A presidential election approaches and the giveaway bidding keeps rising. The two big ticket bids are “free college education” and “forgiveness of student loan debt.” These two issues are symptoms of a problem. They are not the problem. Too often in our culture we focus on symptoms and politicians pander with supposed solutions. That is why many problems are never solved. The real problem is a higher education system that is far too costly and ineffective in delivering quality outcomes efficiently.
Students and their parents sense that something is out of joint. Increasingly they are questioning the value proposition of the four-year college. (Actually, only 39% of students graduate in 4 years and only about 60% by year six.) The cost is too high. The rigor of the experience is questionable as everything outside of academics seems a priority on campus with socialization atop the list. The enhanced economic promise associated with the degree are diminishing. And the debt burden incurred can be stifling.
Higher education costs have skyrocketed. The quality of education has not improved in any way proportionate to the rise in cost. Government programs to make higher education affordable have in fact had the opposite effect – fueling rising costs. Much of the burden of that cost is placed on the shoulders of those ill prepared to complete college and ill prepared to pay back the debt burden.
The U.S. spends about $30,000 annually per student according to the Atlantic Magazine, about double the average of most developed countries. The Director for Education and Skills at the Organisation for Economic Co-operation and Development, Andreas Schleicher says in the Atlantic, “The U.S. is in a class of its own…Spending per student is exorbitant, and it has virtually no relationship to the value that students could possibly get in exchange.”
The national higher education finance system needs an intervention. I propose the transformation of the higher education finance system over the next ten years. The system would be transformed from its focus on subsidizing and supporting all students through grants and loans to one of direct block grants to states tied to improved outcomes and more efficient operations at pubic colleges. Tax incentives and the competition created by more effective and efficient public colleges would force private colleges to respond with increased access and affordability.
At a time when student debt is driving major economic and family formation decisions by young people a reassessment is underway of the value of the traditional four-year college pathway. Parents and students are looking at other options such as community college and vocational education, and very specific technical education such as coding boot camps. When only half of the 70% of high school graduates who begin college actually graduate a major reassessment of policy is due.
The timing is right for another reason. According to Demographics and the Demand for Higher Education, by Nathan D. Grawe, there are major demographic shifts occurring that will put increasing pressure on higher education. College age populations are decreasing and they are shifting North to South and East to West. The time is ripe for a major change in the way we deliver higher education.
According to Best Value Schools the cost of “higher education has surged more than 538% since 1985. In comparison, medical costs have jumped more than 286% while the consumer price index has jumped 121%. Meaning higher education is almost 4.5 times as expensive as it was 30 years ago.”
In more recent years, according to the College Board, costs since 2000 have risen 4% to 6% per year, double the inflation rate. At the same time, according to Forbes, salaries of recent college graduates decreased while debt burden increased.
Have those disproportionate cost increases improved the educational outcomes and earning potential of graduates, or improved worker productivity? The answer is no on all counts. According to the New York Times, “Since 2000, the growth in the wage gap between high school and college graduates has slowed to a halt; 25 percent of college graduates now earn no more than does the average high school graduate.”
According to the Bureau of Labor Statistics, less than one fifth of jobs require a four-year degree. That does not mean that high school students do not need further education. They do. But the emphasis on four-year degrees, is misguided for a variety of reasons. Fewer than 20 percent of American jobs actually require a bachelor’s degree. By 2026, the bureau estimates that this proportion will rise, but only to 25 percent. A study by Georgetown University indicates 63 percent of new jobs in the U.S. will require some sort of higher degree or meaningful certificate, not necessarily a four year degree.
According to the National Center for Education Statistics the 6-year graduation rate for full-time undergraduate students at a 4-year degree-granting institution is only 60 percent. “The 6-year graduation rate was 59 percent at public institutions, 66 percent at private nonprofit institutions, and 26 percent at private for-profit institutions.” The statistics are much worse when broken down by admissions policies. Those with open admission had a 32% graduation rate. The more selective the admission policy the higher the graduation rate.
