How to control public college costs in two easy steps: (1) Get states to stop cutting education budgets and (2) push schools to become more efficient. Getting it done is the hard part.
Last week, President Obama declared war on the rising cost of college -- or at least, he did so to the degree that a notoriously even-keeled politician with a penchant for policy wonkery can declare war on such things. Speaking at the University of Michigan, he laid out a four-point* plan to reverse the surge of tuition rates and student debt that, for many Americans, is threatening to turn higher education into an unaffordable luxury.
Obama's splashiest proposal would tie federal student aid to a university's ability to keep tuition low. The plan would also create a $1 billion competition (based on the administration's successful Race to the Top program for K-12 public schools) aimed at encouraging states to maintain their level of higher education funding while finding savings for students. The White House also wants to form a $55 million pool to fund innovations that would increase colleges' productivity. And finally, it would require schools to offer scorecards and "shopping sheets" that provide basic consumer information to students, such as simplified financial aid data and whether graduates are getting jobs.
Is this plan just "political theater of the worst sort," as University of Washington President Mike Young put it? Or is it a brave attempt at "tying the method of funding to the outcomes we're looking for," as William Powers, president of the University of Texas at Austin, said? Honestly, it might be a bit of both. Some aspects of the plan look like little more than window dressing in an election year. But overall, it seems like an earnest attempt to hog-tie some of the many wild forces that are pushing up the cost of a college education.
WHY PUBLIC SCHOOLS ARE GETTING MORE EXPENSIVE ...
When looking the cost of higher ed, it's important to make distinctions. There are vastly different issues impacting Harvard or Sarah Lawrence than the University of Michigan or your local community college. And if the policy goal is to make college affordable to most Americans, we should be focusing primarily on the state schools, which educate 75% of all U.S. undergraduates, according to the Delta Cost Project. About 42% of students are enrolled at community colleges alone.
Experts have attributed the rise in state school tuition to a whole host of factors, but the basic story of the past decade looks like this: State legislators are slashing funding, which requires college to either cut costs or raise tuition. At the same time, market pressures have led schools to spend more on student services, which include everything from fancy, L.A. Fitness-quality gyms to career services departments. Because of ample student loan funding, colleges often choose to up their tuition rather make hard budgeting decisions, or look for ways to increase their efficiency.
The White House wants to untangle that knot. And the place the administration has to start is state funding. During the past five years, states have cut 3.8% of their support for colleges. But the reductions haven't been even across the country. Twenty one states actually spend more on higher-ed today than they did in 2007. Meanwhile, New Hampshire and Arizona have slashed their funding by more than 30 percent. Several large states, including Florida, California, and Michigan, also drastically decreased higher-ed spending
As the states cut back, students paid more. In this graph from the Delta Cost Project, tuition (in purple) rose as state support (in green) declined.
If the White House can't convince states to keep subsidizing public schools, any hopes of cost containment goes out the window. But the White House also has a plan to make colleges more efficient. It involves a little bit of bribery and a lot of blackmail.
A GOOD START
The administration's plan tries to tackle each of big drivers of public college costs -- shrinking state budgets, rising spending, and bad incentives for colleges. Whether the carrots and sticks in his plan -- $1 billion in state funding, up to $10 billion in student loans -- will be big enough to spur action from colleges or legislatures isn't clear. But the plan is certainly a gesture in the right direction. Its best feature is that it leaves plenty of white space for colleges and states to figure out the details of reform on their own. In an alternate world, the president could have descended from the White House with a burdensome set of specific prescriptions for each college and university to follow. The current batch of ideas might not necessarily solve the entire puzzle of college costs, but at the very least, it seems like it would encourage some much needed experimentation. That's a good start.
*The fifth point in his higher-ed plan involves making tax credits for college tuition permanent and keeping interest rates on student loans low -- but that doesn't strike to the heart of restraining the inflation of college tuition.