Thursday, September 24, 2009

Everyone Can Afford College. All Can Go.

We have a crisis in higher education. Like health care the cost of a college education is increasing at more then twice the rate of inflation, while the money available for scholarships and grants is shrinking. Many cannot attend the college of their choice or attend at all. Private Universities tend to get a disproportionate number of upper middle class to upper class students rather then the best students. I have given this a lot of thought and see a rational plan to solve this. First let me say not everyone should or needs to go to college, but some would benefit from a technical training and this covers that also. Read on to see the plan.

Society and our country benefits by having a more educated workforce and a educated class that can develop new inventions or processes. The person getting an education benefits from added earning potential. Also more lower income and middle income students will be able to attend better schools and not be worried about affording school or being saddled with burdensome debt. Many people will go into teaching or nursing since they will not need to find high paying jobs to pay off college debt. Keep reading the plan is coming.

The individual will benefit from this plan because of increased earning potential. US Census Bureau report shows that: '$4.4 million Estimated lifetime earnings of professional (i.e., medical, law, dentistry and veterinary medicine) degree-holders. This compares with $3.4 million for those with Ph.D.s, $2.5 million for master’s degree-holders, $2.1 million for those with bachelor’s degrees, $1.2 million for high school graduates and $1.0 million for high school dropouts'. Also the individual will be able to go to the best school they qualify with economic resources being no barrier and massive debt will be no barrier to taking the job they want rather then the job they need to pay off their debt. Here comes the plan.

Here is the plan. I will give the numbers to justify it below. The plan is simple students will apply to the colleges they want without concern for the cost. They will be accepted on their qualifications not the ability of their parents to afford it or the desire of the students to go into massive debt. After finishing school, graduate school and any required internships or residencies to complete their training they will pay back the loan this program gives them. They will pay back 0.75- 1.5% of their net income for each year of school they attend for 10 years. i.e. someone going to only four years of school will pay 3-6% of their income (net not gross) for ten years while those doing Medical School will pay 12% of their income for 10 years after they finish their residencies. These percentages are first guesses it may be slightly higher or lower. The final number will have inflation built in so once you fund the first four years the program will pay for itself.

Lets look at some numbers. There are approximately 5,000,000 in each grade level although only 3,000,000 graduate high school (2 million do not, see their lifetime earning potential above, I will present a plan to improve drop out levels in future blog). There are roughly 2,500,000 students entering college each year but there are 18,000,000 in colleges and universities at all levels including college, professional schools and graduate schools. 14,000,000 are in public institutions and 4,000,000 are in private. The total cost of those(14m) in public institutions is 250 billion dollars or $17,000 per student (room, board and expenses averaged of all levels) and those (4M) in private schools is 150 billion dollars or $37,000 per student. Whether private or public the students pay (via loans, scholarships, parent contribution and work study) all but $10,000. So of the 400 billion dollars spent each year on higher education $140B is paid by government, $40B by endowment funds of private universities and colleges and $210B by the student (using: loans; parents contribution, scholarships and work study). Once the program is in place and up and running it will be self supporting. This will mean that local, state and federal government will save $140B yearly or $1.4 trillion over ten years after the first four years and people start repaying loans. Both private and public schools will be able to use the money saved to improve the faculty (both pay and quality) and to improve facilities ( to accommodate the increased number of students that will be attending).

When the program starts those already in school can participate and reimburse the program at 2% each year for ten years of their net income. The repayment will be handled on the persons tax returns.

The beauty of this is that the job a person obtains and therefor the income is based upon the education they get and the field they pick. By setting reimbursement to your income if you decide to go into a low paying job you reimburse less and if you decide to go into a higher paying job you reimburse more. The individual decides. Two people with the same degree may go into opposite ends of the pay schedule.

After eight years there will be approximately 28 million (this number could be almost double if more students go to college then would have) that will be paying back into the program with an average income of $75,000(assuming a combination of those in professions and in trades, with more data this number could be precisely calculated) paying roughly 15% each (averaging those that do just bachelors and those that do graduate or professional degrees) or 315 billion dollars and thus close to self sustaining.

Any one could elect not to be part of the program but they will then need to pay full room/board/tuition of $37,000 yearly at private school and $19,000 at a public school.

This is a first approximation kind of a back of envelope calculation. I want lots of comments and criticism and if you know a college administrator please forward it to them. also to any state or federal legislators.


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