The Australian Green party has proposed cancelling all student debt in Australia, as part of an aim for government to provide "free education for life". However, free education is not free. In an article in The Conversation earlier this month, Bruce Chapman (Australian National University) makes a case against the claim that cancelling student debt would make university education free. In Chapman's argument, someone has to pay the cost of providing education, and if it isn't students paying, then taxpayers will be the ones paying:
If there is no charge for a university degree, this means all taxpayers (including those without a university education) are fully subsidising graduates, who get lifetime advantages from their education.
In other words, calling for “free” universities is equivalent to supporting financial assistance going from the poor to the privileged.
Just about all political parties in Australia – and most governments around the world – agree this is not a not a wise idea.
Chapman is correct, of course. The cost doesn't go away just because students aren't paying some proportion of it. However, even if students are not paying any monetary cost, students are not receiving free education. That's because there are opportunity costs associated with education as well.
An opportunity cost is the cost of not pursuing the opportunity to do something else (the term dates back to the 19th Century Austrian economist Friedrich von Wieser). Studying (at all levels) takes time, and time is scarce. If a student devotes some of their scarce time to studying, they can't use that time for other activities that are valuable to them (and let's not get into the issues with students multitasking in class). A student might give up some leisure time, or work time, in order to complete their studies. The value of the time that they have given up is the opportunity cost of their education.
It turns out that the opportunity cost is the largest component of the cost of a university education. Think about it. A full-time student gives up at least three years of working in order to complete a university degree. If they are working while studying, chances are that they are working in a lower-paid job than they would have if they were instead working full time. The cost of their tuition fees pales in comparison to the cost of foregone income while they are studying.
None of this is to say that university education is not a good idea. For the majority of students, the benefits (higher lifetime income) far outweigh the costs (including opportunity costs) of education. There are also myriad social benefits from having a more educated population, which is why the government generally subsidises education for domestic students. That some of the benefits are private is one justification for students paying some of the costs of tertiary education (as Chapman notes in his article).
The Australian Green party can't legislate away the costs of education. Someone has to pay those costs, even if it isn't the students themselves. However, even if there were no monetary cost, the Australian Green party can't make education free for students, because even when education has no monetary cost, it will still have a large opportunity cost.
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