Phi Beta Cons

The Free Rider Problem in Higher Ed

Alex Pollock of American Enterprise Institute mostly writes about our housing woes, but sometimes applies his insights into our housing troubles to higher education. He does so in this piece.

Colleges, he argues, are free riders on our dysfunctional student loan system. They get the benefits as students pay their bills with borrowed money, but suffer none of the costs when the students later default. (Pollock points out that the true default rate on student loans today is about where defaults on subprime mortgages were soon after the housing bubble burst.)

What to do? His serious solution is to insist that colleges have some “skin in the game.” That is, if schools had to consider the possibility of losing money when they admit students who have little likelihood of succeeding, they’d think twice before roping in any and every kid they can.

He also has a less serious proposal for taxing colleges. If we could implement his skin in the game idea, that would be quite enough.

George Leef is the the director of editorial content at the James G. Martin Center for Academic Renewal.

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