Student aid needs to be revamped
There are a lot of reasons why higher education in the United States is so inordinately expensive for most young people, but the key among them has to be the broken structure of the student aid system. In order to provide everyone the education they want, the student aid system needs to be simplified.
As of 2017, the federal government, along with state and local governments, spent a hefty combined 172.4 billion dollars on supporting higher education, a figure which only has grown since then. A sizeable 36 percent of all current spending on post-secondary school is coming from the government.
Yet despite such a large infusion of cash, students continue to get crushed under an increasingly large mound of debt. College costs continue to outpace income, and many students who would benefit from going to post-secondary school either don’t go or drop out before attaining their degree.
Clearly, many students aren’t benefiting from all the money the government supposedly put into higher education.
A large part of the issue comes from the distribution of aid. State aid predominantly comes in the form of direct subsidies to education institutions, which are distributed not on the basis that benefits equally every student, but partially based on a funding formula dictates. This is to often fund new buildings on campus and is partially based on the lobbying efforts of universities.
It’s due to these mechanisms that the University of Texas at Austin has consistently garnered far greater public funding than schools with poorer, worse-performing institutions and less lobbying prowess.
Not only does this system inequitably distribute funds, benefiting some students way more than others, but it also does this in a way that is regressive and racially biased with predominantly minority schools getting less funding.
Other types of aid also contribute to this problem. Subsidized student loans, the American Opportunity Tax Credit, the Education expenses deduction and targeted grants only help those who are well-grounded enough to go through the painstaking process of applying for them as well as currently attending a post-secondary education institution. This leaves out many students.
On top of these issues, there is also ample evidence to suggest that reliance on student debt is a way to finance higher education and has major negative effects on the psychological wellbeing of students. This can reasonably be expected to have associated additional economic costs.
Aside from these problems, the pure administration of current aid programs alone eats up a sizable percentage of the benefits. In 2021, the administrative costs of Student Loans alone cost the government a startlingly high 3.2 billion dollars, according to the Congressional Budget Office.
Luckily, there is a lot that can be done to improve upon the current system’s woes.
One simple solution would be to transition all the current scattered programs into a new universal education credit that functions somewhat similar to how food stamps and housing vouchers work today.
Under this system, every American would receive a set amount of currency redeemable only at certified education providers, consisting of public universities, trade schools and so on.
In practice, this would mean every Texan turning 18 would receive roughly $32,750 worth of education credits. All without the government having to raise a dime of new revenue.
Not only would this massive simplification of the student aid system completely eliminate the inequity in the current system, but it would also provide students more flexibility in how they pursue higher education.
Regardless of what specific form reform takes, one point should be absolutely clear in the minds of the American public and policymakers. To address the current student aid crisis young people are facing today, an ambitious reimagining of the student aid system is an absolute necessity.
Micah Erfan is an economics freshman who can be reached at [email protected]