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Billions of dollars have been wasted by both the State and Federal governments by way of student subsidies. Most who received subsidy dropped out right before the end of the first year of college, says an American Institutes of Research study. Between the years 2003 and 2008, the Federal subsidies wasted on first year drop outs amounted to at least $1.5 billion.

This study is limited to full-time, first year students at the four year university and colleges. According to the researchers, you can find higher dropout rates at the community colleges. Subsidies are lavished on students by both party policymakers. They argue that if enough subsidies are not granted, we will soon face a situation where our workforce will not be skilled enough to compete globally.

Popular opinion says that students wishing to pursue higher education have plenty of opportunities to borrow from private sources or from their savings. Those who support student subsidies argue that in a free market, higher education will be under provided. In a bid to earn high, most people do not hesitate investing any amount of money in higher education knowing that this is the only route to a lucrative career.

As compared to those without a college degree, those with a degree earn at least 75% more. According to some, this in itself is a great incentive for students to borrow and invest in their education. They opine that tuition prices are driven to unnatural highs due to subsidies.

This is nothing but demand and supply situation. Prices have been pushed higher due to the fact that more numbers of Americans strive to get into colleges. Usually, ability to pay and consumer willingness restrains upward pressure. However increase in tuition rates have been absorbed by subsidies offered by the government. This has also lifted budget constraint of the public.

According to a Boston University professor Peter Wood, universities and colleges consider Federal subsidies as money that is there for the taking. They deliberately set tuition fees higher in order to access these funds.

Most additional student, who benefit from subsidies and choose college education, may not actually be ready for it yet. This is evident with the number of students who require remedial work. In order to accommodate students who are not ready, institutions naturally reduce their standards. This again is evident with the decline in Scholastic Aptitude Test scores. Degree completion rate, as we all know, has also fallen considerably.

Experts say that students spend more time enjoying sports and leisure than in studies. On an average they spend at least four hours in entertainment as compared to three hours of study. Another factor that shows that some students are not really interested in education is the fall in bachelor graduation rate.

A similar situation arose in the housing industry where people were tempted to purchase homes they could not afford with education subsidies. It is apparent that in both situations, illusory benefits are promised to taxpayers who are not ready.