there are 16 breaks, including the lifetime learning tax
credit, Hope scholarship, education savings accounts, and education facility bonds.
Politicians of both parties continue to offer more breaks, so the tax code will likely

get more crowded with such giveaways.

Subsidies and Education Inflation

There are numerous problems with federal subsidies for higher education. For one
thing, such subsidies benefit people who will earn higher than average incomes
during their careers. Thus, the effect of subsidy programs, in part, is to impose
taxes on blue collar workers, who have not attended college, to pay for the tuition
of future white-collar professionals. Why should the government subsidize future
high earners at the expense of average working people?
Supporters of student aid subsidies argue that higher education is a "public good"
that would be underprovided in a free market. However, that is probably not the
case. People have a strong incentive to invest in their own education because it will
lead to higher earnings. Those with a college degree will earn, on average, 75
percent more during their lifetime than those with just high-school degrees. 8 That
is a big incentive for people to save or borrow in private markets to pay for their
own college costs. There is no "market failure" here.
Interestingly, the main effect of federal student aid programs may not be to
transfer wealth from taxpayers to students as mentioned, but from taxpayers to
academic institutions. That's because the rise in student subsidies over the decades
appears to have fueled inflation in education costs. Tuition and other college costs
have soared as subsidies have risen.
It is matter of supply and demand. More and more Americans have sought a college
education, which has pushed prices higher. Ordinarily, such upward pressure would
be restrained by consumers' willingness and ability to pay, but as government
subsidies have helped absorb tuition increases, the public's budget constraint has
been lifted.9 Peter Wood, a professor at Boston University noted that federal
subsidies "are seen by colleges and universities as money that is there for the
taking . . . tuition is set high enough to capture those funds and whatever else we
think can be extracted from parents."10
One can look at average cost data to see the inflationary effect of rising student
aid. From 1987 to 2007, there was a strong upward trend in average per-student
costs of private and public universities (tuition, fees, and room and board).
However, if you subtract from those costs federal grants, loans, and tax benefits,
there has been only a modest increase over two decades.
Consider four-year private colleges and universities. The average real cost (in 2006
dollars) per student rose from $18,122 in 1986 to $30,497 in 2006, a 68 percent

increase. But students didn't bear that large increase because of grants, loans, and
tax benefits. After these benefits, the cost grew from $10,943 to $14,158, a much
more modest 29 percent increase. A similar pattern holds for price increases and
public institutions.
Nonetheless, even after taking inflated prices into account, federal aid has probably
helped increase student enrollment. Total U.S. college and university enrollment
increased about 48 percent between 1986 and 2006. But have those enrollment
increases been an entirely good thing?
Many of those additional students may not have been ready, or suited, for college.
As evidenced by the rising shares of college students who require remedial work.
Further evidence of the problem is that institutions have lowered their standards to
adapt to the rise in second-rate students. The American Academy of Arts and
Sciences reported that from the mid-1960s to the mid-1990s, college grade point
averages grew steadily but Scholastic Aptitude Test scores declined.11 The share of
entering college students who complete degrees has also fallen over the
decades.12 In addition, while college attendance is up, overall adult literacy has
barely budged over the last 15 years.13
With all this in mind, phasing out federal aid would probably not result in reduced
accessibility for truly college-ready students. Indeed, college cost inflation induced
by federal aid probably hurts low-income familiesthe people that federal aid was
supposed to targetmore than others. Further, many private philanthropists
support promising, low-income college kids, and they would have greater interest in
doing so if the federal government was not in the aid business.
The value of a college education is very real, so young people and their families
have a strong incentive to invest in higher education themselves, and private
lenders have an incentive to lend to them. By cutting federal subsidies, tuition and
related costs would fall as students shopped around for the best deals, which in
turn would force schools to reduce their bloated cost structures.
There is plenty of evidence of bloat in academia. Consider congressional earmarks,
which often fund dubious projects at colleges and universities. The number and
value of educational earmarks has soared in recent years. 14 In 2008, earmarks
included $140,502 "to maintain healthful interscholastic youth-sports programs" at
the University of Maine; $98,000 to build a "Student Wellness and Recreation
Center" at Heidelberg College in Ohio; and $1,915,934 for the Charles Rangel
Center for Public Service at the City University of New York.

