Normally, if there’s a question about paying for something that’s phrased in the passive voice, it’s eliding the true question, which is more accurately phrased as “How should you pay for my..?” But education is a special case: it’s extremely expensive, with direct costs totaling $702bn in 2020-21 (as in, that figure does not include the opportunity cost of students’ time, teachers’ talents, and the fixed assets schools occupy). It’s also a case with positive externalities, both from practical work—a country without any civil engineers can’t build or mantain bridges&dmash;and more abstract ones. And, critically for the who-pays-how question, the people attending college do not personally have the resources to drop five figures per annum on a degree, but, because of their age, will be benefiting from that education over a longer period than someone who works for a while to save up enough to pay for college in cash.
So higher education must be paid for through some combination of students’ earnings, parents’ savings, school subsidies, government subsidies, loans, and special deals with employers. Unfortunately, all of these lead to problems one way or another. For example, if we’re requiring everyone to fund their own education upfront, either directly through they’re own earnings or indirectly through their parents’, then we’re setting up a system with an education shortage among people who didn’t choose the right parents, or among people whose post-graduation incomes will be higher than their pre-graduation incomes.[1]Conversely, if everyone’s education were free, then there wouldn’t be a good way to determine a) which specific programs ought to have different prices because of the supply and demand for that kind of credential, b) whether particular people might be better-served by spending their time in different ways, or c) when we’re allocating too much of society’s resources to education, in the aggregate.
The possibility of spending “too much” on education is itself mostly missing from debates over how, and how much, to fund it. But it ought to be a genuine concern. Not just because college graduates have higher incomes, and student loan borrowers’ spending patterns do not indicate much financial distress on average, but because it’s possible for overall education spending to be too high (even aside from the question of whether higher education spending is redistribution towards the highest earners). There are a few failure modes here: obviously it’s a problem if people are literally starving or freezing because they’re too busy studying. But there are more subtle issues: