The Obama administration's proposed regulations for for-profit colleges include this interesting idea: denying federal funding to programs that, in the words of The New York Times editorial board, "repeatedly saddled students with debt that is defined as unaffordable under a new formula that takes earnings into account." In English? Unless the college provides a valuable degree, i.e. one that pays off in future earnings, the federal government won't subsidize it.
The regulation raises a number of entangled issues about the value of college degrees. One obvious catch is that not all degrees from "non-profit" institutions pay off, either, as for-profit advocates, libertarians, and common-sense bloggers have all been quick to point out. And the federal government, of course, is thoroughly submerged in the business of subsidization, particularly through student loans. So this new regulation kicks over a hornet's nest for those trying to figure out the best policy for higher education funding, and raises that most critical question in the debate over college cost: what sorts of degrees should the government be subsidizing, and how?
- The Basic Set-Up Left-leaning blogger Matt Yglesias does the honors:
American taxpayers subsidize institutions of higher education via the student loan process. We do this because we think it's valuable to encourage people to improve their human capital. But many people who take out student loans end up defaulting, an indication that their human capital was not improved. ... The Obama administration ... is trying to take this on by saying that the worst-performing schools will be denied subsidies. That should reduce wasteful spending and also create incentives for schools to improve quality. So what's wrong with that? Well, one fair critique you could make is that Obama administration isn't actually denying subsidies to all of the worst-performing schools, it's merely denying them to the worst-performing for-profit schools.
- The Differing Strengths of For-Profit and Non-Profit Schools Economist Tyler Cowen points his blog readers to a recently-published essay of his examining a fascinating trend: "for-profits do quite well in vocational areas and in areas where the student is eventually certified by relatively objective tests. Non-profits, in contrast, remain dominant in the liberal arts and in areas where quality is harder to measure." (Incidentally, he decides that "overall ... the not-for-profit model for higher education is robust.")
- Why Singling Out For-Profits Is Unfair Lanny Davis, special adviser to a for-profit college group, writes to The New York Times to argue that the "'gainful employment' proposed regulations in all likelihood will hurt the predominantly lower income and minority students who are able to attend 'open admission' for-profit colleges." Davis also writes that "taking into account $1 billion a year of taxes they pay, for-profit colleges cost taxpayers substantially less than not-for-profits and public colleges."
- The Value of a Degree The "product" of college has "three components," writes Scholars & Rogues blogger The Other Sam: erudition, "extended packaged holidays" that allow adolescents to mature, and "degrees, which are distinct from education and are primarily designed to facilitate career progression." You can get a degree from a community college without the vacation and, possibly, erudition, and you can get an education without a degree. But the simple fact is that "many of the degrees that institutions now sell are junk, and the odds of ever recouping the costs of those degrees are not good." He thinks financial aid officers, like mortgage brokers, should at least be "obliged by law to warn you of the risk of your purchase."
- Return on Tuition Former political science professor Laura McKenna points out that The College Board's report "show[ing] the economic benefits of college" is somewhat misleading, because it doesn't show "the breakdown by private and public college. Does a $50,000 tuition education at Sarah Lawrence give you a better return than a state college?"
- How Government Loans Decreased the Return on Tuition for Students The Atlantic's Megan McArdle makes a striking point: "In the past, college degrees conferred higher incomes on those who earned them. But almost all of that surplus went to the student rather than the college," because "college tuition was constrained to what an average student, or their family, could pay." By "introducing subsidized loans," the government, bizarrely, allowed "colleges ... to claim more and more of the surplus created by [the] college degree" in the form of higher tuitions. The problem now is it's not clear how to solve this problem. "Switch[ing] to subsidies, instead of loans" might create a European-style system full of perpetual students and resource-"starved" universities.
- Subsidizing College Won't Give You a Bigger Middle Class "The government decides to try to increase the middle class by subsidizing things that middle class people have," argues Glenn Reynolds--college degrees, for example. His point is somewhat more philosophical, but strikes at the foundation of the entire debate.
... homeownership and college aren't causes of middle-class status, they're markers for possessing the kinds of traits--self-discipline, the ability to defer gratification, etc.--that let you enter, and stay, in the middle class. Subsidizing the markers doesn't produce the traits; if anything, it undermines them.
This article is from the archive of our partner The Wire.
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