Monday, May 14, 2012

Should Ohio Taxpayers assure that Ohio State students assume less debt?

The New York Times had a story yesterday about a "generation hobbled by the soaring cost of college."

The piece featured some disturbing stories--particularly about a student who had $120,000 in debt as the result of attending a college that I had never heard of before.  On the other hand, I also read that, "Three out of five undergraduates at Ohio State take out loans, and the average debt is $24,840."

Ohio State is a world class research university.  I am quite sure that graduates of Ohio State earn much higher lifetime incomes than the average Ohioan.  So higher subsidies to Ohio State students from Ohio taxpayers would effectively be a regressive transfer.  

Should the state subsidize the University?  Almost surely, because its research and its college graduates produce positive externalities.  But does an average debt load of $24,840 keep large numbers of students away from Ohio State?  Enough that it diminishes the positive externalities created by their attendance?  That would be a much tougher argument to make.  My guess is that almost everyone who goes to Ohio State would go to some college, one way or another (just as it is the case that nearly every homeowner who takes the mortgage interest deduction would be a homeowner in its absence).

In order to stimulate upward mobility, there must be financial aid (in the form of grants, not loans) to students coming from low-income households.  But for everyone else, well, it seems like $25K in debt in exchange for an Ohio State education is a very good financial proposition.