How We Can Selectively Make College Education More Affordable

College student debt is a massive problem. In 2016, 44.2 million Americans owe a total of 1.3 trillion in student loan debt (average 37K per person). The average monthly student loan payment is $351, and the delinquency rate is around 11%. These statistics confirm what a challenging problem student loan debt is for many Americans.

This raises the two questions: What is causing this problem and what can we do to solve this problem. Let’s start by addressing the primary cause of this problem. The #1 factor behind the student debt problem is that the total cost of attending college has skyrocketed over the past 30 years. The figures below compares the total cost to attend college in 1971 and 2016 on an inflation adjusted basis.

Total Cost of Private 4 Year College:

1971 – $17,318

2016 – $45,365

Percent Increase – 161%

Total Cost of Public 4 Year College:

1971 – $8,307

2016 – $20,092

Percent Increase – 140%

Given these staggering figures, we also know that a lot more people are attending college in 2016 than in 1971. From an economics point of view, if more people are attending college in 2016, shouldn’t economies of scale and modern technology efficiencies result in cheaper costs? Why in the world has college tuition more than doubled?

The simple answer to this question is that the college education market has no incentive to lower prices because it is not competitive or efficient. People feel like they need a college education to compete in a global economy, so they are willing to go to college whatever the cost. In a real market, if college prices become too expensive, not enough students would enroll and the college would have to lower prices to attract more students. At the same time, well intentioned federal student loan programs are providing a blank check for students to borrow money to help pay for college. The supply of free money in the form of student loans combined with an inelastic demand curve for education results in rising college prices and massive amounts of student debt. This broader point is supported by this New York Times article.

So what’s the solution to this problem? It is obvious that something must be done because the status quo is not acceptable.  Democrats have proposed making college tuition completely free.  While this sounds good on paper, the sheer cost and lack of market competition is somewhat concerning. Colleges would still have little incentive to compete for students based on price or to look for operating efficiencies to drive costs down.  Free college might also further distort the mismatch between the supply and demand in the labor market because students would bear less opportunity cost when picking their major.

One proposal is to make college completely free for specific high-demand fields as determined by the labor department. In 2016, this applies to STEM related fields such as engineering, computer science, nursing etc. – but these will undoubtedly change in the future. As the labor market needs shift, the free college tuition will concurrently steer college students towards the relevant academic fields. Ultimately, this provides a win-win-win for college graduates, employers, and the US economy – Employers get the skilled labor they need, college graduates get good high paying jobs after graduation, and the US economy grows as a result.

Addressing Campaign Finance Reform

One of the key challenges facing America today is campaign finance reform. As a result from the 2010 Citizens United vs FEC Supreme Court decision, there has been a huge influx of corporate money into politics. This large influx of money has the potential to crowd out the interests of the average voter in favor of the corporate donors. Democratic presidential candidate Bernie Sanders made campaign finance reform a key message during the primary – and rightly so.

This Bloomberg article provides in depth details on how much money was spent in the 2016 Presidential election. As of 10/28/16, Hillary Clinton had raised over $1b (spent $900m) while Donald Trump raised over $500m (spent $430m). The sheer size of these numbers quantifies just how large of a problem we currently have.

So, whats the solution? Overturning the Citizens United ruling would be a good start. At the same time, we need to be cognizant that money tends to follow power. The more influence Washington has, the more likely corporate money and special interests will try to lobby for political favor. Ultimately, the only way to counteract this is to stay informed and vote for the issues that are important to you.

The Balkanization of the Media

Many of you might not remember the country of Yugoslavia, but Yugoslavia was a country in the Balkan region of Europe that was broken up into eight entities following the Bosnian War in the early 1990s.

Flash forward to 2016 and the same thing has happened – but this time Yugoslavia is our media. Back in the 1960s, most people got their news from print newspapers or the big 3 tv news networks (ABC, NBC, CBS). This news content was curated, fact checked, and provided a baseline of facts for everyone to agree on. Today, we now have thousands of media sources where we get our news from (Internet, Cable News, Facebook etc). Many of these news sources are partisan, misleading, and not fact checked – all things that undermine the foundation for political discourse.

President Obama talks about this problem in this Washington Post article.

How Free Markets Help Poor People

Is it possible in today’s day and age to both care about poor people and believe in free markets? It seems a lot of the political discourse is around protectionist policies and government intervention from both the right and the left. This Economist article serves as a friendly reminder of how far we have come over the past 20 years on the poverty issue.


Can a Divided America Heal?

Here is a very engaging TED talk on whether a divided America can heal after the 2016 election. Jonathan Haidt does a good job framing some important issues through a social psychology lens.

There are a couple points that are worth paying attention to when watching this talk:

  1. The relationship between parochial vs non parochial world views
  2. The relationship between culture and race
  3. The relationship between immigration and social capital
  4. The relationship between culture and socialism
  5. The moral matrix