Tag Archives: student debt

Here’s Why Tuition Keeps Rising

Ice cream cake has a disturbingly short lifespan in my home. When one is nearby, I ruthlessly hunt it down and devour it. Some days, when I have biked to work or gone for a run, I easily convince myself that I deserve cake as a reward. But exercise does not cause my cake-eating. It simply provides a rationalization for what I was going to do anyway.

Silly as it may seem, my cake-eating habit is similar to colleges’ habit of regularly raising tuition. When there are declines in state funding or increases in faculty compensation or college aid budgets, colleges often feel justified in raising tuition. But colleges raise tuition regardless of what happened to state funding, faculty compensation, or financial aid budgets. Colleges raise tuition because they cannot or will not resist the temptation to do so.

 Bowen’s Five Laws

The best explanation for this tendency is provided Howard R. Bowen’s The Costs of Higher Education, which introduced the five laws of higher education costs:

  1. “The dominant goals of institutions are educational excellence, prestige, and influence.”
  2. “In quest of excellence, prestige, and influence, there is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational needs.”
  3. “Each institution raises all the money it can.”
  4. “Each institution spends all it raises.”
  5. “The cumulative effect of the preceding four laws is toward ever increasing expenditure.”

Conventional wisdom explains rising tuition by pointing to the combined effect of 1) declines in state funding, 2) increases in faculty compensation (Baumol’s cost disease), and 3) increases in college-funded scholarships and discounts (institutional aid). In contrast, Bowen’s Laws imply that colleges will increase tuition regardless of what happens to these costs and revenues. My new paper, using data from the Department of Education, finds that tuition is likely to increase by a substantial amount even if there is no change in state funding, faculty compensation, and institutional aid per student.

For instance, from 2001-2002 and 2002-2003, the typical change in tuition at public four-year colleges was $396. Statistical analysis indicates that if there was no change in state funding, faculty compensation, or institutional aid, tuition was still expected to increase by $327.  In other words, over 80 percent of the change in tuition would have happened regardless of changes in state funding, faculty compensation, or institutional aid. This finding contradicts the conventional wisdom, but is consistent with Bowen’s Laws.

Tuition Increases

Another piece of evidence that undermines conventional wisdom is the strong statistical evidence that changes in state funding, faculty compensation, and institutional aid do not have the presumed $1 for $1 relationship with tuition. At public four-year colleges, on average, tuition increases by $0.05 to $0.19 for every $1 decline in state funding per student, $0.07 to $0.40 for every $1 increase in faculty compensation per student, and $0.08 to $0.75 for every $1 increase in institutional aid per student. These estimates are generally far from the conventional wisdom’s presumed $1 impact for each.

Moreover, the statistical results indicate that the assumption of a $1 for $1 effect on tuition is not supported by the historical evidence. Using those more realistic estimates, on average, 75-91% of the change in tuition at public four-year colleges is left unexplained by changes in state funding, faculty compensation, and institutional aid.

An Irresistible Temptation

While Bowen’s Laws provide an accurate description of what colleges do regarding tuition (raise it), it does not answer the question of why colleges want to raise tuition. The answer to that question is that they want to spend more money, and they want to spend more because they are rewarded for spending more: They can recruit prize-winning faculty and top students, build better facilities, move up in college rankings, etc. But in order to spend more, they need to bring in more money, and one of the ways they can do that is by raising tuition.

This strange phenomenon stems from the dysfunctional nature of competition in higher education. The fundamental problem is that the quality of a college education is not known, which leads to two perverse side effects. First, without any measure of quality, colleges compete in a zero-sum game for relative standing based on reputation – a never-ending academic arms race. Second, as Bowen points out, without any measure of quality “it is easy to drift into the comfortable belief that increased expenditures will automatically produce commensurately greater outcomes.”

Trapped in an Arms Race

Thus, because educational quality is unknown, colleges continually attempt to increase spending under the belief that doing so will both improve their reputation and lead to better outcomes. But the goalposts are moving: their peers are increasing spending too. This academic competition puts enormous pressure on any revenue source, hence the phenomenal growth of fund-raising offices, the commercialization of research, and of course, skyrocketing tuition.

The moral of the story is that tuition increases because colleges are trapped in an endless academic arms race to spend as much as possible, and raising tuition is one tool that allows them to spend more than they otherwise could.

For each time period in the figure below, there are three bars with the same cumulative height equaling the change in tuition for that time period for the typical student (all values in these charts are enrollment weighted averages).

