Public colleges and universities in the United States will never be as conservative as many conservatives want, nor will they become as progressive as many progressives want. A key impediment is the First Amendment: government officials cannot reach into the college classroom to require or ban any viewpoint. Although both groups of advocates claim to prioritize teaching “how” to think versus “indoctrination,” various unsuccessful efforts to either ban or require “critical theory” viewpoints, for example, demonstrate that many advocates want what the First Amendment will not permit.

Meanwhile, many moderates critique higher education for the huge success of progressives in creating a culture of speech suppression against not only conservatives but also moderates, particularly on social issues. Public and private universities alike suffer from demonstrated cultures of timidity when it comes to sharing ideas that stand to the right of the prevailing academic regime. That is the opposite of the intellectual life of a great university.

The public pays for much of this and expects accountability, but “academic freedom” concerns have historically featured deference even to blatant activism among professors.

One solution in these circumstances is to stop funding public colleges in the first place, which means to stop having them, and instead, to privatize them.

States could save more than $126 billion per year if they stopped subsidizing higher education. Texas alone would save nearly $14 billion. 

Two Paths to Privatization

The straightest path to privatization is to gradually reduce state funding to zero. In return, the state can let each college hold its own title to the land on which it sits. Land grant status is probably no impediment, considering that some private colleges, including MIT and Cornell, are land-grant colleges.

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Cutting the cord, though, may be politically difficult for legislators. Such a plan may require legislators to have the same privatization policy for many years in a row, closing their ears as public university advocates cry ever louder that they can’t compete with the nearby private universities unless they get special treatment. But such a plan, after all, frees up millions or billions of dollars for other purposes.

Economists have given me an alternative: the legislature could appropriate to a college about eighteen to twenty times the average appropriation from the past five years. That amount creates an endowment that spins off about the same amount as a normal, annual appropriation, so it would be revenue-neutral for the college. At the same time, the appropriation will be funded by a long-term bond. A bond issue of 18X over thirty years at 4 percent interest, for example, would also be revenue neutral for the state.

In this scenario, the institution immediately becomes private as part of the legislation. The ironclad provision tied into the appropriation and bond is that the university will never again ask for or receive a penny in state funding—though it may compete for state grants on an equal basis with other private entities, and its students may remain eligible for any tuition grants that are offered to state residents. The state would still own the land on which the college sits, providing a ninety-nine-year lease. The college, with enough in the bank to assuage lenders’ concerns, could buy the land from the state at a market price at any time.

From an enrollment perspective, the time for privatization is ripe. Many colleges are naturally losing enrollment due to a decline in the population of college-aged young adults, higher education has suffered a loss of credibility due to faculty activism, and prospective students have a decreasing perception that college is worth the investment. These colleges might jump at the chance to lock in an endowment at the 18X level rather than downsizing along with the student body and then waiting a generation or two for the opportunity to upsize again.

States should not rush into this plan while interest rates are so high, however. States seeking to privatize their universities through an endowment/bond plan should wait for interest rates to return below 4 percent.

Case Study: Fairmont State University

Take, for example, Fairmont State University, a public university in West Virginia, where I live. Fairmont fits the pattern of high access but weak outcomes. It is open to almost anyone, with a 98-percent acceptance rate, and it has a correspondingly high dropout rate, with only 19 percent graduating in four years and 40 percent within six years.

Largely due to state subsidies, Fairmont gives a $10,000 discount to in-state students, charging them $8,708 per year instead of $18,924. Fairmont estimates all other annual expenses at around $12,000 per year. Its first-year retention rate of 69 percent means that many students (31 percent, or nearly a third) decide quickly that they should pursue a different path, and those students lose no more than one year of full-time work while spending no more than $21,000 if they stay for both semesters. It hurts, but they can recover. (Notably, only about 70 percent of Fairmont students attend full time, suggesting that six years rather than four is a fair mark for assessment. Also, part-time students may have significant year-round income to offset expenses.)

For Fairmont students who persist past year one, though, only four out of seven have graduated by the end of six years (69 percent make it past year one, but only 40 percent of the original total finish by year six). Those odds are poor. At $21,000 per year to not finish a degree, these results are not just scandalous, but a waste of taxpayer funding and student tuition.

For the 2025 fiscal year, the State of West Virginia appropriated $20,671,494 to Fairmont State University, considering only the main line item for the university, not other funding streams. Given a student body of about 3,500, this appropriation is about $5,906 per student. Yet, much of that funding is wasted because so many students leave with no degree.

These statistics show the cost of matching high access with low completion. Fairmont is no extreme case, but just one of many examples across public universities in America.

Meanwhile, just sixty miles south is Davis & Elkins College, a private university trying to compete with West Virginia’s subsidized public colleges. Before aid, the average student there accumulates about $45,000 in costs. A student has about $18,000 left to pay after receiving all financial aid. A healthier market in postsecondary education would stop subsidizing Fairmont, letting colleges like Davis & Elkins compete on a level field.

