Higher Ed and Presidential Campaigns: Incompatible Bedfellows? (Part 2)

Before we choose a solution, let’s identify the problem

In my last post, I considered at some length the pros and cons of tuition-free public higher education, as advocated by some candidates now campaigning to be the next president of our country. After all, the reasoning goes, free tuition has been a long-standing policy in the K-12 sector; why not higher education? Different candidates vary with respect to how generous they are prepared to be, with one advocating a means test and at least a token investment by the students and their families, whereas another wants simply to do away with tuition at public colleges for everyone.

Unfortunately, the candidates are not discussing what particular problem their policy is intended to solve. Surely, in order to be effective, solutions have to derive from a collective agreement on, and understanding of, what problem the solution is intended to remedy – and our presidential candidates appear to have skipped this step.

The presidential election is almost a year away, so we still have time to think more about the problem we want to address before we fall in love with a particular solution.

“Highly Affordable, Minimal Debt or Cost Containment?”

Our country seems to have two positions on higher education, and they are maddeningly incongruent. On the one hand, we embrace the notion that all children deserve to pursue their dreams to their best of their abilities, regardless of the circumstances of their birth. If those dreams include a college education, then we should see to it that the opportunity exists for them to attend college. Over many years, state-supported (i.e., public) universities and colleges have increased in number and size to accommodate a growing population of prospective students. Regrettably, most states have found in recent years that the rapidly increasing costs of supporting these public institutions have outstripped growth in tax revenues, and state appropriations to higher education have been cut drastically. These cuts have, in turn, led to sharp increases in tuition costs, as the public institutions have endeavored to replace lost state appropriation dollars with tuition dollars.

On the other hand, we want an effective and efficient expenditure of tax dollars in every aspect of the states’ budgets, and we are frustrated by the number of poorly prepared students who are entering higher education only to find they must do non-credit remedial work before they can enroll in college-level classes. Underprepared students drop out at disproportionately high rates, such that the six-year graduation rate at public universities hovers around the 50 percent level, and the three-year graduation rate at community colleges is generally less than 30 percent. No company could stay in business if it lost half its product during the manufacturing process. How, then, can we justify spending so much public money when we have such a huge dropout and failure rate at public colleges? (See, for example, “Billions in Pell Dollars Go to Students Who Never Graduate,” Hechinger Report, August 17, 2015.)

These two perspectives have converged in recent years, as tuition prices (and therefore student debt) have increased while graduation rates have not, and as we have struggled, as a nation, to emerge from a crippling recession with associated job loss and flat, or declining, family incomes.

But what problem do we, as a nation, want solved? Dramatically lower college costs? Relief from student debt (and do we mean relief for prospective students, or for graduates – or non-graduates – with existing debt)? Greater opportunities for low- and medium-income families to send their children to college? Higher college graduation rates? How do we address the concern that many children from low-income families have received a K-12 education that is inadequate to meet college admissions standards (see, for example, “Only 1 in 9 South Carolina 11th Graders ‘Ready” for Success in College, Scores Say,” The State, Oct. 22, 2015)? Are the colleges expected to remediate problems caused by the inadequacies of the K-12 sector? Isn’t asking colleges to make up for K-12 shortcomings just about the most expensive option available – and the one least likely to succeed?

Which of these problems does free tuition solve? Or perhaps we should be asking, what is our most important problem, and what options exist to solve it? Here are three ways of looking at the issue:

  1. As a nation, we need more of our young people to have a post-secondary education. Free tuition at public universities is the best way to increase the number of college graduates. Our highest priority should be to make a college education highly affordable. 

    The percentage of adults with a four-year degree has risen only marginally in the U.S. in the past 30 years, but has risen markedly in many other countries, to the point that we have long since lost our primacy in this metric, thereby handicapping our nation’s ability to compete economically on the world stage. While not everyone needs or wants a four-year degree, the proportion of students from the top quartile of family income that graduates from college is several times that of students from the bottom quartile – and this statistic has not changed significantly in decades. Therefore, if more Americans are to obtain a college degree in the future, the increase in enrollment will be primarily students from low-income families. To the extent that high cost is the reason for low rates of college attendance among students from low-income families, then free public college tuition may be a reasonable option. But is free public tuition the best way to increase rates of attendance of low- and middle-income families? Might the estimated $70 billion annual cost of free tuition at public colleges be better spent on increasing the size and number of Pell Grants, for example? (At a total cost of just over $30 billion, the Pell Grant program currently provides up to $5,775 annually to more than 9 million qualifying students – but the average grant meets only about 30 percent of the average costs at public institutions. Meeting full costs for Pell-eligible students would cost less than providing tuition-free public higher education for everyone, and it would direct the funds to students with demonstrated need.)