Change per student, 4-year public colleges

The first bar (dark blue) in each time period is the observed average increase in tuition during that time period (“Change in Tuition”). For example, in 2003, this value was $396.

The second bar for each time period consists of four components. The first three strictly enforce the conventional wisdom, meaning that tuition is assumed to increase by $1 for every $1 decrease in state funding per student (shown in the light red bar – “Change in Appropriations per Student*(-1)”), every $1 increase in faculty compensation per student (light blue – “Change in Faculty Compensation per Student”), and every $1 increase in institutional aid per student (light green – “Change in Institutional Aid per Student”).

The last component of the second bar (light purple – “(Assumed) Unexplained Change in Tuition”) indicates how much of the actual change in tuition is left unexplained, assuming the conventional wisdom is true. For example, in 2003, state funding per student fell by $302 per student, faculty compensation fell by $44 per student, and institutional aid increased by $35 per student. Assuming the conventional wisdom is true, this means that tuition should have increased by $293 (302-44+35 = 293). This leaves $103 of the $396 increase in tuition unexplained (396-293 = 103).

The third bar for each time period does not make any assumptions about the impact on tuition of changes in state funding, faculty compensation, or institutional aid. Rather it uses regression analysis to determine each factor’s correlation with tuition, which is then multiplied by that time period’s change in the variable to yield a more accurate estimate of the impact on tuition. For example, for 2003, the regression results indicates that a $1 decline in state funding per student is correlated with a $0.07 increase in tuition, so the impact of the change in state funding on tuition that year was $21 (the $302 decrease in state funding per student multiplied by the -0.07 correlation), shown in the red portion of the bar (“Impact of Change in Appropriations per Student”).

This same process is applied for the change in faculty compensation per student (blue – “Impact of Change in Fac Comp per Student”) and the change in institutional aid per student (green – “Impact of Change in Institutional Aid per Student”). The purple portion of the bar (“(Statistical) Unexplained Change in Tuition”) is the amount of the change in tuition that is left unexplained. In 2003, this was $368 out of the $396 change in tuition that year.

This figure clearly illustrates that there is strong evidence that changes in state funding, faculty compensation, and institutional aid are not able to adequately explain changes in tuition. The key evidence is the size of the light purple and purple components relative to the total change in tuition. Those bars indicate that a substantial portion of the change in tuition is unexplained even enforcing the assumption that the conventional wisdom is correct that changes in state funding, faculty compensation, and institutional aid all have a $1 for $1 effect on tuition.

On average, 25-33% of the change in tuition at public four-year colleges is still left unexplained even when assuming there is a $1 for $1 effect. The conventional wisdom does particularly poorly when state funding increases substantially (implying tuition should fall). For example, 99% of the change in tuition at public four-year colleges in 2006 is unexplained even after accounting for changes in state funding, faculty compensation and institutional aid.

For more details, see the full paper here.

A Close Look at Clinton’s Student Debt Plan

Nearly everyone recognizes that student debt has risen to a level that will be difficult to sustain in the future given the nation’s slow growing economy and the sagging incomes of too many college-educated Americans. Nearly 40 million Americans are carrying some form of student debt; more than 7 million are in default on their loans and many more have missed scheduled payments. Roughly 70 percent of all college students today are leaving school with debts owed to either the federal government or to private lenders, with the average debt per student now well in excess of $30,000. The total amount of outstanding student debt is estimated to be $1.2 trillion, with about two-thirds of this sum underwritten by the federal government.

It is not difficult to figure out the reasons for exploding student debt. On the one hand, high-school graduates and their parents understand that a college education is essential for entry into the narrowing world of high paying professional jobs. College and university enrollments increased by more than a third between 2000 and 2014, from 15 million to more than 21 million students. At the same time, college tuition and fees have been growing at more than three times the rate of inflation for three decades now and at more than twice the growth in the median family income over the same period. In 2015, the average tuition (plus fees) for in state students at public universities is in the neighborhood of $10,000 per year and over $40,000 per year for students attending private universities. A fair amount of careful research suggests that these soaring costs are partly attributable to the increasing availability of loans encouraged by federal policy.

Hillary Clinton’s new $350 billion (over ten years) proposal takes aim at this vast constituency of voters currently paying off student loans or worried about the costs of taking them on. She says that her proposal will enable most students to meet college expenses without taking on loans, a claim that is surely exaggerated in view of the scale and scope of her plan.  At best it is a proposal to mitigate the problem somewhat by permitting borrowers to reduce interest rates on current loans and to use the carrot of federal funds to force states to invest more public funds in higher education.

