Stan Dvorak’s story is all too common. The Canton, Ohio resident was laid off from an appliance supply company in 2009. Facing dire circumstances and limited options, he chose to go back to college to acquire more marketable skills in the field of healthcare.
Since Stan was a first time college student with family obligations, limited knowledge, and no cash to spare, he decided to enroll in a school run by Corinthian Colleges, at the time a for-profit company operated by business executives making millions of dollars, rather than professors interested in a career in education. The tuition and cost of living would be financed with student loans backed by the federal government, which Stan assumed he would pay back by finding work in the healthcare industry after graduation. As opposed to receiving quick cash with a car title loan.
For-profit institutions taking in students like Stan live off student loans. They depend on a constant flow of federal dollars to keep their doors open. However, their students often fail to graduate. Those that do manage to earn a diploma like Stan often find that the school has a poor reputation amongst employers. The government is faced with a difficult choice: keep student loans flowing and continue the unsustainable cycle of propping up bad colleges like Corinthian; or restrict student loans, potentially denying some the ability to attend a college, while risking costly system-wide bailouts.
This scenario recently played out when Stan’s alma mater Corinthian Colleges declared bankruptcy. Students with unfinished degrees were left in a particularly bad situation. Their credits are rarely transferable to a more legitimate institution. After public outcry, the Department of Education announced last June that they will forgive the debt of thousands of former Corinthian Colleges students.
The administration estimates that the total cost to taxpayers of the Corinthian forgiveness program alone could cost around $544 million. It is highly unlikely that Corinthian will be the only institution that goes down this road. The Department of Education has now set a precedent for how to treat all future college bankruptcies.
Stan Dvorak is considered a success story. He graduated and ultimately found work at a local nursing home. He is now on an income contingent student loan repayment plan. But by earning less than $20 an hour, Stan is still not paying enough back to the government to even cover the interest on his education. By Stan’s own calculation, the government has already spent over $100,000 on him alone, not including the compounded interest.
What if instead of spending that money the way we did for Stan, the Department of Education simply gave a state school in Ohio $20,000 per year for Stan’s tuition for up to four years?
Tuition-free public education is commonplace around the world, including in poorer countries like Mexico. It was also commonplace in the United States during much of the 20th century in states like New York and California, a time when we spent significantly less on education than we do now.
State flagship colleges are struggling financially and cannot shoulder this burden on their own. Therefore, the Department of Education needs to allow a per student payment to any state 2 and 4 year college. The amount will be capped to prevent runaway spending on luxuries like football stadiums.
Ultimately, if managed properly, the program could cost less money than the current system of subsidized student loans, bailouts, and scholarships, particularly as for profit colleges continue to fold. Students like Stan will then have the option of attending a reputable college that offers a valuable education with more marketable skills, for less money for both him and the taxpayer.