Here are some other signs that both students and institutions could tighten their
belts:

College students devote 3.2 hours to education on an average weekday,

versus 3.9 hours to "leisure and sports;" 15
The six-year graduation rate for bachelor's students is only about 56 percent,
indicating that many students are not very serious about education; 16
Almost half of full-time college students binge drink or abuse drugs, and the
incidence of such behaviors is rising.17
Between 1983 and 2007, energy consumption costs at America's colleges
rose twice as fast as energy costs in the private business sector, indicating that
colleges are not very cost-conscious.18

Rising Federal Regulatory Control

Even with its problems, the American postsecondary education system is
considered to be the best in the world. Driven by freedom of choice by consumers
and competition between independent institutions, it has an unmatched vibrancy.
However, increasing top-down control and subsidization from Washington is creating
a threat to the strength of the American system. As we have seen in K-12
education, the growth in federal subsidies is usually accompanied by calls for more
oversight, micromanagement, and rising levels of red tape imposed by Washington.
A classic case of top-down federal control coming as a package deal with federal
money was Title IX of the education amendments law of 1972. It banned
discrimination on the basis of sex for any education-related program receiving
federal assistance. Title IX has created many dislocations in activities such as
college athletics, and it has generated large bureaucracies of lawyers to administer,
enforce, and litigate the complex rules. The law is enforced by the Office of Civil
Rights in the Department of Education, which had 629 employees in 2008. Title IX
is a regulatory octopus with arms in education programs, athletics, cheerleading,
the Boy Scouts, fraternities, and many other activities. Whole books have been
written about its broad-ranging and problematic effects. 19
Today, a growing regulatory threat to higher education are the calls for "national
standards," similar to the top-down rules imposed on K-12 education. In 2005, then
secretary of education Margaret Spellings created a commission to formulate a
"comprehensive national strategy" for higher education. The Bush administration
signaled that it wanted to tighten federal control over higher education as it had
done over K-12 education under the No Child Left Behind Act. The commission's
final report stopped short of advocating outright federal imposition of standards and

tests, but it did call for the creation of "a national strategy for lifelong learning" and
a federal database with information on every college student in the country.20
Secretary Spellings also tried to impose outcome-measurement requirements on
colleges through the regulation of accreditors, which are organizations whose stamp
of approval is needed for the receipt of federal aid. In her plan, accreditors would
be required to have schools report explicit outcome measures, which would
probably mean standardized tests for incoming and outgoing students.
For the time being, Congress has rejected these proposed advances of federal
intervention into higher education. However, Americans need to be aware that
federal subsidies and regulations create a growing threat to academic
independence, and would jeopardize the nation's outstanding system of
autonomous and competing institutions of higher learning.

Waste, Fraud, and Abuse

Just about every federal program that hands out subsidies to individuals or
businesses suffers from large waste, fraud, and abuse problems. Those problems
are an ongoing issue in Medicare, Medicaid, housing subsidies, food stamps, farm
aid, and other budget areas. When programs hand out billions of dollars of grants
or loans, they attract cheaters and fraud artists. What makes it worse is that federal
policymakers have shown themselves to be incapable of standing up for taxpayers
and ending the waste.
Federal student loan and grant programs have been subject to waste and fraud for
decades, and have taken many forms. One problem with needs-based student aid,
for example, is that it creates incentives for families to misreport their income to
garner excess federal cash. With the Pell grant program, this fraud problem costs
taxpayers hundreds of millions of dollars per year.21 Another ongoing problem is the
high default rate on student loan programs. In 2001, the Government
Accountability Office found that there were about $22 billion of student loans in
default.22
Students aren't the only culprits in education aid abuse. Under most student loan
and grant programs, the aid is sent directly to thousands of educational institutions,
which are supposed to distribute it to the eligible students. However, that
distribution system has attracted swarms of shady school operators, who have lined
their own pockets with funds meant for students. A related type of waste that has
grabbed news headlines recently regards the large returns earned by the financial
institutions that are subsidized to service student loans.