There are three major parts to her plan:

First, (borrowing an idea from Sen. Elizabeth Warren) she wants to allow borrowers locked into loans at high rates of interest to refinance those loans at current federal rates for student loans, much as people are allowed to refinance their home mortgages when interest rates fall.  Federally subsidized student loans are given at fixed rates (set by Congress), generally for a period of up to 25 years.  The current interest rate (as of 2014) on federal loans is about 3.9 percent, down from 6.8 percent charged a decade ago. That reduction would save a typical borrower carrying a loan of $20,000 or $30,000 between $500 and $1,000 per year.

It is hard to find fault with her proposal, at least in the abstract. Many Democrats and even some Republicans are sympathetic to it as a means of providing some relief for overburdened borrowers. Still, there is less here than meets the eye. Private lenders have long offered variable rate loans that move up and down with interest rates. In addition, borrowers have long been able to refinance their student loans through private lenders, which is already a common practice.

Mrs. Clinton’s plan would allow borrowers carrying federal loans to do so through the federal system rather than through private lenders. This may be a step in the right direction, but it is a very short step when one considers the options already available.  Further, her proposal carries an estimated cost of between $60 and $100 billion per year to the federal government, depending upon where interest rates happen to be and how many borrowers take advantage of the plan. This is one of the sticking points: Congress is reluctant to appropriate such funds in a time of deficits, rising entitlement costs, and generally tight budgets.

Second, she proposes to establish an income-based repayment system so that borrowers will never have to pay more than 10 percent of their income on student loans (the standard in the past was 15 percent) with the possibility of loan forgiveness after twenty years of faithful payments.

This is also a reasonable but modest proposal, and one that has been endorsed by other national leaders, including her fellow presidential candidate Republican Sen. Marco Rubio. One problem with it is that the Obama Administration, following the advice of a task force led by Vice President Biden, has already implemented most of it under a law that took effect in 2014. Under that law, borrowers choosing an income-based repayment plan will pay no more than 10 percent of their income toward student loans and those who faithfully repay their loans for twenty years are eligible to have the remainder of their debt forgiven (those who work in public service for ten years can have the remainder of their loans forgiven after ten years). Mrs. Clinton’s proposal “tweaks” current policy at the margins by consolidating existing income based repaying programs into a single plan, but it does not significantly add to it.

There is another problem with income-repayment schemes that is now beginning to emerge. The Financial Times reported last week that Moody’s Investors Service is reviewing the credit worthiness of some student-loan-backed bonds in response to falling repayment rates on loans.  Moody’s review was triggered by wider use of income-based repayment plans which allow borrowers to repay loans more slowly, creating the possibility that bonds may reach maturity before the underlying loans have been repaid.  This could lead to defaults, even if the debt is backed by a government guarantee.  Such concerns have led to a doubling of the yield on Triple-A rated bonds in recent months and to the possibility that Moody’s might downgrade its ratings on those bonds. As the FT reports in its article, “sharp downgrades could spur an exit from the sector by investors banned from buying low rated debt.” This would drive prices down and interest rates higher on those bonds, which in turn could lead to higher interest rates for new borrowers, and perhaps even to an exit from the sector by private lenders.

Third, Mrs. Clinton proposes to spend $175 billion over ten years to encourage (bribe) state governments to invest more resources in higher education so that tuition charges can be reduced at four-year institutions and eliminated entirely for two-year community colleges.  Under her plan, the Department of Education would make funds available to match state budget allocations for higher education and to reward states that keep a lid on tuition increases.  She would also expand work-study programs to permit more students to work off college expenses during their student years. The combined federal and state funds, perhaps as much as $35 billion per year across the country, she claims, would allow states to maintain tuition at affordable levels for students so that loans would be unnecessary. This is, as already noted, an exaggerated claim. An additional point worth emphasizing:  she is not making tuition “free,” but rather substituting taxpayer funds for student-paid tuition.

Total tuition charges at public institutions across the country in 2012-13 amounted to something like $300 billion, plus expenses for fees, books, room, and board. A mix of federal, state, and private scholarships subsidizes a significant portion of this sum. The federal government, for example, spends about $30 billion per year on Pell grants to support tuition and other expenses for more than 9 million students from lower-income families. Mrs. Clinton’s contribution of $17.5 billion in federal funds per annum would make a dent in this package but it is hard to see how it will ever allow reductions in tuition and fees to levels that would allow students to dispense with loans.

