In the days ahead, millions of kids will pack their bags and leave home (hopefully for good) to go to college. For parents experiencing this for the first time: welcome to the biggest financial scam in America. Richard Vedder, an economist at Ohio University and an expert on college costs, puts it very plainly: "Colleges and universities may be the least cost-efficient institutions in the United States. No industry, perhaps other than prostitution, has seen less productivity improvements than higher education."
As the father of two college kids I can personally attest to the astonishing rip-off of college tuition costs. One son just graduated from Northwestern. All things considered (room, board and tuition) it cost $62,500 a year. Yes, he learned a lot, but let's be honest: Mostly what I paid for was a four-year party and a reprieve from having to get a job.
Peter Thiel, founder of PayPal and one of the greatest investors of all time, says that for really bright and talented 18- and 19-year-olds, college is a detriment to success, and he sponsors a program to get kids to leave college early and get on with starting their own businesses.
Which brings me to Hillary Clinton's newly announced ten-year plan to make colleges more affordable by offering up $350 billion in taxpayer subsidies. She's right that colleges are unaccountable, lack transparency and are overpriced. "College is supposed to help people achieve their dreams, but more and more, paying for college actually pushes those dreams further and further out of reach," Clinton declared. "That is a betrayal of everything college is supposed to represent."
So why reward the ivory-towered, money-guzzling beast with another $350 billion?
The latest statistics are jaw-dropping. There are dozens of colleges this year that charge students and their families more than $50,000 a year for room, board and tuition. That is a betrayal. College tuition costs have gone up faster than the costs of health care and even housing over the past decade. In the digital age, education costs should be falling. You can now take online courses for a tiny fraction of what it costs to sit in the classroom.
Clinton's plan would only make the crisis worse by having taxpayers foot an even larger share of the cost of tuition. She wouldn't make it free -- that's the Bernie Sanders idea -- but only a small fraction of college cost would be borne by the students. This third-party payer system is what has caused the spiral of inflation in tuitions in the first place. The only other industry that has a similar government payer system is health care, and look at the runaway costs there.
Clinton wants to provide dollars to states that agree to provide "no-loan tuition at four-year public colleges and universities." States that agree, under the Clinton plan, will win multibillion-dollar grants from the federal government. She also wants to make community college free. But bribing states to spend more money on higher education when they are having trouble paying their existing bills and balancing their budgets seems a gross misallocation of resources.
So what is the solution to skyrocketing costs of tuition? First, it's time to look under the hood of the ivory towers and find out where money is being wasted. Every state legislature should demand a full-scale audit of the public universities that they support. Colleges should be forced to open their books. When that happened this year at the College of DuPage in Illinois, the auditors found so much waste and fraud that heads rolled on the board of trustees, and the new regime cut out the fat and is actually cutting tuition costs this year. That could and should happen at every public university. As for the private schools, pressure should come from the donors and the alumni to force full-scale audits with the goal of cutting tuition in half over the next decade.
Another way for colleges to become more affordable is to start forcing universities with multibillion-dollar endowments -- Harvard and Yale are at or above $20 billion -- to use the money to lower tuition costs to students. There are dozens of colleges that could pay 80 percent of the tuition out of their endowments and not run out of money for many decades, if ever. Why do colleges have to be vast storehouses of wealth? This is a special plea to those who write six- and seven-figure checks to their alma maters: insist on transparency before you give a dime. And of course, make sure that the college(s) you support don't have speech codes.
What is wrong with asking 19-to-22-year-olds to work at least 10-25 hours a week to help pay for their own educations? They'd probably get more out of their classroom experiences if they had to foot some of the bill. Many colleges do this already. College of the Ozarks provides free tuition for kids who work, and many of the kids learn at least as much on the job as they do in the classroom.
It's a good bet that if the Clinton plan were implemented, colleges would respond to the rush of money by raising tuition even further. The days of the $100,000-a-year universities would be right around the corner. Someone needs to tell Clinton that, just as there's no such thing as a free lunch, there's no such thing as a free college education.