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State Tuition Hikes? Deal With Them

Public university students should stop protesting tuition increases. Cash-strapped states have no choice but to raise fees, and even with the cost hikes, state schools are a huge bargain compared to their private counterparts. Pro or con?

Pro: States Shouldn’t Have to Fund Higher Education

When I lecture on campuses, students often express dismay about special interests descending on government. They worry that bailouts like AIG’s show that corporations are in bed with government and that the Supreme Court’s Citizens United decision will unleash more corruption.

Yet as governments in California and elsewhere cut subsidies to public universities and raise tuition, students rally in protest—and become one more special interest jockeying for position.

There has to be a better way. To find it, consider the source of warring special interests.

War is inevitable the moment we accept the idea that there’s a right to a university education, a business that cannot go bankrupt, or a comfortable old age. Such "rights" require others to foot the bill, with the government intervening to make sure those unlucky others pay up. Governments become the dispensers of the unearned: They erect public universities and subsidize students, bailout businesses, and establish Medicare and Social Security. Thereafter, everyone woos legislatures to win favors while minimizing his bills.

To put an end to this sordid spectacle, we must discard the idea that anyone has a right to something at another’s expense. What would this dramatic change mean for higher education? Subsidies would end, and all universities would be private. Students would pay their own way or rely on private scholarships and loans.

In such a system, a university education would no more be within the reach of only the "rich" than are computers or cell phones today. In fact, with the Post Office-like mentality of all too many public universities replaced by the profit-seeking and value-oriented mentalities of corporations like Google (GOOG) and Apple (AAPL), we should expect in higher education what we’ve come to expect in the tech industry: rapid innovation and falling prices.

That is a future truly worth picketing for.

Con: Students Should Keep on Fighting

Investments in public higher education offer huge benefits to the U.S. economy as a whole. Yet over the past 30 years, state spending on colleges and universities has failed to keep pace with costs, creating constant pressure to raise tuition and fees.

Public spending on incarceration now exceeds that on public higher education in a number of states, including California, Massachusetts, and Oregon.

Sure, the public institutions that educate about 75% of college students in this country cost far less than the privates. They also spend a lot less per student, relying on part-time faculty to help keep prices low. Some economists like tuition hikes counterbalanced by increased financial aid, because they lead to higher prices for those who can afford to pay.

But consider the bite on families in the middle of the income distribution—the third quintile. In 2007 to 2008, average net college costs (tuition, room, and board, minus financial aid) at public four-year institutions represented 25% of median family income, compared with 18% in 1999-2000.

Many students have gone into hock. By 2007-2008, graduates of public four-year institutions who borrowed to pay for school left with an average burden of $19,839.

The Great Recession has amplified these problems. The California higher education system—once a model of affordability—recently hiked tuition and fees by 30%. Other states are following suit. The increased financial aid proposed by the Obama Administration—including more generous Pell grants—will surely help. But our financial aid system is both complicated and inadequate.

Indeed, increased financial aid for low-income families often serves to justify tuition hikes, leaving students and families who are right at the edge of eligibility in the lurch.

The loss of eligibility for Pell grants as parental income increases can reach the equivalent of a 47% marginal tax rate. If we hiked income taxes on the very rich to that level, imagine the protests we would hear.

Opinions and conclusions expressed in the Bloomberg BusinessWeek Debate Room do not necessarily reflect the views of Bloomberg BusinessWeek,, or Bloomberg LP.

Reader Comments


People don't appreciate something unless they pay for it. Look at our public elementary and high schools. Students are absent, they are disruptive, and parents demand that teachers take the mistreatment of the brats! I say dismantle public schools and make parents pay for their kids' education. Give subsidies only in cases of financial need or academic merit. By the way, let's get rid of the jock scholarships. The NFL needs to get their own farm teams, not use the universities.


The system is just how the elite wants it. Too expensive for the average person, preserving the economic classes and preventing upward mobility. Those who do go to school are saddled with huge debts (owed to the elite) that are difficult to repay and cannot be erased through bankruptcy. Part of the reason for huge increases is the failure of schools to control costs. There are many expensive programs that are irrelevant to most students. In addition, professors have generous salaries and benefits--when their jobs should be re-priced to reflect the economy and labor market. Finally, we give grants and scholarships to foreign students while neglecting our own.

Gideon Reich

Government education is wrong on principle, as it is wrong to tax Peter for Paul's education, and as is to be expected, it leads to all sorts of horrors in practice although the horrors vary. Dr. Ghate correctly mentions as one of the horrors the warring of special interests--an inevitable result of the mixed economy and government education in particular. If students want a cause, they should research ways in which a transition from the mixed system of today to a completely private system could be achieved. It is a difficult problem to solve but the result will be education in which payment would be voluntary and quality would be far superior to what we have today.


Public spending on higher education is largely wasted because few useful job skills are being learned.