  1. Higher education is much more expensive today, in both absolute and relative terms, than at any time in the past. The consequence has been a dramatic increase in both the number of students graduating with debt, and in the amount of debt per student. High student debt slows down the national economy. Our highest priority should be to reduce student debt.

    We tend to see debt as inherently a bad thing. But Americans have long relied on borrowed money to acquire homes, and collectively we have several trillions of dollars in mortgage debt – but while we pay close attention to mortgage interest rates, we don’t worry much about the debt itself, because we see the investment value in buying a home. Student debt is a much more recent phenomenon, and the fact that it now totals $1.2 trillion has caused no end of hand wringing by politicians and the media. But in strictly economic terms, borrowing to receive a college degree is actually a better investment than borrowing to buy a house – the differential in earnings between college graduates and high school graduates is such that the average student loan can easily be repaid from the differential in monthly earnings, and still leave the college graduate ahead financially. And of course the ultimate irony is that Americans readily take out car loans to acquire commodities that, from day one, decline in value, whereas homes and college degrees are almost always investments that increase in value. Yet we are more concerned about the $1.2 trillion in student debt than we are the $1+ trillion in car loans – because the first is relatively new, whereas the second is a long-standing tradition. But to the extent that fear of debt deters some high school graduates from attending college, then free tuition at public universities may be sound policy. Of course, a Pell Grant program that met a higher proportion of actual need – or even full need – would be more efficient and less expensive, because the benefits would be limited to those students with actual need – but the most popular proposals from politicians are those where everyone receives a benefit. Will a politician who promotes a value for some receive support from those who do not benefit? Most politicians would like to avoid asking that question, and that is why they advocate for a chicken in every pot, not just in some pots.
  1. Free tuition at public universities would eliminate the problem of rapidly escalating higher education costs, because the public institutions would be forced to operate within whatever appropriation they receive, and private colleges would have to constrain their cost increases or risk becoming so much more expensive than the publics that they would lose enrollment. Our highest priority should be to constrain the growth of college operating budgets.

    Not many people are talking about it, but one consequence of free tuition at public universities would be that, over time, universities would have fewer dollars per student. It is inconceivable that state or federal appropriations to public universities would keep pace with the pressures that increase the operating costs of higher education institutions. To date, colleges and universities have been passing these cost drivers on to the students in the form of annual tuition increases. To be sure, many people would see the failure to increase state appropriations as a good thing, because there is widespread anger that colleges – public and private – have, in the mind of the public, done such a poor job of managing their costs. We continue to hear references to “frills,” and to a “country club atmosphere,” with climbing walls being the primary object of ridicule. (In actuality, the costs of climbing walls pale in comparison to the millions of dollars public universities transfer from tuition dollars to their athletics departments to support obscenely expensive Division I sports programs – but almost no one wants to see their football program go away, regardless of the cost. See, for example, “Small Crowds, Big Subsidy for UB Sports,” The Buffalo News, Nov. 28, 2015, that reports a $24 million annual transfer from student fees and general operating funds to the athletics budget of the University of Buffalo.) But in the spirit of “no good deed goes unpunished,” capping costs at public colleges would result in economies that few would wish to see – larger classes; fewer permanent faculty; more reliance on online instruction; more credit for work experience or credits earned in high school – all mechanisms that reduce the cost of a college degree by reducing its current value. Just as some states have increased high school graduation rates by weakening academic standards (thereby reducing the actual value and significance of the diploma), public colleges would be forced to follow suit. This isn’t the outcome intended by a policy of free tuition at public universities, of course, but it will almost certainly happen. Sadly, this is an outcome where everyone would suffer, and no one would benefit. The law of unintended consequences raises its ugly head once again.

So the bottom line is that the creation of tuition-free public universities would be an expensive and inefficient way of increasing college attendance of low- and middle-income students, and it would risk cheapening the value of a university degree. Increasing Pell Grants to a level where they cover most of the costs of a public university education is less expensive, more efficient (because this solution doesn’t subsidize high-income students that have no financial need), and it doesn’t risk dumbing down a college education.

Next week, Part 3: Is the primary purpose of college to prepare young people to get a good job, or is it for them to have a great life?