Funding higher education: a sensible proposal

The status quo

So, Obama wants to be the Education President.  The public education system is a disaster because politics have taken over.  University education is still the envy of the world but it is getting unreasonably expensive.  The only solution that anyone seems to be considering is getting in debt, if you're unlucky enough not to have rich parents.  The latest proposal, that would force students to start paying interest on the student loans while still in school (and dealing with courses, exams and homework in addition to likely working part-time already for day-to-day expenses) is nothing more than corporate welfare of the worst kind.  Why should financial institutions profit from the least equipped to succeed, those without an education?

Financial inversion

It is unfortunate that the world as it is seems to be financially backwards.  When one is young, energetic, curious, creative, motivated to learn and start businesses, is when financial backing would be most helpful and could make the biggest difference yet is unavailable.  In old age, when most people have the means, after a lifetime of working, saving and investing, the energy, curiosity, and in many cases health is gone.  Old people can't enjoy their money and young people don't have any.

The proper incentive

In regards to education specifically, why enrich the parasitic loan sharks?  If it is agreed that everyone should have the education they are capable of handling, independently of their means, how about giving incentives to make sure that when it is needed (at the end of secondary education), the necessary funds will be available, without turning the student into an indentured servant of the financial institution for the rest of his/her life?

How to fund higher education

Upon the birth of a child, and every year thereafter until he/she turns 18, a tax credit should be available, equal to the current cost of a year's tuition and other related expenses at the most expensive learning institution in the country.  After all, a future Einstein should not be deprived of the best education because he was born on the wrong side of the tracks.

No debt and no government handouts

This tax credit would be deposited into an education savings account, usable only for education of the target child.  Because the cost of education is what it is, it is likely that for most people this tax credit would reduce the tax obligation to zero, especially if multiple kids are involved.  Still, this is less expensive in the long run than paying interest to a financial institution and becoming an indentured servant of same, or dealing with the social consequences of poverty, ignorance, unemployment, crime and welfare.

More than enough money

What would be the implications?  For those whose tax burden would otherwise be equal or larger than the cost of a year's education at the most expensive university, they would reduce their tax burden by that amount, and be able to deposit the whole tuition (and other expense equivalent) into the education account.

Enough money for a PhD

For those that have a tax obligation that doesn't quite reach the level of the most expensive university, the tax would be reduced to zero and all the tax that would otherwise have gone to the government would go into the education account.  This means, of course, that most people would not be able to save as much as it would take to go to that most expensive university, even if one considers that over the 18 years the account would be growing and some of the difference would diminish.  On the other hand, tuition costs have only one way to go: up.  Still, 18 years of saving should cover 8 years of higher education, and that's a PhD.

Or more...

In the worst cases, such an amount of educational savings would cover at least a bachelor's degree.  In the best cases there would be money left over after attaining a PhD, and that could be used for changes in career, dictated by shifts in the economy or personal interest.

And more if necessary

Of course this does not have to eliminate scholarships and grants, which can be used to supplement the education account if necessary, but it is likely that the latter will be sufficient for a lifetime of education and learning.

Too much money?

How would the maximum amount be calculated?  To be realistic, this amount should include not only the tuition, but books, other expenses and room and board.  It is not reasonable to require someone who qualifies for a Harvard education to remain near the parental household because room and board are not included.

Competition remains

Keeping the current mix of public and private higher education would insure that there would be competition and that the availability of this dedicated money would not cause educational hyper-inflation.  Still, higher education has already been rising much faster than inflation, but that is another issue for another discussion.

Not education establishment welfare

While it can be argued that this proposal would benefit the higher education industry, it does not direct any specific amount of money to any particular institution so strictly speaking it is not educational welfare subject to political interference.  It would directly benefit the individuals who would get the best education the country has to offer, for which they qualify; and those individuals would have all the choices they now have - more actually, since affordability would be taken out of the education equation.

Proper regulation

The accounts could be regulated similarly to IRA accounts, they would of course be tax free - what would be the point in taxing their growth, as their whole purpose is to generate the maximum amount for education?

It can be assumed that a lot of people and institutions would be salivating at the prospects of getting their hands on this money, by legitimate means or not.  As a start, only properly accredited educational institutions should qualify.  Of course, anyone can see (with appropriate guidance) that the value of a diploma generated by a diploma mill is not worth the paper it's written on, so reputations acquired in the marketplace are still useful.

To avoid the effect of some present-day parents not being properly informed about the use of education accounts, an education account might be set up automatically at birth and the income tax collected deposited there automatically instead of going into the general fund.  Thus, every child would have their education funds when needed even if the parents did (on knew) nothing about education.  But then, what parent wouldn't want the best education for their child, when it costs nothing additional?


If there are multiple children, how should the money be divided?  Equal parts every year seems the simplest and fairest way.  The earliest child would have a bigger account but would need to use it earliest.  As older siblings reach majority age, the total amount would divided among fewer children.

Long term consequences

In a generation, this country would have the best educated population in the world, as only those that don't want to be educated wouldn't be.  If it is accepted, as is by many, that education is the gateway to eliminating poverty, it is likely that this proposal could have a major impact on the poor in our lifetime.

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