Appropriations for higher education in states across the country have fallen off by an average of 16 percent since the onset of the financial crisis in 2008.   Mrs. Clinton, along with the liberal think tanks associated with the Democratic Party, claims that this is a major cause of tuition increases at public universities and thus a major source of the student debt crisis.   This is another exaggerated claim:  student debt was accumulating for years and decades prior to the financial crisis due to rising college costs and the wide availability of federally subsidized loans.   The financial crisis made many problems worse across the country, including the student debt problem, because it provoked a budget crisis for state governments that extended to all publicly funded programs.

Mrs. Clinton and her advisors might ask themselves why so many states found it necessary to cut appropriations for higher education in the years following the financial crisis.  The major reason was that governors and legislators had other priorities, among them paying for public employee pensions, meeting federal mandates to pay for Medicaid, welfare, and K-12 education, and finding revenues to meet law enforcement and transportation budgets.  Medicaid for years has been the fastest growing item in state budgets, followed by spending on K-12 education. Together these two items now claim close to half of all state expenditures across the country.   In ramping up spending on these two items, governors and legislators have necessarily taken into account the carrots (matching funds) and sticks (mandates and court orders) of federal policy.   In view of federal policies and the hard-nosed politics in play in the states, it is not hard to understand why higher education has been squeezed out in the keen competition for state funds.

Mrs. Clinton would now hold out federal dollars to induce states to appropriate more funds for higher education, just as the federal government already does with Medicaid, welfare, K-12 education, and transportation projects. Her proposal would compel governors and legislators either to raise taxes to cover those added expenditures or to cut budgets in other areas — or, alternatively, to dispense with the federal funds altogether.  The federal government has contributed to the budget crises in the states through its mandates and matching programs, and Mrs. Clinton now proposes to address that problem by adding still another mandate and matching program.  This will only make a difficult problem worse, especially when the next recession intensifies the scramble among interest groups for scarce public funds.

Mrs. Clinton’s plan is undoubtedly one of the more inefficient ways through which we might address the student-debt problem.  The major problem in higher education today is one of cost and expense, and only secondarily who pays for it (students or governments).  American colleges and universities are highly inefficient enterprises that maintain scores of useless, duplicative, out-of-date, and politically correct programs for no other reason than that there are interest groups on campus that would protest if any of them were eliminated.  Too many universities maintain masters and doctoral programs in fields for which graduates have no hope of finding jobs.

This is also true of many undergraduate programs currently in place.  Most of those programs should be eliminated in the service both of long-run efficiency and educational integrity.  Ideally, this kind of streamlining should take place state-by-state and campus-by-campus as governors, legislators, and academic leaders grapple with priorities and limited resources.  It is a nagging problem that academic leaders, particularly in public institutions, should begin to address.  Yet Mrs. Clinton’s plan would encourage them to put off the day of reckoning in the hope that all programs can be maintained with still another infusion of federal funds.

Mrs. Clinton proposes to pay for this program by (no surprise here) eliminating tax breaks and loopholes for the wealthy. Her main target is the charitable deduction, which (like President Obama) she proposes to cap at 28 percent for taxpayers in the highest- income brackets (individuals earning more than $200,000 per year and couples more than $250,000). President Obama, who has included this proposal in his annual budget proposals for the past five years, estimates that such a measure would bring in an additional $320 billion to the U.S. Treasury over eight years (another dubious claim). Ironically, in proposing such a measure, Mrs. Clinton is likely to provoke opposition from academic leaders who rely upon generous contributions from wealthy donors to fund scholarships, new buildings, and important research programs.

Mrs. Clinton’s approach is a typical kind of Democratic plan that relies upon subsidies, higher taxes and more spending, and cost-shifting among participants in the higher-education industry.  It will do little or nothing to encourage restructuring or cost-cutting among institutions of higher learning.  It stands in contrast to the approach taken by Sen. Rubio, who proposes to overturn the accreditation system to allow more participants into the industry, thereby encouraging competition among providers and eventually lower costs to consumers. This is the kind of debate we should have over the future of higher education – between those who wish to prop up the current system and those who propose to introduce competition into the industry as a means to restructure and reorganize it. If it does any good, then Mrs. Clinton’s proposal may provoke such a debate.

