Who is to Blame for Student Debt?

Neal McCluskey and Vance Fried explain at the New York Daily News that they believe that it is federal politicians who are to blame for soaring student debts.




McCluskey and Fried claim that, because nonprofit schools take excess revenues coming from undergraduate education and distribute them throughout the college in subsidies for research, graduate education, low-demand majors, low faculty teaching loads, excess compensation or featherbedding.

“In other words, rather than rewarding investors, colleges pay themselves.”

Calculating all the inputs required to educate undergrads, from market-rate professors’ salaries to photocopying costs shows that roughly $8,000 to educate an undergraduate at an average, residential college.

The average tuition and fee charge at a private bachelor’s college was $13,515 in 2008. Subtract the $8,000 from that, and just from tuition and fees the school made about $5,500 per student, a margin of 41%, writes McCluskey and Fried.


The Cato Institute claims that colleges have been able to achieve these stunningly high profit margins by radically increasing the prices they charge students. Inflation-adjusted tuition and fees have tripled in the last 30 years.


Though McCluskey and Fried claim that Washington can be a major part of the solution.

They suggest changing financial aid rules that give schools sizable advantages over students when setting after-aid prices.


They alternatively suggest to phase out the big subsidies to students that enable schools to raise prices with impunity.

“That means reducing everything from Pell Grants, to cheap student loans, to tuition tax deductions.”

McCluskey and Fried acknowledge the outcry would be that this will hurt students.

But it would do the opposite, they claim. It would “force schools to keep their prices in line with the real cost of providing education, and saving both students and taxpayers big bucks. And that is what everyone should want.”