The magnitude of waste and fraud in federal student aid programs became clear in
the early 1990s. One scandal at the time regarded the trade school American
Career Training Corporation in Florida. The school recruited new "students" at food
stamp offices and housing projects, and helped them take out loans. 23 The school
owners received tens of millions of dollars in federally guaranteed student loans,
and simply pocketed much of it.
Many similar rip off schemes came to light. In 1991, a year long Senate
investigation found that the federal student loan program is "plagued with fraud and
abuse at every level," robbing taxpayers of billions of dollars.24 The investigation
accused the Department of Education of "gross mismanagement, ineptitude and
neglect" and found that it had a "dismal record" of dealing with loan abuses. 25 The
report found that losses from the student loan program totaled an enormous $13
billion between 1983 and 1990.
Another fraud scheme at the time involved 21 Jewish schools in New York State,
which received millions of dollars in federal Pell grant money. The schools spent
hardly any of the money on education. For example, one of the schools pocketed
$3.2 million in Pell grants in a year and spent just $21,000 on education. 26 Another
scandal involved employees of Advanced Business College in Puerto Rico, who used
Pell grant monies to buy high-end sports cars and real estate, wasting more than
$3 million of taxpayer funds. Once again, auditors fingered the Department of
Education for its poor management and oversight of loan programs.
In 1994, the department admitted that it was losing a staggering $3 billion or more
annually to waste, fraud, and loan defaults, accounting for more than 10 percent of
its entire budget. Education Secretary Richard Riley called the department's
oversight "worse than lax."27 For years the department had been wiring billions of
dollars of loans and Pell grant funds to obscure trade schools based on unproven
claims about how many enrolled students were qualified. Students and schools had
to fill out paperwork to get the aid, but the Department of Education never verified
it.
Some program changes have reduced the extraordinarily high fraud rates of the
1990s, but large amounts of funding are still wasted. One 2002 investigation
revealed how easy it is to scam student loan programs: the GAO created a fake
university in London with three fake students, and then applied for, and was
awarded, $55,000 in federal student loans.28 And a 2005 investigation revealed
that owners of a company called the CSC Institute stole $4.3 million of the $13
million it received in Pell grants.29
Student aid scandals have continued in recent years. In 2007, Secretary Spellings
testified to Congress, "federal student aid is crying out for reform. The system is
redundant, it's Byzantine, and it's broken. In fact, it's often more difficult for
students to get aid than it is for bad actors to game the system." 30 One issue is the

very large return earned by some financial institutions using a loan program
loophole. Under the Federal Family Education Loan Program, dozens of loan
originators figured out how to earn a 9.5 percent guaranteed return from the
government, even though market interest rates were much lower. The 9.5 percent
rate was supposed to have been eliminated in the 1990s, but lenders figured out
how to revive it, which caused subsidies on guaranteed loans to explode and
lenders to earn billions of dollars at taxpayer expense.
The Democrats have used this latest scandal to try to reduce or eliminate private
student loans in favor of direct loans from the government. The Republicans have
reflexively supported private lenders over government-sourced loans. Our view is
that the Department of Education has been a terrible financial manager of all its aid
programs, including Pell grants, direct loan programs, and loan guarantees to
private lenders. All of those programs should be scrapped, and students ought to
rely on grants and loans from private financial institutions and philanthropic
sources.
In theory, it is possible to improve federal management of higher education
subsidies, but programs that hand out billions of dollars to a vast array of recipients
will always be vulnerable to major rip-offs. As the Inspector General of the
Department of Education noted, "the department's student loan programs are large,
complex, and inherently risky the loan programs rely upon over 6,000
postsecondary institutions [and] more than 3,000 lenders." 31 There is no reason for
taxpayers to support such a large, complex, and risky scheme, especially when
private alternatives are available.