A Conservative Path to Higher Ed Reform

This is an edited transcript of comments delivered by Mr. Kelly at the 2015 Lynde and Harry Bradley Foundation Symposium on “The Future of Higher Education” June 3 in Washington D.C.The event was co-sponsored by the Ethics and Public Policy Center and National Affairs. You can read the full transcript of the symposium here.

Three trends are complicating reform of higher education.

First, tuition has been trouncing family incomes and has grown faster than just about every other good or service in the economy as well.

Second, the wages recent college graduates earn have been flat or declining for quite a while. This is important because it means that people are paying more for a degree that in absolute terms is actually not worth as much as it used to be. It is worse for people who have some college and no degree. They earn even less. They look a lot like high school graduates these days.

The problem is we have a lot of dropouts, as anybody who has looked at graduation rates can attest. So if you started at a two-year public, just 40% of students finish with some kind of credential — associate’s degree, bachelor’s degree, certificate – within six years. This is for the 2008 cohort, the most recent data available. It is from the National Student Clearinghouse.

It is not much better at four-year publics. It is higher, but we still have a little less than 40% of people who are not finishing or credentialed within six years and again, taking on debt.

You add up trend one and trend two and you have a lot of struggling borrowers. These are numbers from the Consumer Financial Protection Bureau in 2013. They looked at who was actively repaying their loans when payment was due. And essentially, what happens is people who are in school or in the grace period don’t have to repay. But if we include them all on the denominator then actually the rate of default or forbearance looks better than it actually is. But if you look — I mean, 40% of people were not actively repaying down their loans in this latest cohort.

We have trend one, we have trend two, and we usually stop there. And we start asking, is college worth it? And then based on the cost and returns many people have concluded no, it is no longer worth it. It is too expensive and you don’t get much for it.

But this is where the third trend comes in–that high-school graduates have had it even worse than college graduates have. Their job prospects have dimmed considerably since the 1970s, in large part due to hollowing out of middle-skill jobs and manufacturing.

The wage premium attached to college is down, but the wage premium between earnings of a college graduate and the earnings of a high-school graduate have actually increased over time. The same is true for associate’s degrees.

This sets up what I call the college conundrum: that some education after high school — associate’s degrees, certificates, technical training, some kind of education post-high school — has become more important to economic mobility, but it is also more expensive than ever before, and it is also riskier than before because it is both more expensive, and completion rates have actually declined over time.

This creates what I call the Enterprise Rent-A-Car problem. If you’ve watched college sports on TV, you’ve seen the commercials. Enterprise prides itself on hiring college graduates. And during college games, they profile former athletes who work and run their rental-car counters. So some of us see that, and I myself say, gosh, four years of college to run a rental car counter? College isn’t worth it any more, is it?

But for some parents, particularly in middle-income and working-class families, it is a much more terrifying proposition: my kids can’t even work at Enterprise Rent-A-Car if they don’t go to college.

And so harping on the fact that too many kids are going to college, I think, is tone-deaf. Tone-deaf to the anxieties of the middle class. And this is why it is a defining middle-class issue. People feel trapped. They can’t afford to go to college and they can’t afford not to; the cost of both have increased.

How did we get here? I’ll march through four problems quickly. The first is that we have a third-party-payer system and easy credit.

So federal aid, student aid programs started out with a noble purpose. There were poor people who could benefit from higher education but couldn’t get access to it because they faced financial barriers. It was targeted, it was need based.

This has now turned into a large entitlement for anybody with a high school diploma and, in fact, for parents of anybody who attends college. In the 1970’s we made upper- and middle-class and then eventually upper-income families eligible for federal loans. They used to be need-based then we sort of opened the floodgates in the late 70s. That is why you see that increase in tuition among private colleges in the early 80s.

In the 1980s, we opened up the loan program to parents. In the 1990s, we made that parent-loan program; we took away the annual limits on how much you could borrow. Now you can get unlimited borrowing up to the cost of attendance. As long as you have a kid in college, you can borrow money to defray the costs.

In the 1990s, we created a host of tax benefits that disproportionately benefit upper-income families. And then in the 2000s we created a federal graduate student-loan program that allows, again, graduate students to borrow up to the cost of attendance unlimited amounts. If you continue to enroll in graduate school, you can borrow as much as you want.

As somebody who took eight years to finish my Ph.D., I know that the incentive is not there to really finish your studies as quickly if you have access to these credit programs.

I think it is really important, though, to distinguish here for the purposes of thinking about tuition inflation and the perverse incentives between programs here. So I think it is important to focus in particular on the loan program. And within the loan programs on the parent-plus and grad-plus programs which have unlimited borrowing up to the cost of attendance.

