As far as I can tell, the predominant business model at our colleges and universities runs something like this:
- Spend millions of dollars on new plant and equipment and hire lots of expensive administrators to provide new services, so your school operates like a resort.
- Jack up the tuition to pay for the new buildings and services.
- Use the new buildings and services to entice wealthy students who can pay the full freight.
- Use any remaining funds from the endowment and from the higher tuition to let in other students regardless of need. They will either get scholarships or take out large loans.
This business model only works if the economy generates plenty of high-paying jobs for graduates, who can then pay off the loans. That hasn’t been the experience for Gen Z–hence, the calls for wiping out student debt.
For the reasons I have discussed on many previous occasions, using tax money generated from workers who didn’t go to college to eliminate the debts of students who actually managed to get high-paying jobs as a result of their education is obnoxious. Some debt relief on a case-by-case basis is appropriate, however. And in the meantime, while private schools are free to operate in any manner they see fit, state governments need to get serious about overturning, or at least mitigating, the impacts of the faulty business model. In other words, get rid of the unnecessary administrators and don’t build any more white elephants.