NCPA - National Center for Policy Analysis

The Impact of Artificially Low Tuition

July 18, 2012

Over the past few decades it has become common for governments around the world to implement policies aimed at increasing access to education, with the hope that it will result in greater prosperity. One of the most frequently utilized mechanisms for increasing access is to lower the cost of tuition compared to the market price, often through subsidized loans or debt relief, says Hugh MacIntyre of the Fraser Institute.

Unfortunately, these policies only appear to help students, while in reality they have numerous negative effects that lower the quality of education and worsen the job market for graduates.

  • Studies have repeatedly shown that students subconsciously respond to lower tuition rates by putting forth less effort into their studies.
  • The logic here is simple: if education is an investment, and the amount at risk has been significantly lessened by government policies, then the effort to ensure a good payoff can also be lessened.
  • This culminates in students allocating more time to leisure, opting for easier courses, and producing biting criticism of tough-love professors.
  • Additionally, by artificially lowering rates, government policies do succeed in pushing more students into schools, but this has the effect of creating a glut of graduates.
  • As a result, the labor market is oversaturated with college-educated workers and the returns to their labor are significantly diminished by excess supply.
  • Consequently, college-educated workers increasingly find themselves relegated to jobs that do not require a college education.

Furthermore, these government policies do not only lower the value of college education to students, but also lessen its value for employers.

  • Employers rely on educational standards in order to assess the marginal productivity that a given employee will bring.
  • Interestingly, researchers have found that the above-mentioned effects of decreased student effort result in institutions lowering standards (responding to customer preferences).
  • Thus, government policies that encourage student malaise implicitly encourage colleges and universities to lower standards to fit that malaise.
  • This leads to college educations that are unreliable indicators of student achievements.
  • Further, the lowering of standards also has the effect of dulling the skills that college graduates actually have.

Source: Hugh MacIntyre, "The Impact of Artificially Low Tuition," Fraser Institute, Summer 2012.

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