[jedmeyers]

Your argument is very similar to the "i think it should be" argument that I mentioned before. Are there any studies or some other justification that might substantiate that your theory is indeed true?

Does all tertiary education should be "free" for everyone? English history, art, etc? How does the price setting works: government just pays whatever educational institution asks for? Does it forces institution to accept the amount of money being provided?

Also, what does "better payoff for the economy" mean? Does it mean that the median wage rises, amount of taxes collected increases, productivity increases, something else... ?

[dv_dt]

First, if you're skeptical that the gov't should just pay educational costs with a blank check, I would agree. Our current system of paying a grant and allocating loans to students blindly is pretty stupid. It increases university cost inflation as students shopping for an education don't have the experience needed to make a good cost decision to serve as a signal to control university spending. (and their parents have out of date information) too. It would serve a better cost control as well as be administratively cheaper to pay fewer public universities directly with strings attached for low or no cost tuitions.

As to why one would want to do it, economic activity would be higher. Lets compare two cases:

One a student goes to college, ends up with $40k worth of loans, starts working a job which they start to pay back almost immediately. The loan starts to reel back in the cost of the capital almost immediately, and it offsets the net income of the student. They spend less than they would have, they save less, and have less time to compound interest on smaller savings (creating a higher social burden). In the early portion of life you have a lot of economic activity. Moving into a first apartment, then first house generates all sorts of ancillary economic activity. All of this is delayed by higher student debt, and reflected in data.

On the other path, the same student goes to college, gets the same job at the same gross income. Now though, they have more disposable income and savings. More disposable income, means more spending, which means more economic activity. The gov't, even if it goes into debt itself to fund the education, wins in the short term with more activity and more tax receipts, and in the long term - better savings translating to a lighter load on backend gov't services. Students and parents benefit, the economy benefits, the govt doubly benefits, society improves...