Conclusions
Federal aid to students and higher educational institutions is harmful on many
fronts. It drives up tuition costs, encourages bloat and inefficiency, and is an unfair
burden on taxpayers. It also poses a threat to the core strengths of American
higher education, including institutional autonomy, competition, and innovation. All
efforts to impose top-down federal regulations on colleges and universities should
be rejected, and federal subsidies to students and institutions should be phased out
and eliminated.

1Budget

of the U.S. Government, Fiscal Year 2009, Appendix, p. 356.

2Milestone Documents (Washington: National Archives and Records Administration,
1995), p. 57. Quote from an excerpt at www.ourdocuments.gov/doc.php?doc=33.
3U.S. News and World Report, "More Billions for GI Schooling," August 31, 1951.

For the fiscal 2000 data, see Budget of the U.S. Government, Fiscal Year 2002,
Analytical Perspectives, Chapter 26.
5Budget of the U.S. Government, Fiscal Year 2009, Appendix, p. 356.
6Budget of the U.S. Government, Fiscal Year 2009, Appendix, p. 357.
7 U.S. Department of Education, Digest of Education Statistics, 2008, Table 373.
8 Jennifer Cheeseman Day and Eric Newburger, "The Big Payoff: Educational
Attainment and Synthetic Estimates of Work-Life Earnings," Special Studies, U.S.
Bureau of the Census, July 2002.
9 For background, see Richard Vedder, Going Broke by Degree: Why College Costs
Too Much (Washington: American Enterprise Institute, 2004).
10 Quoted in Jeff Jacoby, "Making College Affordable," Boston Globe, February 10,
2005.
11 Henry Rosovsky and Matthew Hartley, "Evaluation and the Academy: Are We
Doing the Right Thing?" American Academy of Arts and Sciences, 2002.
12 John Bound, Michael Lovenheim, and Sarah Turner, "Understanding the Decrease
in College Completion Rates and the Increased Time to the Baccalaureate Degree,"
Report 07-626, Population Studies Center at the University of Michigan, November
2007.
13 U.S. Department of Education, Institute of Education Sciences, National
Assessment of Adult Literacy, nces.ed.gov/naal/kf_demographics.asp.
14 Jeffrey Brainard and J.J. Hermes, "Colleges' Earmarks Grow, Amid
Criticism," Chronicle of Higher Education, March 28, 2008.
15 Bureau of Labor Statistics, "American Time Use Survey," chart topic:
students, www.bls.gov/tus/charts/students.htm, November 13, 2008.
16 National Center for Higher Education Management Systems, "Six-Year Graduation
Rates for Bachelors Students," 2007, www.higheredinfo.org.
17 National Center on Addiction and Substance Abuse, "New CASA Report Finds Half
of College Students Binge Drink, Abuse Prescription and Illegal Drugs," Press
Release, March 15, 2007.
18 Alex Davidson, "Economics 101," Forbes, December 22, 2007.
19 For example, see Jessica Gavora, Tilting the Playing Field: Schools, Sports, Sex,
and Title IX (San Francisco: Encounter Books, 2002).
20 The Secretary of Education's Commission on the Future of Higher Education, "A
Test of Leadership: Charting the Future of U.S. Higher Education," U.S. Department
of Education, September 2006.
21 John Higgins, Inspector General, Department of Education, Testimony before the
House Committee on Government Reform, Mary 26, 2005.
22 Government Accountability Office, "Federal Budget: Opportunities for Oversight
and Improved Use of Taxpayer Funds," GAO-03-922T, June 18, 2003, p. 17.
4

