The Real Cure for the College Tuition Bubble

Posted by admin on April 29, 2012 under Political Economy, Youth and Students | Be the First to Comment

The Need to Raise Wages and Abolish Student Debt

By Keith Joseph
CCDS in New Jersey

The rise in student debt is commonly attributed to the rising cost of tuition.  But this mistakes the chain of cause and effect.  Rising tuition did not cause us to go into debt.  Thirty years of falling real wages caused us to go into debt.  And debt causes tuition to rise. In other words, student loans cause tuition to rise.  If no student were given access to a student loan next year then tuition would dropped dramatically; the tuition bubble would burst.  This is the crucial point: tuition rises because we are being forced into debt.

That is the law of supply and demand.  As demand rises relative to supply the price (tuition) rises.

The easy credit of student loans functions the same as sub-prime mortgages.  Sub-prime mortgages, and easy credit, created a housing bubble — a dramatic rise in the price of housing caused by a rise in “effective demand” i.e. demand backed by the ability to pay.  When interest rates rose a bit there were some defaults.  Defaults create a higher interest rate by increasing “risk.” Defaults continue to rise and housing prices have been falling ever since.

Like housing prices during the bubble tuition is inflated. We are in a tuition bubble, i.e., tuition increases because student debt creates an artificial ability to pay.  Why do you need an artificial ability? Since no one in your family has ever earned enough to save for your college education, because the 1% were cutting wages since the 1970’s and replacing those wages with credit cards, we would never be able to afford college.  If we can’t afford tuition the price of a college education must fall or the schools will empty.

The struggle against tuition is the struggle against debt and the struggle against debt is the struggle against tuition.  They are one, cause and effect.  Without debt a rises in tuition is not possible.

The struggle of current students against tuition hikes must take the same path as the movement to abolish debt if it is to be successful.  We must abolish student debt and college tuition.  Yes, we must have free public college education paid for, in its entirety, by an education sur-tax on the 1%.

The problem is relatively simple.  Average citizens are not paid enough in wages or salaries to save for their children’s education.  Educated citizens are obviously the only people capable of self rule. Educated citizens are self evidently the only possible basis for democratic society, for, a government of the people, by the people, and for the people, to put it in the formulation favored by Lincoln.  The current method of funding our education on the backs of our future wages has failed and this failure is about to cause a deepening of the current economic crisis.

To prevent a furtherance of the crisis and to put the economy in position to turn the corner the Federal government must cancel existing student debt and eliminate tuition by putting an education sur tax on the 1% equal to the costs of educating every 18 year old who wants to go to 4 years of college.  In this way we will have a public education system worthy of a democracy and a citizenry capable of self-rule.  We need a debtors union to impose this plan on the 1%.

Debtors Unite! Tax the 1% for the costs of education!