We are sending too many high school graduates to college that are not prepared to be there. Worse, when they fail they often leave with a debt obligation they cannot pay. Sixty percent of students entering a community college require remedial classes because they cannot handle the most basic course work. There are other pathways that can provide better economic outcomes that should be developed and emphasized in technical and vocational education.
The federal government created higher education grant and loan programs in response to high inflation in the 1970s and early 1980s. Like so many programs there were unintended consequences. When inflation was tempered the programs were not ended. Rather, they were continued and expanded. The influx of grants and loans contributed to the inflation of higher education costs. Some studies indicate for every granted or loaned federal dollar the cost of higher education was inflated by 60 cents.
The default on student loans is over $75 billion with a trend line that gets worse. Indebtedness is causing changes in life decisions. Indebted graduates are delaying family formation and home purchases, and the psychological burden of beginning their adult lives is creating undue stress. The impact extends beyond the individual to the broader economy.
The time has come for another look at higher education funding. Not to increase the amount of federal dollars allocated necessarily, but to redirect the funding in a way to make it more effective in delivering greater access and outcomes with more effective and efficient delivery.
Democratic presidential candidates are making pronouncements of “free college for all,” “tuition free college,” “debt free college,” etc. There is little meat on the bones of these “proposals” and that which they have said has a very wide variety of meaning. Bernie Sanders probably has the most detail based on his proposed College for All Act but it too is very thin. Basically, he proposes taxation of Wall Street to pay for tuition. All of these programs are treating symptoms and failing to look at the underlying disease and movement toward a cure.
Sander’s proposal and others are largely about further subsidizing individuals with cash infusions to pay colleges and universities under the same system that has failed. They do not change how we deliver education, its priorities, effectiveness, or efficiency. It will end up only emboldening a fatted higher education system focused largely on the business of attracting customers (students) to increase revenues.
I propose looking back to the Land Grant college model in the Morrill Act of 1862 . The purpose was to expand the availability of higher education, but also to expand the focus to practical agriculture, science, military science, and engineering in addition to classical liberal arts education. In 1890 the Morrill Act was expanded to include the states of the confederacy with the same opportunities, but with additional requirements to advance Black opportunities. Many of the historically Black colleges of today were formed under this law.
The model was one of the federal government empowering the states with specific requirements and holding them to account. This model is more appropriate today. All student aid programs (grants and loan guarantees) would be eliminated. In their place would be state block grants with specific targeting and requirements placed on the state and its public higher education systems.
- Elimination of all federal student loan programs
- Elimination of federal Pell Grants, Federal Supplemental Educational Opportunity Grants, GI Bill, and all other direct subsidies of students.
- A refinancing program of all outstanding federal student loans that cuts the remaining balance on all loans by 25% and sets the rate for remaining obligation at 1% for 3 year loans, 2% for 5 year loans, 3% for 10 year loans, and 4% for 20 year loans.
- Creates a block grant program for state public colleges and universities that reduces the cost of vocational and community college education to zero for students that is open to all assessed able to do the work. Four-year public colleges and universities would have a sliding scale of cost to qualified students based on household income, major selected, and academic preparedness from $0 to $5000 per year. A rigorous array of performance standards of effectiveness and efficiency would be tied to the grants.
- Establish criteria for state block grants that includes requirements for funding linked to the percentage of students that are in-state and banning any funding to state public institutions that have student bodies less than 70% in-state.
- Incentive the creation of innovative models of intensive technical and vocational training in funding formulas.
- Banning any college or university from receiving federal or state funding that ranks in the bottom 5% of any one, bottom 10% of any two or bottom 20% of three of the following measurements: graduation rate, salary after attending, and rate of student loan repayment.
- Taxation of private college and university endowments by the federal government to subsidize the block grant program and state taxation of private college and university property on a sliding scale based on the percentage of enrolled and graduated students from low and middle income households.
A great deal of detail would have to be debated and compromises struck before such a bill could be enacted to transform the higher education system. But both Democratic and Republican members of Congress could find value in an opportunity to reshape the system.
To continue as we are today is a mistake and the pandering offers of greater and greater benefits to voters stressed and strapped by the current system will change nothing. We can do better.