Is College an Entitlement? Are Student Loans Bad?

Flipping around my television for a mental break this afternoon, I stumbled across former CNN anchor Frank Sesno moderating a panel at George Washington University (my apologies to American University President Neil Kerwin who would likely prefer that I refer to it as "that other Washington school"). My idea of mental floss (to borrow a phrase from Brad Feld) may be a bit odd, but I stuck with the discussion because it centered on the cost of attending college.

The panel opened with a bit of news that apparently came out of Stanford today as that university announced that for students from families making less than $100,000, there would be no student loans or tuition. Those from families making less than $60,000 would pay no room and board either.

GWU President Steve Knapp was concerned about "debt burden" of graduates and felt that it impacted career choices, deterring some from taking lower paying public service jobs. He said for students that leave his school with debt it averages $29,000 and he has a goal of reducing that figure to $20,000.

Let me say at the outset that I was quite fortunate and went to American University on a full academic scholarship, so I left school with no student loans to pay. That’s one of the reasons why I have been an active supporter of the university in recent years as I have achieved success in business. I’m proud of the fact that I have now given more to the school than I would have paid in tuition.

I also want to acknowledge that the cost of higher education does seem to be growing at a significant rate and it clearly presents a challenge to many students. That’s why much of my giving focuses on funding scholarship programs at AU.

However, one of the panelists (Jared Bernstein from the Economic Policy Institute) noted the "college premium" that economists recognize has increased quite quickly in recent years and, in fact, has doubled in the last generation. In other words, the amount of money earned by college graduates is growing very quickly as well.

This all made me wonder whether some of the concern is a bit overblown and whether, in fact, some college debt might actually be a good thing. One of the cornerstones of the American economy is the notion that it takes risk to gain rewards. The notion of "get rich quick" schemes, happily, doesn’t prevail, but rather the idea that one must invest to reap rewards dominates.

Now, this isn’t merely an effort to ensure that Christopher Penn remains gainfully employed at the Student Loan Network, but rather an honest attempt to examine what the right public policy decision might be. But perhaps we shouldn’t view college as an entitlement for which schools and government must work to reduce the cost as close to zero as possible (understanding it won’t likely be very close). Perhaps, instead, we should address the concern that Steve Knapp outlined at the start of the conversation of limiting job choices of college graduates.

The idea, then, would be not to focus as much effort on the cost of college education itself, but rather seeking some way to balance the cost after graduation. If someone takes a lucrative job and can easily pay off student loan debt, there’s no real reason for government to subsidize the cost. But if they take a job in an underserved area of public service, for instance, then there’s a better reason to address that debt burden.

Of course, it would be important to avoid a perverse incentive to take certain low-paying jobs simply to gain a subsidy. Instead, it seems to me you would want to use it to lure students to become teachers at inner city schools or take other similar posts where college graduates may be less inclined to go. 

As a conservative, I have a distaste for government manipulation of individual choices, so I’m treading on thin ice here (but that’s what happens when you think out loud as I am in this post). So here’s where you come in. Am I nuts? Is there a nugget of value to my ramblings? What say you?