Friday, November 16, 2012

Today's tuition discussion

From Counterparties:

Megan McArdle argues that surging costs are as much a consequence as they are a cause of unprecedented levels of student debt, spurred on by government subsidies. But Mike Konczal flags a Department of Education study that shows that the government earns $1.14 back for every dollar it loans to students and asks, “What’s a good word for the opposite of a subsidy? Whatever it is, student loans are that”.
 This really seems to be a major problem with the modern discourse on education.  We are all convinced that there has to be some sort of amazing (clever, counter-intuitive) theory about why tuition is going up.  Bad policy, on the other hand, seems to be completely ignored.  But if the government is making a net profit off of student loans, that seems to be rather concerning.  Not because I object to profit, but because the loans are so high.

There was a period where this blog used to use the word "Canada" a lot.  The reason is that Canada has a lot of interesting existence proofs for US policy.  They have universal health care, acceptable health outcomes, and a much lower percentage of GDP spent on health care.  Their system has flaws and trade-offs, but it shows that a diverse, multi-ethnic and geographically large country could control health care costs. 

In the same sense they seem to have much lower tuition and very high quality Universities.  They may not be the absolute best, but they are surprisingly competetive for a small country.  I am not sure we'd want to adopt all of the problems of Canadian education, but it is worth noting that they seem to be able to deliver high quality education at a much lower price point.  And this should have alerted the clever reader to the problem of Ms McArdle's argument -- why doesn't it happen in other countries, which also have a high return to education? 

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