Rather, a university education is an elaborate and expensive ritual to prove to potential employers two things.

a) That one is diligent enough to jump through the hoops required for graduation.

b) That one was intelligent enough to be admitted in the first place.

An aptitude test followed by a two-year apprenticeship could serve these purposes at far lower cost.

College would go back to its original purpose: a place of study for wealthy dilettantes.

Michael Caution

Ghate has it right. By drawing out the fundamental error between different issues (tuition, bailouts, subsidies, Social Security, etc.), he is able to present a comprehensive solution. Special interest warfare is the result of a mixed economy, i.e., government intervention, and only a fully private university within a laissez-faire system that respects individual rights can solve tuition hikes.

Ervin Hill

Dr. Ghate has it right. Private education is far superior to public education because people inevitably want value for their dollar. Dan missed one goal of the publicly funded higher education: indoctrination into the socialist way of life. They teach Hegel, Kant, and Marx, but not Aristotle. Most college graduates leave the system completely brain-washed against capitalism and individual liberty.


"The object [of my education bill was] to bring into action that mass of talents which lies buried in poverty in every country for want of the means of development, and thus give activity to a mass of mind which in proportion to our population shall be the double or treble of what it is in most countries." --Thomas Jefferson to M. Correa de Serra, 1817. ME 15:156. >>> 2010 Amazing how many still don't get it!


Is life unfair?

Mark Dohle

Ghate is right on. Dan, I agree with your experience. Most college degrees aren't worth it. If education wasn't subsidized, perhaps people would take it more seriously instead of jumping right in without a thought about the future.

People used to be able to work their way through college with summer jobs, but now easy government loans have allowed colleges to increase tuitions to a level the free market would never allow.

It's time to rethink education. For too long the debate has been about how the government should educate citizens. The real question: Is it the responsibility of government to educate citizens?

In my view, government education failed. The schools are dirty, dangerous, and ineffective. Let them fail. It was a bad idea in the first place.


Government should have a quality control overlook toward universities' quality management i.e, should things be different?


I do not understand why people have not thought of selling off the public universities to the private sector. It would end California's current budget crisis, and it would instantly raise the quality of education. It is a win-win.


I must agree with Dr. Ghate and I have been reading many of his articles because he clarifies the problem in such a rational manner.
I agree with Ghate when he writes:

"To put an end to this sordid spectacle, we must discard the idea that anyone has a right to something at another's expense."

As one must consider that just because they think they have a right to education does not call for grabbing money from a person who has worked for it. Most if not all of these are tax dollars, and they for the most part are not given willingly and with a big grin. The looter class must realize how that money is got and that even though they got some supposed rights to an education, which is untrue, that looting and mooching is not the solution to any problem.

Since I am a high school student myself, I still go to school and unfortunately it has to be a public one. I bring that trivial fact up because coincidently I heard some absurd statement from a teacher. I don't know what the context was, but I guess you could only expect that from a Liberal. So, I was walking by a classroom and I heard a teacher say something to the effect of,

"Oh, education is not a lifestyle, it's what causes one."

Isn't this the exact mindset these people have concerning education? Because it's the root of how one lives, we need it and we should have a right to it. However, is it really a lifestyle or the cause of it? I think not, It's a privellege? It's no right at all. It's lucky that we have such a thing and perhaps not public schools, but students of private colleges should look at what they pay or what their parents pay as a privillege or opportunity rather then a right given to them at birth.

I also think schools should go private because education is the students' responsibility and not partially the government's responsibility. Some students pay nothing for their college education and this gives people the idea that they should not be responsible for anything because since the government will pay for schooling that it could pay for other things in life too. Also, this encourages irresponsibility and students in college not taking school seriously. If the individual does not pay, then why should they value it? They might take it for granted and not do well in school since they don't have to pay they can do something far more important because the government pays after all, so why should they care? There only responsibility is to get the minimal requirements and get out of there.

Stephen Douglas

Large universities often seem like large businesses going about their programs of raising money and building departments. The student arrives on campus at his or her own risk. The focus is on what? Students?


Keep it in context, RobD. Jefferson was talking before there was any established educational system, and he was talking about something very simple: "A bill for the more general diffusion of learning... proposed to divide every county into wards of five or six miles square;... to establish in each ward a free school for reading, writing and common arithmetic;..." And he goes on to explain a very limited system, not like today. And besides, "My partiality for that division [of every county into wards] is not founded in views of education solely, but infinitely more as the means of a better administration of our government, and the eternal preservation of its republican principles." We can see that didn't turn out right. In fact, education today, eternally undermining its republican principles.


The public college education system provides the vast majority of skilled and educated labor in this country. Easy access to that education is parmount. As a current uc student, I could not afford a private college. College is not all just signalling to employers, the vast majority of non liberal arts majors learn useful skills that are required in future jobs. Computer programming etc. In a modern information based economy, an educated workforce is the driver of all economic growth. Public universities provide that workforce, they are the reason california is one of the largest economies in the world, because it has one of the most extensive public college level education systems in the country.

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