I saw a post on Facebook today about how other countries (namely Germany, Finland and Denmark) provide free access to university education to their citizens.  So I did a little research here.

While I agree that the nearly 7% interest rates on student loans is criminal, and I content that the availability of student loans has allowed the tuition of even public universities to grow at nearly 3x the rate of inflation for the last 30 years creating a situation where paying for college is a tremendous burden on the middle class who earn too much to qualify for “real” financial aid.

As difficult as it is for us to hear, the reality is that Germany, Finland and Denmark on income and sales or vat tax – are much higher than the US for comparable income. So if you want to pay 25% sales tax instead of 8% we probably could afford free universities.

I really don’t want to pay the kind of higher taxes that other developed countries pay.  However, I think that in the information age, university education is becoming more and more essential for the kind of growth careers that are emerging.

Every politician says they want to fix it, but have you heard a concrete proposal from any of them?

Here is my proposal instead…

Every adult age 18 – 65 who is not currently attending university, pays $1000 per year into a college trust. Each adult pays over 47 years a total of $47000. Limit college tuition at public universities to 40000 for 4 years. You can adjust for inflation or not, whatever.  US Citizens only can access education through the fund.  Although any person working in the US pays – this allows aliens and ex pats who benefit from our economy to contribute to our national education fund.  People who choose not to attend university fund the people who go on to advanced degrees.  In order to continue to access the fund, students have to maintain full time status and rational grade point average (2.0 or a C average).

OK – maybe the numbers don’t work over the long haul.  Maybe population fluctuations create obstacles.  I am sure some smart financial analysts can figure out some numbers that do work.

Here is the benefit of this.  Motivation.  Every parent pays, knowing that it is an investment in their children.  Every graduate pays, knowing that without the fund, they would be paying off ginormous student loans. We don’t see it as a tax, but as an investment.  It is our automatic 529 plan.  It doesn’t interfere with who gets accepted to which university.  It doesn’t interfere with private universities – they can charge whatever they want and maybe students who choose those get 75% benefit (like vouchers) or something so there is still choice and freedom.  Best of all, since this is a national program, maybe there is no difference between in and out of state tuition – or a minimal difference.

Both parties can get behind it, because while it is not a redistribution of wealth, it hugely increases opportunities available to lower and middle income families.  Every politician can support it because it is an investment in making our people internationally competitive.

Here’s why I like it! – NO STUDENT LOANS! The bankers make nothing off of this.  No interest.  No debt.  More of the money funding our education goes straight into the system.  Nobody skimming profits off the top.  Student loans really anger me, because a $30,000 loan at 7% interest for 10 years adds almost $10,000 to the bottom line.  The longer you take to pay, the higher that number gets.  It does not fund education.  It is waste in the system.

Since it is not an entitlement as it is continuously paid back or paid forward, there can really be no abuse of the system.  The universities access the funds from the trust.

All other college costs must be funded by the state or other private fund raising.

The Only Catch

All of us poor bastards who made it through the current system and already paid for our own or our kids education or currently have student loans.  Here is my best answer.  Renegotiate rate of student loans – so that the government lends at prime – 50 basis points, and the effective interest rate to former students on all student loans goes down to prime + 50 basis points – capped at whatever the current rate is.  That is the best I can do – so instead of the bank making like 4.5% and students paying 7% it would be banks making 1% and students paying 3.25% that is a 3.75% interest rate benefit to those with current student loans.

Possible Modifiers

• Increase benefits to programs that generate careers that are projected to be higher in demand.
• Decrease benefits to programs that generate careers that are either saturated or diminishing in demand.
• Some form of more effective career or guidance counseling combined with a mandatory internship program where companies kick in some money – and get tax benefits for hiring interns.
  • This one might be a condition of the program – as students who fail out or who change majors or degree programs late in the game suffer the most.
• How about this – public universities qualify for hiring bonus funding when they hire people with student loans – this is a trickle down incentive – that takes the new education funding and uses it to pay down old education funding.

If you have better ideas or comments – I really want to hear them.