Note on the Intergenerational Transfer of Public Higher-Education Benefits

Abstract

The traditional way of looking at the burdens and benefits of higher education is to distribute the net benefits received by students by the income classes of parents (taxpayers). This sweeps the problem created by the intergenerational nature of the benefit transfer under the rug. It seems to me that a more useful way of looking at the problem is to acknowledge that the benefits of public higher education are received by one generation while the costs are paid by another and that there is no way of merging benefits and costs in one distribution to evaluate the equity of the system. The benefits of higher education are received by the students who attend college (although their parents may also feel better knowing that their children are being educated). The costs are shared by the parents, who pay for most of the out-of-pocket costs (tuition and room and board), the taxpayers, who subsidize higher education, and the students, who bear the cost of foregone earnings. Let us omit foregone earnings for the moment. The remainder of the costs are borne by a generation of people (either parents or taxpayers) who are, in effect, making a gift to those who are going to a public college or university. Of course, there is an understanding that each generation of earners will pay for the higher education of the succeeding generation. There is no practical way of obtaining a distribution of net benefits (or net burdens) by income classes in such a system, because the persons who receive the benefits are not the same persons who pay the costs.'