Karl Vick, "Florida Trade School Probed for Loan Abuse," St. Petersburg Times,
February 27, 1990.
24 Quoted in Jason DeParle, "Panel Finds Wide Abuse in Student Loan Program," New
York Times, May 21, 1991.
25 Quoted in Jason DeParle, "Panel Finds Wide Abuse in Student Loan Program," New
York Times, May 21, 1991.
26 Michael Winerip, "Billions for School Are Lost in Fraud, Waste and Abuse," New
York Times, February 2, 1994. See also Mary Jordan, "A College Aid Rip-Off;
Education Dept. Invites Fraud, Nunn Says," Washington Post, October 28, 1993.
27 Michael Winerip, "Billions for School Are Lost in Fraud, Waste and Abuse," New
York Times, February 2, 1994.
28 Government Accountability Office, "Department of Education: Guaranteed
Student Loan Program Vulnerabilities," Letter to Senator Susan Collins (R-MA),
November 21, 2002,www.gao.gov/new.items/d03268r.pdf
29 John Shiffman, "Pair Accused of Taking $4.3 Million from
Grants," Philadelphia Inquirer, July 1, 2005.
30 Margaret Spellings, Secretary of Education, Testimony before the House
Committee on Education and Labor, May 10, 2007.
31 John Higgins, Inspector General, Department of Education, Testimony before the
House Committee on Government Reform, Mary 26, 2005.
- See more at: http://www.downsizinggovernment.org/education/higher-educationsubsidies#sthash.WNMwgm02.dpuf
23

From early childhood through the post-secondary level, education in the United States is subsidized
by taxes, grants, and donations because we believe that it provides profound benefits to our society,
challenging students to create lives of meaning and purpose and providing them with the tools to
sustain this process for themselves and others. To the extent that we, in higher education, have
forgotten this important mission, we risk collapsing into a fee-for-service industry in which we simply
convey information and train narrowly for the workforce.
In the United States, markets allocate goods, with consumers and producers determining prices,
providing signals for the allocation of resources. And for many, many goods and services, these
markets tend to work very well.
However, we recognize that markets are not always able to provide all of the services that benefit
our society, and so we also support activities and subsidize programs not in markets but which hold
meaning for us. In 2011, Americans gave nearly $300 billion in charitable contributions; 117 million

U.S. households, 12 million corporations, 99,000 estates, and 76,000 foundations gave to charities
during the year. (Reuters, June 19, 2012) We provide such support because we believe in the
missions of these institutions and want to increase the impact of their programs.
In addition to giving directly, we also subsidize a whole host of services and activities provided by the
government and financed through our taxes. Usually, these are services that produce benefits to
society at large, outside of those who are directly consuming or producing them. Economists call
these benefits positive externalities and recognize that free markets will likely underprovide these
goods without any interventionsubsidizing them increases their use and enhances the welfare of
society at large.
As in many nations, primary and secondary education in the United States is subsidized. Making
basic education available provides the necessary (but not sufficient!) conditions for a well-informed
population so that a representational democracy can operate, and we maintain a society comprised
of individuals who have the basic skills required to join the labor force, act responsibly, and have the
tools necessary to face the many global challenges faced by humans today.
Post-secondary education is also subsidized. Virtually all private and public institutions, both 2-year
and 4-year, subsidize their students educations through donations, grants or with public funding. For
example, in 2009, Connecticuts 55,000 community college students paid for 21 percent of the total
cost of their educationthe highest rate in the last 20 years. (CT Mirror, December 8, 2010) At
private liberal arts colleges and large universities, subsidies are provided at just about every level;
for example, the Harvard Law School website states that [e]very student enrolled at Harvard Law
School receives an implicit subsidy from the Schools endowment and the annual gifts made to the
Law School by generous benefactors, in that the tuition fee covers only about 60% of the total cost
of providing a quality legal education to each student.
Why dont we expect students to pay the full cost of their education? If the only goal of postsecondary education were to provide accurate information and vocational training, then most
students would simply pay the full cost and receive the returns in terms of higher income throughout
their careers, just like an investment in a financial market. If all schools are doing is training for the
labor market and signaling to future employers, then subsidies do not really make sense. Sure,
some subsidies would be available in recognition of profound differences in preparation and access,
but we would not have reason to subsidize all students.
Let me be clear before continuing further: an education that provides skills to serve the labor market
is vital for individuals, the economy and our society. Providing the means to engage in meaningful
work is obviously important.
However, the reason we continue to subsidize post-secondary education is to produce benefits
beyond those that simply accrue to the student him or herself through vocational training and
employment.