One way to do this is to end the annual subsidy to Fairmont and privatize it—either cold turkey or over time. In fact, West Virginia has already followed this path, reducing the per-student subsidy by $953 between 2001 and 2022.

At the same time, West Virginia could target additional scholarship aid to students who are most likely to succeed in college, and hold a more compassionate line against admitting students who are unlikely to succeed. Currently, Fairmont takes a lot of first-year tuition for students who are reasonably likely not to finish a degree, which Fairmont could predict in part using applicants’ SAT scores. Instead, West Virginia could end Fairmont’s funding and reallocate some funds to students likely to graduate. Funding students is a better economic choice than subsidizing institutions, as education economics expert Andrew Gillen describes in a recent paper. Moreover, with up to $21 million saved, West Virginia also could reallocate some funds to career colleges, where many adults go when they need a Plan B.

In exchange for termination of the subsidy, Fairmont would receive title to its land and become free from many state regulations—the oversight and central planning that make it harder for public universities to innovate and adapt. Although this plan could be enacted in a single budget year, Fairmont’s path to privatization could involve subsidy decreases over a period of five to ten years.

If legislators dislike this privatization plan, there is an alternative: funding a revenue-neutral endowment using a long-term bond. This choice would immediately give Fairmont the benefits of a private university while ending the annual state subsidy.

In Fairmont’s case, 18X its current appropriation is about $372 million. This amount would dramatically increase Fairmont’s endowment from its present $32 million. Considering long-term market returns against inflation, it is not unreasonable for Fairmont to expect the 5.55-percent annual return required for this plan to be revenue-neutral. Fairmont could spend all of the annual interest each year or could choose a smaller annual payout in order to see the endowment grow—or at least match inflation.

In the long run—over the course of a thirty-year bond—the Fairmont area is likely to increase in population, with Fairmont State’s enrollment increasing accordingly. But the privatization deal is that in exchange for its endowment windfall, Fairmont State cannot ever get another appropriation. Due to inflation, the value of the windfall will probably decrease over time. In this scenario, Fairmont’s path to privatization will be effectively realized as the state infusion becomes worth less and less and the playing field becomes level.

Since the deal puts private-sector trustees in charge, it must prevent them from closing up shop and taking the money. Fairmont would be required to maintain nonprofit status into perpetuity. Fairmont would lease or buy its land from the state, with its large endowment providing attractive surety to lenders. Or, if the state gives Fairmont title to the land, it must always be used for an educational purpose. If Fairmont closes for any reason, any remaining equity must go to another nonprofit educational purpose (or back to the state if there is no suitable beneficiary).

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To give this deal teeth, there probably should be a third-party beneficiary. In other words, if either party reneges on its part of the deal, a third party should have the right to recover from Fairmont most or all of that $372 million. The third party could be, for example, Davis & Elkins College, which ought to have a reasonable expectation that the deal will be honored as the college makes its own plans. This provision should be a sharp incentive for the state legislature not to renege on its promise to taxpayers.

Public Education Needs the Discipline of the Market

Apart from ideological and academic concerns about university activism, American colleges’ embarrassingly low rates of student persistence from year one into graduation lead to an indisputable conclusion that traditional “four-year” college programs are severely over-enrolled. This problem began with the mid-twentieth century GI Bill, which intentionally put veterans in college instead of the workforce, and massive subsidies to colleges have grown. The cost of greatly improving college access has been millions of students who leave their hometowns and forgo full-time employment for four to six years, only to leave school with debt but no degree.

No one knows the true market for postsecondary education because of the extreme distortions caused by extreme subsidies. These distortions should end. While state actors can do relatively little about federal student loans and the billions of dollars transferred via federally sponsored research, states do control whether to keep their public colleges public.

To better align state postsecondary system enrollment with state needs, far more students should be in career colleges relative to “four-year” bachelor’s programs. Ending state subsidies for programs that provide bachelor’s, master’s, and doctoral degrees (the overproduction of advanced degrees is a topic for another time) means putting public universities on a path to privatization.

A path to privatization is not only possible but could be welcomed by many public colleges. One option is to gradually shrink the annual appropriation to zero and to repurpose the funding or let it remain with taxpayers. Another option, which may be particularly desired by colleges likely to shrink with demographic and other trends, is to privatize them outright. States can provide one-time endowment funding to replace state subsidies, funding the deal with a long-term bond and protecting the deal by giving enforcement incentives to a third-party beneficiary.

The large endowment will also give potential lenders and donors more confidence in the long-term viability of the institution. Furthermore, privatizing colleges will not only free them from bureaucratic impediments to innovation, but also will relieve government leaders from the pressure to interfere ideologically.

Postsecondary education in the United States needs the discipline of the market. Putting all public colleges and universities on a path to privatization—and, eventually, removing all forms of public subsidy—is how to get there.