An Interview with Neal McCluskey: How much is the average taxpayer subsidizing College Tuition?

Oct 27, 2011 by

Michael F. Shaughnessy
Eastern New Mexico University
Portales, New Mexico


  1. Neal, let’s start simply with the lead question from this interview- How much is the AVERAGE taxpayer subsidizing the AVERAGE student’s college tuition?

This depends a lot on how you break down the numbers – I did it a couple of ways in a new report – but if you only include estimates of net costs to taxpayers after student loans are paid back, and exclude funding for research, the average taxpayer subsidizes higher education to the rough tune of $530. Include research and all federal loan volume – what taxpayers are ultimately on the hook for – and the number balloons to $1,068.

  1. Neal, as I recall, I paid a good deal of my tuition myself- I am presuming that the various colleges and universities received state and federal funds- correct?

Certainly state colleges received state money, and they almost certainly received federal dollars both directly and through student aid. Private colleges typically don’t see nearly as much state money, but also get oodles of federal dough.

  1. Now the difficult issues— as we all know WAY too many colleges and universities have developmental, remedial, whatever you want to call them- courses in writing, math, study skills, etc. Is the average taxpayer—you and me, Neal, paying for students to review or rehash or re-learn what they should have learned in high school?

Absolutely, and often they don’t learn or re-learn it, wasting both student and taxpayer money. It’s estimated that taxpayers spend well over a billion dollars a year providing remedial college courses, and we know that over half of college enrollees – including in two-year schools – won’t finish their programs on time, if at all.

  1. There are some who would say that all of this money going to colleges/universities is well spent, since we are keeping these students out of jail and prison- your thoughts?

I don’t hear the “keep them out of prison” argument that much for college – it’s mainly offered to support spending more on K-12 schools. But to the extent someone’s completing college might be the difference between his going to jail or not going to jail, we are often encouraging him to pursue a college education for which he is not prepared, letting him languish for years without eventually getting his degree, and in so doing just putting off his entry into prison.

  1. Who should be holding colleges accountable for their completion rates- the states or the Federal government?

Ultimately, neither: That should be a market function, with students taking their money to schools that help them and away from those that don’t. The main problem is that right now students are largely using other people’s money, not their own. If some level of government has to be in control, though, it should be states, not Washington. The Feds have demonstrated for decades that they don’t have the competence to handle higher education, nor do the have the constitutional authority.

  1. How do you define “higher education” productivity?

That’s tough, or at least measuring it is. In the end, you want colleges to supply the greatest amount of the skills and knowledge people want at the lowest cost. But there can be no easy yardsticks to measure what “people want” – it is so variable, and so difficult to pin down even for individuals. It’s another reason markets must be allowed to work. Only when individual students and educators freely interact, without the distortions of money taken from third-parties, can they most efficiently make educational arrangements that meet their individual needs and desires.

  1. Compare and contrast- a liberal arts education completed in four years with a major in history and a minor in philosophy, with a business degree in marketing and finance- which is more valued by society- and who makes the judgments?

The clearest way we express what we value is in what we’re willing to pay for it. We might say we love art, for instance, but we’ll often pay much more for a car than a painting. Now, that doesn’t apply in colleges because so much of the bill is being paid by someone other than the consumer. It does, though, apply once a graduate enters the labor market. And there we see that at least employers value, for instance, engineering and economics majors much more than art history majors.

  1. We seem to need more science and math teachers, and foreign language teachers and special education teachers- yet students seem to be going into elementary education in droves- ignoring the market side of the economy. Are they all in for a difficult job hunt or search?

Once you get into K-12 education there is no real market. Science and math teachers generally get paid the same as every other teacher, despite the much greater demand for math and science skills outside of education, and the greater difficulty in obtaining a math or science degree. A real market would almost certainly pay people with those majors more. And for the majors of which it seems there should be a glut, government schools are often controlled by labor unions and other special interests, and they hire tons of people they don’t truly need.

  1. If a student is REALLY interested in Art History and Religion, who is to say that this student may not make a lasting contribution to our society in some way, manner, shape, fashion or form?

No one is, and everyone is. They might very well make huge contributions to society, and no higher power should be able to forbid someone from studying those things. But through prices, everyone ultimately decides the value of what is learned in those majors. By accounting for everyone’s almost limitless, differing priorities and valuations of all the different things they can choose from, prices tell us the relative worth society places on all things. Of course that only works well absent major distortions, but that is really how society demonstrates what it thinks of the contributions of, well, everything.

  1. Neal, who regulates in Washington,D.C. how much money goes to colleges and universities? And what should taxpayers be saying to their Senators and Congressmen?

Congress is ultimately responsible for setting student aid policies and amounts, though increasingly the executive branch is exercising control through regulation and, it seems, executive fiat. What taxpayers should be saying is “phase out student aid.” It seems counter-intuitive, especially if your goal is to make college more affordable, but what the aid really ends up doing is letting colleges raise their prices to capture all the aid – negating its value to the student – and encouraging massive waste. In other words, the only ones ultimately winning are the schools and their employees (and often only the most influential employees). And taxpayers are the clear losers.

  1. What have I neglected to ask?

I think you got all the good stuff.


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