The federal government subsidizes colleges through a host of financial aid programs for students, then leaves them mostly alone to do what they want to (except for some annoying Department of Education rules). That’s the opposite of the situation that prevails with business enterprises, which are not subsidized but are subject to extensive regulation.

Is this sensible? In today’s Martin Center article, economists Roger Meiners and Andrew Morriss argue that colleges should be regulated like other businesses. They observe that colleges take advantage of unsophisticated “investors” to sell them dubious products called degrees.

Key paragraph:

Rather than focus on forgiving debts after they are acquired, we argue that existing laws can help protect inexperienced investors (students) from making dubious choices. This solution has several virtues. First, it relies on existing laws, minimizing the need for legislative action. For example, applying the Federal Trade Commission Act (FTC Act) to the purchase of higher-education services does not require Congress to pass a complicated new statute; only an administrative decision is needed to apply the FTC Act to certain aspects of the sale of education by colleges. Second, consumer-protection investment regulatory measures are often enforced by private lawsuits. Applying them to higher education should be no different.

It’s an idea worth debating.