When I hear advocates of free tuition for public colleges — as from some U.S. presidential candidates — I suspect they might be the kind of folks who are generous with other people’s money, but tight-fisted with their own.

I am a chronic gift-giver and I don’t restrict that to special days; I give year ’round when the spirit moves me. And from that experience I can say definitively that those who receive free things enjoy it, but they don’t value it.

Because they put no effort into the acquisition, they see no need to take care of it. That’s not universally true, but it is mostly true. I don’t think we want young people to see a four-year education that way because they need incentives to take seriously the choices they are making about what they are studying, and to weigh the benefits of classroom learning against that of the workaday world.

It also seems naïve for professors to believe that they can maintain academic freedom over the long run with government funding all tuition. Do they really think the government will let just anyone set up a school to feed off the public trough?

There are going to be rules and standards and micromanagement. The long-term impact isn’t likely to be positive.

UH Manoa Student Services Building.
The UH Manoa Student Services Building. Free college tuition is a bad idea, but there could be a compromise to help people get an education and not go broke. Cory Lum/Civil Beat/2019

So even if we had a lot of extra money, which we don’t given our thousands of underfunded societal priorities, there is just something silly about the idea of free college tuition. Even if it were free, which it isn’t. Free at the point of sale, but you pay for it in other ways.

Only the inexperienced think that taxes on a business aren’t passed through to the customers of that business. Research topic: the “formal” versus the “economic” incidence of a tax.

But there may be a middle ground. The amortization schedule of a loan is the monthly amount by which the loan principal amount is paid off or “amortized.”

Making Money

Many loans front load interest payments, so that the pay-down of the loan principal is anemic in the early years, but gets bigger in the later years.

But it doesn’t have to be that way. You can have level amortization of principal where you pay the same amount each month over the entire term of the loan. At least you could have a slope for the amortization that is less draconian than the one that is typically used.

The upshot: the lender makes less money over the term of the loan.

So they will try to compensate with higher origination fees or a higher interest rate. But some controls could be put on that. Across the board controls are the wrong way to go about it. Maybe we should enable the possibility of these kinds of loans and see if the market will provide them to some students.

That is to say that we enable with certain requirements. If you freely chose to do X, then you must have Y as a feature of X. And don’t worry unduly about the ability of lenders to protect their interests with legislatures. They have done pretty well at that in the past.

False choices about extremes sometimes mean that nothing gets done. Sometimes, admittedly not always, a middle ground can be a decent solution.

It’s an old saying that if you subsidize something you get more of it; and if you tax something, you get less of it. But what about financing?

When we finance health care through insurance, and education and real estate through loans, we get more of it, higher GDP. But does the price go up or down?

False choices about extremes sometimes mean that nothing gets done.

If you said “up,” you can officially take yourself off the list of total dorkness.

For a long time now, we have borrowed from the future to keep GDP growth up in the present. But it’s like putting salt in your food. It works, until it doesn’t. At some point we have to stop pretending that the government can handle all possible priorities in an optimal way.

That path is gone now, because we walked down it the way we did. The arrow of time goes in one direction.

We should still dream big, and work harder than we dream, but we won’t get to our goals unless we face up to reality, and take personal responsibility for the society we have created and benefited from.

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