Education must create environments for our students to inquire and challenge themselves about the
meaning of their lives and the lives of others; this is the primary mission of education. Our courses
must offer challenging reflections on how the material relates to our students values, allowing them
to discern the nature of the impact they want to have in the world.
We must return to this mission and attend to it throughout our classes, student services, career
counselingall aspects of higher education.
I believe that many in higher education have forgotten about this primary mission, and that this
explains why so many in higher education are concerned about its purpose.
Christina Elliott Sorum, writing about this issue from the perspective of liberal arts in 2005, said, It
seems to me that our missionwhy we teach what we teachis muddled, especially with regard to
the questions of whether we should or can teach values and of why the liberal arts are relevant
beyond the teaching of skills. From the vantage point of 2013, I agree with her statement: It is no
longer clear to our studentsI fear, in part, because it is not clear to usthat the liberal arts prepare
us to be better persons and better citizens and leaders in todays world. (Christina Elliott Sorum
The Problem of Mission: A Brief Survey of the Changing Mission of the Liberal Arts, in Liberal Arts
Colleges in American Higher Education: Challenges and Opportunities ACLS, Occasional Paper No.
59, 2005.)
This mission, of challenging our students to inquire as to what it means to be a good citizen of this
world, must be supportedand needs to be subsidized, since all beings benefit from it. We
subsidize our students education since that is how we create and support a vibrant and ethical
society.
We have the means to do this: to complement our teaching by integrating students sense of
engagement and purpose directly into their studies.
The first step in this process is for students to become clear about what is most deeply meaningful to
themwhat are their values? It is vital that we provide exercises and time for students to reflect on
how the material in their courses affects and challenges their own sense of meaning. Along with
guidance in this inquiry, students need to be supported in learning to attend to the implications and
consequences of their actions; without an understanding of the impact our behavior has on
ourselves and on others, we are destined to create harm and suffering. This requires clarity and
sustained attention; expedient gains from abandoning meaning seem so alluring, and actions based
in violence, lust or greed have such obvious costs. But once this inquiry is established and
supported, students can begin to focus on their intention and alter behavior that is not in accord with
it.
To support our students in the inquiry as to what means most deeply to them, and to provide them
the tools to live out that meaning in the world is the primary mission of education. Analytic thinking,
fostered and developed so well by academic institutions, also benefits from the complement of these

contemplative approachesenabling students to relate their learning directly to their own lives and
act in ways that they value, deepening their understanding of the material they are studying.

When the government is in the business of handing out money, interest groups lobby to get it or
advocate to receive more than they are already getting.
So it is with spending on higher education.
As the Michigan Legislature debates the state budget for the upcoming fiscal year, more money for
preschool, college and everything in between is being proposed. Over the long-term, the funding for
those areas has increased dramatically. Taxpayers should be skeptical of the current reasons for
subsidizing universities further.
Requests for more higher education funding is reported willingly in the media: Its the "most
important investment" people can make. It sees "$17 in economic benefits" per dollar invested by the
state. It results in "lifetime earning power."
But the central arguments are dubious for five main reasons:
1.

There is no link between higher education subsidies and economic growth, and none

between college degrees and job creation.

Since 1980, Michigan has spent a much higher proportion of personal income on state government
support for higher education than nearby states like Illinois and Ohio. According to Ohio University
economist Richard Vedder, by the year 2000, the Mitten State was spending the sixth most in the
country (2.34 percent of its personal income), double what Illinois was spending and much more
than Ohio. This did not lead to higher growth as Michigans economy performed among the worst in
the country during that time period.
And states with a higher proportion of college graduates do not necessarily grow by adding more
college degrees. A comparison of the number of state residents with a college degree with per
capital income growth from 2000-2008 yields no correlation.
2.

More subsidies equals more waste.

