Publicly funded colleges & universities will be waking up to an uncertain future on January 20th. The President-Elect plans to increase spending in several areas including a $1 trillion infrastructure package, and, an increased defense budget. The plan of action, it seems, is to cut non-defense discretionary spending by 1 percent annually. One specific portion of this budget that should be under extra scrutiny is higher education, which received over $51.3 billion annually in federal funding by the most recent numbers.
Across the country and in Washington, people are unhappy with the way our country’s institutions of higher education are decreasing opportunity; the exact opposite of what they should be doing. The main criticism of the higher education system increasing cost of tuition. According to U.S. Bureau of Labor Statistics, tuition costs at both private and public universities rose sharply from 1995 to 2015. Students at private universities could expect to pay 179 percent more, on average, than students two decades ago, while public-school students could expect to pay an excess of 200 percent more than their 1995 counterparts. These substantial hikes in the cost of higher education considerably outpace inflation over the same period.
These facts do not bode well for Millennials, who depend on a college education to open doors to career opportunities. Fewer college students are able to cover tuition costs by taking a part-time job, for example. For most young people, student loans will be the sole option to cover the costs. In fact, over 44 million Americans are still paying off their loans with an average payment of $351 a month.
Are these increases in tuition costs as inescapable as they appear? The fact of the matter is that colleges and Universities are being fiscally irresponsible with their funds. This raises important questions about the prudence of spending so much taxpayer money on higher education. In fact, this excessive amount of federal money being used on higher education may actually be part of the problem.
Recently, one of the more mainstream criticisms of colleges is that they don’t utilize their massive endowments to decrease tuition. An endowment is a large pool of money owned by institutions consisting of a multitude of donations. This fund is invested by the university and acts as an untaxable source of income with healthy returns.
Princeton, for example, has over $22 billion seemingly sitting around for a rainy day. Because of federal funding, these institutions are less likely to hold themselves accountable for financial irresponsibility and less willing to use their endowment money for University costs. While some suggest that the federal Government should mandate a certain allocation of funds from these massive endowments, this can be much more easily achieved by decreasing higher education funding outright.
Another way colleges are fiscally irresponsible is in the variety of ludicrous endeavors they actually do spend money on. Among the many superfluous examples are classes on topics such as “Recreation Tree Climbing,” “The Science of Harry Potter,” and “The Sociology of Miley Cyrus.” Colleges have also spent an extraordinary amount of resources just to cope with the results of November’s election. Universities have a penchant for funding research devoted to such crucial issues as jazz-playing robots and Koozies, why not forego the nonsense to save young people some money?
Not only do federal subsidies incentivize waste and fiscal irresponsibility, they also contribute to tuition increases. There is a striking correlation between increases in federal funding and tuition hikes. A study by the New York Federal Reserve Bank concludes that every $1 of Pell Grant money given to a school, money that isn’t paid back, corresponds with a 55 cent increase in that school’s price. This suggests that colleges and universities are taking federal money, increasing their tuition costs, and profiting while students are no better off.
When the spending priorities of the country shift this January, policymakers and the public alike should consider just how beneficial higher education spending is for young people across America. It is clear that government subsidies cause colleges to be fiscally irresponsible while decreasing opportunity by raising tuition excessively. Decreasing federal funding would also cause universities to rely on private donations in a greater capacity. Private benefactors are better equipped at holding institutions accountable with factors such as donor-intent agreements and variability of the check-size.
When it comes to reforming a broken higher education system, the government should rethink its role. Decreasing the reliance of federal funding will go a long way to making college more accessible young Americans and more effective in its academic endeavors.