The Best Solution to Student Debt is the Free Market

Posted on Tuesday, October 18, 2022
by Shane Harris

AMAC Exclusive – By Shane Harris

On Monday, the Biden administration formally announced that the online application for student loan forgiveness had gone live, marking another step toward full implementation of the plan. But even as President Joe Biden plows forward with his brazen debt forgiveness scheme and Democrats in Congress pursue equally irresponsible policies, the American private sector is finding new and innovative ways to address student debt without harming American taxpayers.

In just the latest example, pizza giant Papa John’s announced last month that it would be offering workers fully funded college degrees, becoming just the latest employer to provide college tuition assistance as an incentive to attract and retain employees. Under the Papa John’s “Dough and Degrees” program, more than 12,000 full and part-time employees – including staff who work as little as 10 hours per week – will now be eligible for fully funded degrees from partner schools such as University of Maryland Global Campus, Purdue Global, University of Phoenix, and Colorado Tech.

As many companies continue to struggle to fill open positions following the pandemic, tuition assistance has become an increasingly popular way to attract motivated employees. Chipotle, which offers 100 percent tuition assistance in some cases, told CNBC that employees who take advantage of its program are 3.5 times more likely to stay with the company. Chipotle CFO Jack Hartung said that the company views tuition assistance as a way to “invest” in its employees and develop a relationship beyond just a simple paycheck.

The fast-food industry – which employs a disproportionate number of young people and students – has been a leader in implementing these tuition assistance programs. With restaurants experiencing a quit rate more than twice that of the overall economy and 40 percent of restaurants saying they are understaffed, tuition assistance is a win-win for employers and employees.

While college tuition assistance is nothing new, one noticeable shift in recent years has been blue-collar and service industry employers offering more tuition assistance. As college tuition prices continue to skyrocket, more students are working long hours to pay their way through college and avoid taking out large student loans. Still, wages for most unskilled workers remain low, and a few hundred dollars a week is a paltry sum compared to the exorbitant cost of tuition, books, and room and board. That’s where tuition assistance programs come into play.

One company that has been getting it right on tuition assistance for decades is Chick-fil-A. The company has pledged $24 million in scholarships for 12,700 employees this year alone, and since 1970 has offered more than 80,000 employees more than $136 million in tuition assistance. As a result, ninety percent of aid recipients said they plan on working for Chick-fil-A even after graduation. With such loyalty to its employees, it’s perhaps no surprise that the fried chicken chain is renowned for its customer service and restaurant experience.

But Biden’s debt forgiveness scheme now threatens the effectiveness of all of these programs. While tuition assistance encourages young people to work hard to earn money for college – which also aids companies in retaining good employees, benefitting the overall economy – the federal government has now removed the incentive to work, instead promising free handouts for borrowers. Why would any student today get a part-time job in college if they can just expect the government to forgive their loans later on?

At the same time, neither Biden’s plan nor private sector tuition assistance programs provide much of a long-term solution to the rising cost of college. Eventually, companies offering financial assistance to employees won’t be able to keep up with tuition increases. In just the last 20 years, tuition at both public and private institutions has more than doubled.

Here again, however, the free market may provide the best solution, albeit one that may seem counter-intuitive. College tuitions began to rise dramatically in the first place soon after the federal government began offering more loans and grant money to prospective students. As colleges realized that the federal government was handing out more money, they simply raised their prices – a connection supported by a New York Federal Reserve study.

Dramatically shrinking or eliminating the student loan and grant program may sound like bad news for students struggling to afford college, but it would likely drive prices down in the long run by allowing the free market to determine costs. As the stream of federal loan dollars dries up, institutions would be forced to compete with one another by lowering costs – good news for students, who would then have cheaper college without tens of thousands of dollars in loans.

While some government intervention may ultimately be needed to bring down the cost of attending college, politicians and the American people would nonetheless be unwise to dismiss the power of the free market in solving student debt. It may well be that arriving at a sustainable solution will require a combination of regulatory action and market incentives to make higher education work for students and families again.

Shane Harris is a writer and political consultant from Southwest Ohio. You can follow him on Twitter @Shane_Harris_