This article was originally published on GrasstopsUSA.com.

            It seems that we live in an age of abundance. Ample, inexpensive, high-quality food is virtually ubiquitous, and no American involuntarily starves to death. A few days’ work at a typical wage enables a person to afford numerous outfits of clothing. Electronic equipment keeps improving in quality while falling in price. Entertainment is everywhere, and the Internet makes much of it almost free. A high-quality piece of furniture might cost a few days’ typical wages at most. Even automobiles are well within the reach of virtually every working family – and most families now own two or three cars.

            Why, then, does such a tremendous number of Americans – including many hard-working, disciplined, conscientious ones – still experience serious financial difficulties in their lives? The vast majority of Americans’ expenses can be traced to three broad categories: higher education, heath care, and real estate. In each of these categories, prices keep rising much faster than most Americans’ wages – forcing many to enter unsustainable debts while erecting colossal obstacles in front of young people just starting out on their own. None of these three kinds of goods or services have any inherent properties that necessarily render them as astronomically expensive as they currently are. Furthermore, certain prior periods in history had been marked by more reasonable prices in each of these three areas. The reason why education, health care, and real estate are unaffordable to many Americans – and why involuntary financial suffering continues to exist in this country – is massive government intervention.

            Americans concerned about this genuine economic crisis would do well to examine each of these three categories and discover the tremendous damage government policies inflict on ordinary citizens’ finances and prospects. Here, we will consider the rising costs of college education, while costs of health care and real estate will be examined in subsequent essays.

            Prior to the mid-20^th century, a small fraction of Americans attended college – not because they could not afford it, but because most employers did not require a college education from their employees; a college degree was not seen as the certificate of overall competency that it currently is. Rather, it was a gateway to professions in research and academia, as well as jobs requiring extensive application of advanced theories. Indeed, the designation “college student” was widely viewed as an honorific and a mark of distinction. The people who did go to college were typically the people who genuinely wanted to be there – as opposed to virtually anybody and everybody today. Other things equal, if demand for a given good or service is lower, so is its price. Thus, the price of a college education for the truly serious and motivated students was far lower than it is today – and it was often augmented by a plethora of private merit scholarships to the deserving.

            This changed after World War II, when the federal government introduced the G. I. Bill to massively increase college attendance and demand for a college education above natural free-market levels. Through financial subsidies, the government artificially stimulated returning veterans’ demand for college educations, thereby leading to an increase in the price of college for everybody. The subsidized veterans could, of course, afford college – as could wealthy families, but the intelligent, aspiring middle- or working-class students were put at a great disadvantage. The federal government was not entirely oblivious to this problem, but it decided to correct a prior harmful intervention through another yet more harmful intervention – federal aid, mostly “need-based,” to students. Today, this aid is immense and increasing in the form of Pell Grants, student loans, and a variety of scholarships – most of them not based on academic merit or personal accomplishment.

            Federal aid to “needy” students further artificially stimulated demand for a college education, leading virtually everybody to seek one – even when personal interests and career goals did not correspond with such a path. This significantly reduced the quality of student bodies at most colleges – as many students used college as simply an excuse to “party” and delay assuming serious responsibilities for four or more years. It also raised the tuition prices colleges could charge.

            Not only does an increase in demand by lead to an increase in the market price of a service, but many colleges also recognized the source of the demand increase as government aid and thus figured that the subsidized students could afford to pay a little more out of their own pockets as well. What resulted was an almost fifty-year upward spiral of tuition prices. The government increased its subsidies to students, whereafter colleges hiked tuition rates, whereafter students again began to feel that college was unaffordable, whereafter the government again increased its subsidies. The unsubsidized students – mostly highly accomplished young people from moderately prosperous middle-class families who did not qualify for aid – suffered the most, as the number of merit scholarships declined and tuition burdens threatened to bankrupt families with even six-digit annual incomes.

            But even the subsidized students ended up worse off than they would have been in a completely free market. This is because much of the federal government’s educational aid comes in the form of low-interest loans. While these loans enable many people to go through college, they also burden college graduates with debts that take many years to repay. In a system devoid of government aid, tuition prices would have been much lower to begin with – enabling most students and their families to pay the tuition outright, not having to deal with paying any interest on debt – however low the rates might be.

            Furthermore, in a fully free-market system, taxpayers’ money would not have gone to providing the federal aid and administering it via a cumbersome bureaucratic behemoth. Thus, Americans would have kept more of their own money and been able to use it to pay for education – among other goods and services.  In addition, the non-existence of federal aid would have enabled a far more extensive array of private aid sources to exist – mostly based on academic merit and the expectation of solid student performance in college. Just as government welfare crowds out private charity and public education crowds out private education, so does government aid to students crowd out private merit scholarships.

            Most Americans would like to see college tuition costs decline. To accomplish this, two courses of action must be taken. First, more private colleges need to be pressured to reject all forms of federal aid. Outstanding educational institutions like Hillsdale College and Grove City College – which do not accept government money – also have far lower tuition rates than federally-subsidized colleges of comparable caliber. Second, politicians and policy makers need to be pressured to curtail federal aid to colleges and college students, thereby permitting both college attendance and college education prices to fall to their natural, free-market levels.  As a result, we can also expect a change of employers’ attitudes toward college degrees. Instead of being seen as an obligatory permission to work in any industry, such degrees will come to be perceived as genuine marks of distinction and outstanding merit. Furthermore, many Americans will recognize that they can do just fine in life without attending college – and the unwarranted stigma currently directed at those without college degrees will be diminished.

            Everybody does not need to attend college, just as everybody does not need to know calculus or automobile repair. But, given the current level of prosperity, it is possible for everybody to pursue the educational opportunities and interests of their choice, if only the government would keep out of the way.

G. Stolyarov II is a science fiction novelist, independent philosophical essayist, poet, amateur mathematician, composer, contributor to Enter Stage Right, Le Quebecois Libre,  Rebirth of Reason, and the Ludwig von Mises Institute, Senior Writer for The Liberal Institute, weekly columnist for GrasstopsUSA.com, and Editor-in-Chief of The Rational Argumentator, a magazine championing the principles of reason, rights, and progress. Mr. Stolyarov also publishes his articles on Helium.com and Associated Content to assist the spread of rational ideas. His newest science fiction novel is Eden against the Colossus. His latest non-fiction treatise is A Rational Cosmology. His most recent play is Implied Consent. Mr. Stolyarov can be contacted at gennadystolyarovii@yahoo.com.

Click here to return to TRA's Issue CXX Index.