The number of administrators and service staff at Michigan's 15 public universities increased at a
faster rate than full-time equivalent students. Administrators and service staff numbers went from
19,576 in 2005 to 22,472 in 2009, while full-time equivalent students increased from 250,030 to
257,230 over the same time period. At the same time, the compensation for the average
employee increased 13 percent.
Michigan is not alone: A 2009 report from the Center for College Affordability and Productivity
showed a 20-year increase in administration and support staff. And revenue for Michigans public
universities went from $4.2 billion to $5.0 billion, largely from higher tuition and fees. The average
compensation for University of Michigan full-time faculty increased from $122,943 in 2005-06 to
$141,753 in 2009-10. The University of Michigan-Flint now has more administrators than faculty.
Colleges set tuition rates relative to supply-and-demand, but government subsidies distort this
process and inflate the cost. That's why schools like Grove City College (my alma mater) and
Hillsdale College, which receive no government funding, do a much better job at keeping down the
cost of tuition. Annual tuition at Grove City is $13,598, the cheapest of all institutions of higher
education in Pennsylvania. Tuition at Hillsdale is $20,760 a year. Both are much cheaper than the
average cost of private colleges and universities in the country at $31,975 a year.
3.

When comparing earning power between college graduates and non-graduates,

correlation is not causation, and the actual cost of college matters.

Proponents of more funding for higher education almost always cite the same statistic as their main
point: Overall, college graduates tend to make more money in their lifetime than those without a
degree.
But this assumes that the degree caused the higher earnings, rather than the fact that those who
complete college are already more likely to be financially successful whether they attend university or
not.
The common figure cited is that a college degree is worth $1 million over the lifetime of a worker.
Besides ignoring the point above, this is a poor exercise in statistics. The number is arrived at by
taking the difference between the average pay of a college graduate and the average pay of a noncollege graduate and multiplying it over a 40-year career.
First, that only tells us what the average is today, not what the actual future earnings are.

Second, this assumes that all college degrees have the same value. For example, it assumes that
a Bachelor of Arts in art history is the same as a Bachelor of Science in quantum physics. Most
significantly, it ignores many important factors: taxes, the real salary data of todays graduates, the
opportunity cost of going to college (how much someone would earn during those years in school),
the fact that a large proportion of students start school and do not finish, and, most importantly,
student loan debt.
4.

Ensuring that everyone has college schooling would not enhance the labor market it

would dilute a university degree.

The assumption among many is that every career should require a college education. This belief
leads to subsidies for subjects with little practicality in the workforce and areas where a student may
be better off doing an apprenticeship or working for four years than attending more school. Pushing
for everyone to go to college does not automatically make those students university-ready, it lowers
the overall standards of higher education. This has lead to a high dropout rate, more repeated
classes for those in school and an explosion of marginal subjects in which many degree-holders are
forced to work outside that field because of a lack of demand. In short, incentivizing degrees
students do not ever use.
5.

Higher education may be the next bubble to burst.

Much like the housing bubble, higher education is fueled by government subsidies, publicly-backed
loans and incentives that say everyone should be doing something. As noted and expanded on by
law professor Glenn Reynolds, economist Richard Vedder and writer Nathan Harden, tuition costs
have skyrocketed well above inflation while colleges compete to expand into areas outside of their
main purpose and taking on more debt to do so. At the same time, competition from other sectors,
like online education, offer cheaper alternatives to the bread-and-butter of university academia.
It is important for citizens to be educated, both to learn a job and to better be able to respond to a
changing marketplace. But there is a difference between education and schooling.
Spending more money to send people to get a specific number of degrees at a specific institution is
different from education. Education comes in the form of apprenticeships, trade schools and time on
the job learning.

And education is something you cant force on someone else. Just putting someone in college does
make force them to learn anything. Education is a personal matter, and more subsidies will only
influence a person's decision to learn or not to learn at the barest of margins.
Higher education can build new skills, enhance old ones and show prospective employers that
students are able to put in the time to earn a degree. But the value of a degree varies by the
institution, the cost, the time and the subject.