Nick Gillespie makes many good points in his piece “Why Students (and Obama) Should STFU Already About College Costs.” Much of the media reporting on rising college costs is sensationalized. College is still a good investment for most students, and fewer people than ever are skipping college.
But that doesn’t mean the president or the public should STFU about a system that’s not working as well as it should.
First, some housekeeping: Gillespie writes that “Pell Grants have increased in size and scope. (Eighteen percent of families making between $60,000 and $80,000 get them, compared with just 2 percent in 2007.) All that free and reduced-price money is one of the main reasons why college costs outpace the general rate of inflation.”
It’s true that under Obama’s leadership, the maximum Pell Grant award was increased to $5,635 for the 2013–14 school year (up $905 over 2008) and that 50 percent more students qualified for it than did five years ago.
But “all that free and reduced-price money” can’t possibly be driving the increase in college costs—because Pell Grants cover less than they ever have. For the 1978–79 school year, the Pell Grant covered 77 percent of the cost of attending a public four-year college. For 2010–11, it covered 36 percent. Even after the increase, it will still cover a lower percentage of the cost of attendance than it has in the entire history of the program.
Hoping that 17-year-olds will “choose” smarter higher-education financing is a stupid way to try to ward off a student loan crisis.
Earlier this year, a report from the State Higher Education Executive Officers Association found that, adjusted for inflation, per-student state and local support for higher education was the lowest it had been in the 25 years tracked by the research. And guess what? The percentage of educational revenue derived from tuition went from 23.3 percent in 1987 to 47.0 percent in 2012. Tuition isn’t going up because of inefficiency; it’s going up because other funding is tanking. It’s about addition and subtraction, not complex ideas about incentives and moral hazard.
Public higher education, once viewed as a public good worthy of national investment, is deep into its march toward becoming just another consumer product. Now the student bears most of the expense and if the debt load worries her, well then it’s her fault for not majoring in petroleum engineering. That’s an insane approach to education policy.
The libertarian utopia where government subsidies for higher education are stripped away year after year and students benefit from more efficient, more affordable colleges already exists. In the University of California system, class sizes have been on the rise, and overcrowding makes it nearly impossible to graduate in four years from that system. A May survey from the American Institute of CPAs reports that 41 percent of student borrowers have delayed saving for retirement because of student loan payments, 40 percent have delayed car purchases, 29 percent have put off homeownership, and 15 percent have postponed marriage. The Wall Street Journal recently reported on the startups that will never exist because their would-be founders have too many student loans to take the risk.
If all that sounds great then, by all means, rip into the president for fighting for increased Pell Grant funding, more affordable student loans, and accountability that will strip federal funding from colleges that are signing students up for piles of debt that any financial planner could predict can lead to nothing but disaster.
Of course Gillespie blames the student: “None of this is to deny that some people get overwhelmed by student debt, often because they choose ridiculously expensive private schools that provide no boost in earnings for most students.”
He’s right about that: the student loan horror stories are mostly limited to for-profit colleges and expensive private colleges that lack the endowments to provide affordability for the middle class.
The problem is that we’re talking about adolescents: people with no financial knowledge making decisions in the midst of a dangerous cauldron of competitiveness and self-esteem-movement-instilled positive thinking. Very few teachers wander the halls of high schools grabbing students by the shoulders to inform them that, their dreams of stardom aside, they will probably never earn enough money to repay a $35,000 loan.
Hoping that 17-year-olds will “choose” smarter higher-education financing plans is a stupid way to try to ward off an ongoing student loan crisis. It’s never worked, and there is a 0 percent chance that it ever will work. Obama’s plan to rate colleges based on affordability and then use those rankings to target federal aid is smart, and he’s brave for pushing for it; you can tell it’s a good idea because the higher education establishment hates it. It’s still in the early stages, and the notion of colleges losing federal money because of low affordability ratings is a long way off. But the goal is to shift higher-education funding away from schools that make America worse and into schools that make America better. That’s revenue neutral, and conservatives and liberals and everyone else should love it.