Free college is even worse, because there is never any student repayment and taxpayers must bear all the costs. Many of these taxpayers were themselves unable to attend college, or chose more affordable options, but are now forced to pay for others.
Yet as presidential hopefuls offer taxpayer‐funded college, private financing programs are already available. Individuals, foundations, firms, and colleges themselves choose to take on the risk and bear some or all of students’ education costs.
For instance, many college and university endowments are hundreds of millions of dollars. Some even reach the billions — Harvard’s endowment is $39 billion. Endowment returns pays for merit and need‐based scholarships, in addition to other institutional expenses.
Meanwhile, many private businesses from McDonald’s to Microsoft offer higher‐education scholarships. Tennessee Achieves, which aims to increase access to higher education within the state, raised $16 million in private funds from 2009 to 2014 to help cover college costs. Purdue University uses Income Share Agreements as an alternative to student debt accumulation. In these agreements, investors agree to pay a portion of a student’s education costs in exchange for a percentage of post‐graduation earnings over a predetermined period.
Endowment‐funded grants and corporations have long helped students pay for college. Programs such as Tennessee Achieves and Purdue University’s ISAs are, however, relatively new. They are creative movements away from the government student‐loan monopoly toward private‐sector, voluntary financing options, transferring education expense and risk from the taxpayer to students and investors, where it should be held.
Yet innovative private‐sector solutions are difficult to develop because of massive education subsidies and the federal government’s expansion into student aid. Democratic proposals to expand government’s education‐funding footprint will certainly further deter private solutions. But if the government reduces college financing, it will incentivize innovative private‐sector engagement, provide taxpayer relief, and empower individuals and private organizations to choose their preferred type and level of collegiate funding.
Policymakers should embrace an entrepreneurial spirit, and encourage states and regions to experiment with private programs tailored to fit their unique needs. The diversity of students, colleges and universities, disciplines, and post‐graduation employment opportunities alone justifies moving away from the federal one‐size‐fits‐all approach.
With high and rising costs, free college may sound appealing. But remember, when any politician offers something for “free,” the costs eventually fall on all Americans.