February 6, 2012

Education protesters

Photo: Flickr/Fibonacci Blue

President Obama addressed the issue of soaring costs of higher education last month in a speech at the University of Michigan that drew cheers from students in attendance. However, if the students had taken a moment to consider the implications of his proposals, they may have reacted very differently.

Under his plan, the federal government would aim to slow tuition growth by conditioning the amount of federal campus-based aid to colleges. He proposes giving $1 billion to states that curb education costs and expanding the Perkins loan program from $1 billion to $8 billion. He further suggests a “college scorecard” for every institution to compare them on metrics like tuition, graduation rate and earnings upon graduation.

This proposal falls short. For one thing, increased federal involvement would tend to exacerbate the problem, as Heritage Foundation scholar Stuart Butler explains:

Moreover, the extensive and expensive system of federal aid for college has actually exacerbated increases in the total cost of college. This is because colleges can boost tuition when such assistance enables students to offset part of their costs. To be sure, better-targeted student aid can help specific groups of students afford college, but increasing total aid, as the President proposes, will tend to increase—not decrease—the sticker price of college.

The scorecard concept is also wanting. The private sector has already developed a robust system of scorecards (i.e. U.S. News & World Report, Forbes) which are perpetually improving their methodologies. Imposing a one-size-fits-all federal scorecard fails to address the challenges in measuring quality and value for money in education across schools and across the preferences and goals of  prospective students.

There is a better way. For example, instead of subsidizing college loans, the government could reform the federal tax code to remove the double taxation of savings for college. The tax reforms included in our Saving the American Dream plan move in this direction.

Butler concludes by arguing that “higher education appears to be on the brink of fundamental change” as disruptive new types of schools enter the marketplace:

The real antidote to tuition hikes at traditional public and private colleges is emerging competition from colleges that are pioneering new business models, online education, and other technologies that dramatically cut costs. The best way for Washington to foster this competition is to make sure that accreditation requirements and other regulations are loosened. And the best way to ease the student debt problem for future students is through tax reform that encourages saving.

How do you propose the higher education costs could be fixed?

Comments (1)

Sanford Reed - February 6, 2012

When examing the costs of college, is the research strictly discussing state colleges? I would assume so. The private schools and universities are running more of a business model and I would think are on their own economic agenda. I would like to know the affordability index change in state colleges since their inauguration.

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