More government action is necessary to maintain the affordability of higher education than subsidizing loans. It is true to say that as the costs of education rise, the necessity of government subsidized student loans increases, where the size of each loan is determined by the financial needs of a student, the price of a desired institution, and the student's likelihood to succeed in a college environment. However, subsidized loans are unsustainable unless a reasonable degree of educational “value” (an increase in income as a result of a bachelor's degree) is received by the student. The value necessary to repay the loans is difficult to ascertain when students vary wildly as to the costs of the institutions they attend, the financial circumstances of their families, and their chosen academic specializations. If the value of a student's education is ever less than the amount of money she was given through government loans, repayment drops sharply and the government is left with a lending deficit. Net government deficits (in this instance the relevant expense is money loaned to students) do not increase when more students apply to, attend, and graduate from institutions of higher learning. Indeed, government reaps the benefits of expanded education in the form of taxes collected from incomes increased as a result of college graduation—that is, value added by the attainment of a degree—but the value added by education is not increasing at the same rate as the costs of that education—students are being charged more and receiving fewer benefits.
The necessity of introducing more stringent regulations on educational costs is obvious if one understands the benefits government enjoys from high rates of scholastic attainment. The prices colleges set for themselves are dictated not by the costs of operation, but by the prices students and the organizations supporting them are willing to pay. Once this high price of education is established, college administrations have little incentive to lower costs. Governments must circumscribe educational costs within reasonable bounds to ensure their subsidization programs remain effective. Governments must ensure that students procure substantial value from the educations they receive. And governments must make it so the individuals to whom they lend money will reliably pay it back at reasonable intervals.