I visited three cities on Monday — Asheboro, High Point, and Winston-Salem — as part of a statewide “Tax Awareness Tour.” In each city, I picked up the local newspaper and read the Associated Press version of a story that appeared Sunday in the Fayetteville Observer-Times about budgetary pressure in the state’s community colleges.
The story (click here) underlines (though unintentionally) one of the most puzzling aspects of the current debate about state funding of higher education. If a college education offers the kinds of financial returns that students are promised, why isn’t it valuable enough to pay a reasonable price for?
The newspaper observed that community college tuition has increased 77 percent over the last three years. The cost of tuition for full-time students is $992 for 16 credit hours. It was $560 during the 1998-99 school year. The paper went on to note a “growing concern” that most of the cost of educating each student is shifting onto the students themselves.
Tuition and fees in the University of North Carolina system and the community college system have long covered only a small fraction of the actual cost of instruction. At UNC, the students’ share was around a fifth, but after recent tuition hikes it may well be in the neighborhood of a quarter. Community college cost-sharing is comparable (so the “growing concern” stated in the Fayetteville story is as yet unwarranted). Essentially, the vast majority of the bill for public higher education is paid by taxpayers, not the students or their families.
But surely, if college educations are what they are cracked up to be, most the benefits accrue to students. Yes, one can argue that there are “externalities” from higher education. That is, persons other than the student receiving the education can be said to benefit through a more productive economy, a more enlightened society, etc.
There is actually a lot of debate about whether these side-benefits are truly not paid for by the society at large — through higher prices for better-quality goods, for example. But if you grant the presence of externalities, surely it would be ridiculous to suggest that only 25 percent of the benefits of higher education go to students and the remaining three-quarters go to taxpayers as externalities. That can’t be right.
So what if one assumed, for the sake of argument, that the benefits were divided 50-50 between students and taxpayers? That would still be a generous estimate of the externalities involved, and thus the social cost should students be deterred from going to college because of a lack of public subsidy. But this assumption would justify students paying about half the cost of their instruction through tuition and fees. If we implemented such an arrangement, which is essentially the same deal offered to students in Virginia and other states where plenty of people get good educations, that would save taxpayers hundreds of millions of dollars a year.
But wouldn’t some students choose not to attend UNC or community colleges if tuition were significantly higher than today’s price? Yes. Students should pay more of the cost not justbecause of the benefits to the state’s bottom line but because it would discourage those students who don’t necessarily expect a large personal return on their college investment from attending in the first place.
It is a social cost, not a social gain, when marginally qualified students attend and later drop out of state-subsidized colleges. They are wasting their time, which could be better spent gaining useful skills through on-the-job training, and they are wasting our money.