August 22 2013
Federally-Mandated College Affordability: Mission Impossible?
Vicki E. Alger
President Obama is on a “personal mission” to make college more affordable. Today he began a two-day tour of Pennsylvania and New York, where he unveiled a plan to base federal financial aid on a new college rating system, the College Scorecard.
Under the plan, starting in 2015 colleges would be rated according to their value, measured by tuition prices, the proportion of low-income students enrolled, graduation rates, and debt loads carried by graduates, they advanced degrees they attain, and graduates’ earnings. By 2018, once the rating system designed by the U.S. Department of Education is well established, federal aid will be dispersed to institutions based on their ratings.
At a time when the average graduate leaves college $27,000 in debt and faces a 9 percent unemployment rate, the president is right to say, “It's time to stop subsidizing schools that are not producing good results and reward schools that deliver American students of our future.” But his solution’s all wrong.
Over the next several years the president will convene meetings across the country to get feedback from, well, everybody, to refine his suggested “value” measures. Consider the effect of using graduates’ earning as a measure.
Obama insists that a college degree is “an economic imperative.” Yet few of the fastest growing jobs actually require college degrees. In fact, based on Bureau of Labor Statistics data, just one out of four job openings over the next decade will require a college degree or higher.
Think No Child Left Behind narrowed the curriculum and drove administrative costs up? NCLB will seem like chump change compared to the president’s college affordability plan. Basing college’s aid on the earnings of their graduates will probably result in the elimination of programs in fields that don’t pay well—limiting students’ options and likely fueling a glut of neurosurgeons and engineers.
Enrolling more disadvantaged students is also an admirable goal—but since a higher proportion of these students are at risk for dropping out, expect colleges to start lowering standards to help turn around today’s dismal 58 percent college completion rate.
The lack of college affordability is largely a problem of the federal government’s own making. For decades the federal aid flowed to institutions, which in turn raised prices with immunity—making college less, not more, affordable.
An analysis by the Center for College Affordability and Productivity found that if colleges actually did use financial aid to lower costs for students, a typical four-year college degree would cost families about $3,500 less, and overall higher education spending would be $59 billion lower each year.
Research has shown that over the past 15 years college administration has grown twice as much as instructional staff. This situation will no doubt worsen as colleges hire more aid and compliance officers to make sure the federal money keeps flowing, rather than cut administration and lower costs.
Instead of making the federal government the arbiter of college value, we should instead phase out federal lending to institutions altogether. Public aid should be directed toward students in the form of performance contracts, freeing them to make the higher education choices that work best for them.
Businesses and undergraduates should also be allowed to enter into human capital contracts, in which businesses would agree to pay for students’ degrees in exchange for a specified term of employment after graduation.
This introduces natural competitive pressure for colleges to offer the best programs at the best prices—all without government micromanaging degree programs and manipulating prices under the guise of “value.”