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Instead of free tuition, Democrats should ask colleges to lower their prices

Jake Novak
Intellistudies | Getty Images

This just in: College is really expensive, and the costs of higher education are only going higher.

A new analysis of College Board data by 24/7 Wall Street shows that a four-year education at a private college in the United States costs more than 10 times what it did in 1971, and costs at four-year state institutions are more than 14 times what they were 48 years ago.

Even after adjusting for inflation, those costs are still about two and half times greater overall for both public and private colleges.

So no one can blame the Democratic presidential candidates for trying to make a big campaign issue out it. Many of them, led by Sens. Bernie Sanders and Elizabeth Warren, are pitching plans that include relieving tuition costs for families, making state college tuition free, and even eliminating student loan debt entirely.

Sanders says he'll pay for his plan with what his campaign calls a "Robin Hood" tax on Wall Street. Warren's campaign is calling for a new "ultra millionaire's tax" on people with $50 million net worth and above to pay for her plan.

No pressure on prices

There's just one problem with all of these plans: There's nothing in them that calls for a ceiling in just how much tuition the government will pay to make tuition free for students.

Warren's plan does cap student loan forgiveness, offering it only to households making $250,000 per year or less. But Sanders is calling for all $1.6 trillion of America's student loan debt to be erased, period. And no plan says a thing about putting any pressure at all on the schools to keep their prices down.

This is just downright odd. Because these are the same candidates who never seem shy about berating insurance companies, drug companies, and the banks over their prices and fees.

We hear them spew a steady mantra of terms like "price gouging," and "corporate greed" whenever they go after those industries. So where's the tough rhetoric from the Democrats berating America's colleges and universities? More importantly, where are their policies blocking them from what they'd be calling "price gouging" if it were anyone else?

Meanwhile, educational institutions have raised tuition and fees at a rate than would make corporate America blush.

Now if you were selling something that you knew your customer wouldn't have to pay for no matter what the cost, what are the odds you would charge a very large sum? No, this isn't a trick question.

In other words, why should it matter to the colleges who's paying the bills, whether it's mom and dad or Uncle Sam? Indeed, that's exactly the same scenario that got us into this mess in the first place.

Former Education Secretary Bill Bennett noticed 32 years ago that all the easy-to-get student loan programs that began to multiply in America in the late 1970s were encouraging colleges to charge more for everything. He predicted that trend would continue, and he was exactly right.

When put in that context, these supposedly bold new plans are really just more of the same. More taxpayer liability, more incentives for tuition inflation, and less incentives for better accountability from the colleges and students to provide and complete a productive education process.

Better ideas

But it's not like there aren't any better ideas that recognize that tuition costs are a problem that should be tackled by students, taxpayers, and the universities together without anyone getting off scot free.

Many of those ideas have come from Iowa Republican Sen. Chuck Grassley, who has made tackling student debt and tuition inflation a major policy goal for two decades.

It started in 2007 with his call to tax university endowments. The plans changed in form a bit over time. But the prevailing policy Grassley has backed is putting a special tax on universities in years when their endowments are growing but those schools still increase tuition by greater than the rate of inflation.

More recently, he's pushing for more transparency. Grassley wants colleges to more clearly publish their actual costs to students and give the government a more accurate measure of their own costs. Similar to the Trump administration's push for more price transparency for hospital and prescription drug costs, Grassley believes more transparency will also push tuition prices down.

Then there are more aggressive ideas like Missouri Republican Senator Josh Hawley's push to make colleges financially liable for 50 percent of all student loan defaults from their former enrollees. Critics say that plan might encourage more students to default, since now their costs would be 50 percent less. But that problem can be fixed simply by focusing on the debts of grads and dropouts who aren't hitting minimum income levels to begin with.

The bottom line is that the government has been helping our institutions of higher learning jack up prices for so long, perhaps it's forgotten that it doesn't have to work that way. Instead of keeping the same problem alive, Democrats running for president might find more success with the voters if they started pressuring the colleges instead of enabling them.

Jake Novak is a political and economic analyst at Jake Novak News and former CNBC TV producer. You can follow him on Twitter @jakejakeny.

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