Get the Middlemen Out! Why we need to eliminate 3rd party payer systems in education
April 16, 2011 3 Comments
The Blaine Truth argued a few weeks ago about the usefulness of college considering the soaring costs of education. While this is an important question to answer, after reading that I started to think more about the root of the problem: why are education costs soaring? They have far outpaced inflation in the past many years, and the reason for this is the current funding system that relies upon a third-party payer system. In the current model, students who cannot afford college tuition receive funding from a variety of sources until their ‘demonstrated need’ has been met. Most typically, the educational institution and the federal government supply the necessary scholarships to enable students to attend college.
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“Demonstrated Need.” Most students are not given even close to their REAL demonstrated need. Not only that, but the federal government and college institutions provide students with financial aid packages that are heavy with student loans and light on things such as grants. Sure, academic and financial heavyweight institutions like Stanford and Harvard have vowed that families will not pay more than 10% of their annual income, most universities do not have the luxury of doing this. Most students who desperately need financial help are looking at cheaper state school options who are cash-strapped and cannot give as much help due to less state funding as well as much smaller endowments. What do state institutions do to cover these two shortfalls? They raise tuition until the college’s “demonstrated need” is met. To a university, their needs come first.
Agreed. Educational costs are ridiculous. The use of third party loan companies only makes the cost of education rise. These companies exploit college students and their families and turn a huge profit off of the loan payments. If universities are going to charge absurdly high tuition, they should be the ones that are dispersing loans. It’s a very uncomfortable situation that must be addressed. Students are graduating with thousands of dollars in loans and spend years paying them back, often for useless concentrations.
I’m not sure how much sense this makes in answering the question of why education is still so expensive… but, all I have to say is that it is, because it CAN be.
I have a long-time family friend who has been an executive at The College Board for 10+ years. He told me one day while on topic of USC, that in conversation with the Dean of Admissions, he learned that the University could admit 100% of the student body with people willing to pay tuition in full. $50,000/yr in EVERY seat.
So why would they stop charging so much when they know so well that the money is out there?