How Should We Pay For Higher Education?

This article raises questions about how we fund higher education. The impetus for the article came from student movements at Berkeley and CUNY which are protesting what they see as the privatization of public education.

The government subsidizes higher education in numerous ways that are presented in the article. The total cost to government is comparable to what it would cost if government paid for the cost directly. The government prefers to use the tax code to subsidize higher education. For example, interest paid on student loans is tax deductible, employers can deduct the cost of funding employee education from income, banks are subsidized for making student loans, and there are numerous government programs that help to pay for higher education. This method of subsidizing higher education has also enabled corporations to enter the market in the pursuit of profit.

Government's role in funding education raises a fundamental question. It can subsidize higher education through the tax code, that turns potential students into consumers of education, and it enables the market to determine outcomes. The rationale for government subsidization of higher education is that it is a public good. If it is a public good, however, government could pay for it directly and not let the market determine outcomes.