NEW YORK (TheStreet) -- I've often found counterintuitive notions offer solutions. One of the first, and important of these notions was made by Christopher Columbus. Because he knew the earth was round, he came up with the radical notion of sailing west to reach the east. Then there's the thinking behind vaccinations -- a little disease can fuel the body's own defenses. And of course the good old Laffer Curve, which says as tax rates rise beyond a certain point, tax receipts will fall.I'd like to throw another into the mix: Student loans are making college prohibitively expensive. (Corollary: Student loans are like an albatross around the neck of our economy.) What's brought this on, at least for me, was the revelation last year that student loans totaled some $1 trillion. That's a thousand billions, and a staggering amount of money. My contention is it's the existence of student loans that is driving the cost of college through the roof. For evidence, look no further than venerable Harvard University, with an endowment estimated to be $32 billion. Let's do the numbers, back of the envelope style: If Harvard could manage a 3.5% return on their endowment, that would be about $1.1 billion annually. Using the university's figure of 21,000 students, and applying the $40,866 undergraduate tuition and fees across the board totals about $858 million. OK, kick in $10,000 more per student to account for the higher graduate tuition rates, and the figure is about $1.06 billion. So, it turns out with a different set of policies, every student at Harvard University could go there tuition-free, assuming a return of 3.5%. This argument is even more compelling when taking into account Harvard's actual return on its endowment over the last 20 years of 12.9%.
|Harvard University campus|