Do any beneficial externalities arise from people attending college that would justify public funding of college education?
A positive externality exists when people who are not part of an economic transaction gain benefits from that transaction. A person attending college definitely creates positive externalities for the society as a whole.
If a person goes to college and society does not pay for it, positive externalities arise. By going to college, the person increases their human capital. They come to be able to do jobs that will benefit society. They may become a teacher and help the next generation of children learn or they may become a scientist and discover a new medicine that will benefit society. If these (or any one of millions of other things) happen, society gains without having paid for the person's education.
In this sense, college education can create positive externalities. It therefore would make sense that it should be supported with taxpayer money.
The whole society will be benefited from education received by its members in two ways. First, the value of human capital on each individual will increase with the level of education received. The more the educated people in the society, the greater the productive capacity of the economy. Therefore, the college educated people will bring more productivity to the economy that will bring higher income to the country.
Second, by going to college will indirectly minimizing the unproductive activities especially among the youth. In fact by engaging in certain activities, such as criminal-related activities, will put more cost to the society as corrective or remedial measures. This definitely will drain the country's resources.
Therefore, positive externalities arise from people attending college hence would justify public funding for college education. In terms of macroeconomic management, it is proven that many countries have enjoyed faster economic development by spending more money on educating public.