Tuesday, December 8, 2009

Comparing Healthcare Financing and Higher Education Financing

Every time there is an election, some candidate accuses the other candidate of wanting to cut higher education spending, and promises that he or she will fight for more money on higher education, and say “Because our young people are the promise for tomorrow” or something similar.

Let's imagine what would happen if in fact, government higher education financing was reduced or removed. No government student loans, No Pell grants, other German grants, etc.
And let's just say that tuition at College X. is $15,000 per year. (Some of you will say that's too cheap, and others will say way too expensive.) And now, there is no government aid.

Do you believe the colleges will all shut their doors? Do you believe that every student that does not have $15,000 at the beginning of the year will be unable to attend? Will they fire every professor? Will the University of Texas and University of Alabama shut down their football programs?

After 9/11, the airlines were facing the equivalent of the government shutting down student aid. "America was afraid to fly." Some airlines filed bankruptcy, others did not. Most kept flying. They cut everybody's pay between 25% and 50%, if not more, and had substantial layoffs. BUT, they kept flying.

What will colleges and universities do?

Offer their own loans? Cut salaries? Lay off staff? Merge and consolidate? Stop offering ridiculous electives? Re-evaluate how many credits are needed for a degree? Go to online classes? Sell some buildings? Reduce services?

The answer is, they will probably do ALL of the above. They will get creative. They may reduce tuition. They will do everything not to close the doors, and still offer quality education and profitable sports programs.

So your next question should be: "If they can do this without student loans and aid, why don't they?"

When you were a kid and your allowance was $2.00, you spent it. When it was raised to $5.00, you spent it. If you got $10, you spent it.

In other words, as long as the money is there, you will find a way of justifying and spending it. It’s the same with colleges and universities.

Do you think health insurance has had any effect on the cost of medical procedures? (answer tomorrow)


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