Stafford loans for dependent students: you can only borrow up to $31,000 over the course of your career, which is a substantial sum of money.

So we spent a lot, particularly over the past decade or so. The Obama administration has both increased the size of the Pell Grant program, spent a lot more on it, and increased the size of federal tax benefits. And people are borrowing a lot more.

A lot of this has to do with the bump in enrollment. More people are going to college. But we are also spending more per person in federal aid.

Here is what we have to show for it over that decade: the net price of attendance for middle-income families has gone up considerably. This is the net price as a percentage of your income. So if you are a middle-income family with a son or daughter attending a private four-year college, you’re paying nearly 40% of your income after taking account of grants and scholarships; public doesn’t look much better.

What is the theory of action here? As far as I can tell, it is subsidize, watch tuition rise and subsidize some more. It’s like trying to bail out a boat with a Dixie cup. So pouring money into a system with misaligned incentives is not going to change the incentives.

Problem number two: we have inadequate quality assurance. There is almost no underwriting on federal loans. You get the same terms whether you are going to Harvard, Joe’s Barber College, or Jay’s Technical School. So lots of federal money flows to bad colleges.

This is from a study that I did where I looked at where student-loan dollars for undergrads went according to the school’s graduation rate. So 37% of our loan disbursements go to places that have graduation rates under 40%.

The regulatory triad, which is the three-pronged approach to regulating higher-ed — that is the federal government, accreditation agencies, and state governments –, is an ineffective gatekeeper when it comes to eligibility for federal aid. It also has a bunch of other problems.

The main rule that the federal government has to hold schools accountable is called the Cohort Default Rate. It says that if more than 40% of your students default on their loans within three years after they stop attending, whether they graduate or not, then you are kicked out of the program.

I said this to an audience of finance people in New York and they like could not contain their laughter. A 40% default rate on a financial product is unheard of. But as long as you are below the threshold and as long as people don’t default within that three-year window you are held harmless. So just eight institutions were subject to sanction in 2011. We don’t know whether they were actually sanctioned. It is really hard to find any kind of information on that.

Accreditation plays a role here—this is essentially a process of peer review. It is built on a conflict of interest. Faculty from the neighboring college down the street come and review your programs and say hey, you look a lot like us and this looks great, you know, you are approved. Terrific. So no surprise, the GAO did a study of this, they found that only eight percent of schools were sanctioned and just one percent lost their accreditation.

We know there are a lot of bad colleges. We know that there are more than one percent. Bad colleges maintain access to federal aid.

Problem number three, we have imperfect consumer information. In the Atlantic, a friend and colleague of mine said, wouldn’t it be great if we had a nutrition-facts approach to college? It would just warn you, if you are going to take on a lot of debt, you are not going to earn anything, and you are not going to graduate, just be careful.

So limited ability to judge cost and quality blunts market discipline. People can’t effectively vote with their feet. Colleges can promise you all sort of things. You have no way to validate whether their promises are accurate and you continue to invest in bad programs.

Problem four–a big one–is that the existing system creates barriers to entry, not allowing competitors in to offer a better product at a lower price.

So right now, thanks to advances in technology, colleges are moving from a logic of scarcity to one of abundance. In the past it made sense to bundle things together, because smart people were scarce and books were scarce and talented students were scarce, so we brought them all together in one place on one campus. And we rationed access to that; we couldn’t have everybody coming in.

But thanks to advances in technology, Proctor U will allow you to take an exam from your own house. It will monitor whether you are cheating or not. It will make sure you are not sort of looking up the answers on the internet. Mozilla Open Badges, anybody can go on there and create an open badge with assessments attached to it that says you have completed this task and here are the skills they proved in completing it; EdX and Udacity, two of the massive open online course providers; and then General Assembly, which is not online at all, it is an in-person immersive set of courses on web development and different kinds of professions. All these things are operating on the periphery. But guess what, the accreditation system keeps new entrants out, acts as a moat; it just says, nope, sorry, you are not coming in here. You don’t look like a college. You haven’t attracted enough students for us to approve you. You don’t award degrees. If you don’t award degrees you can’t get degrees or certificates, can’t be accredited.

So what happens is accredited schools can get access to federal aid, these guys can’t, so if you are a student and you are choosing between paying out of pocket for something versus paying nothing, getting a free education at the community college down the street, you are often going to choose the free option.

Faced with these problems, what has been the progressive response? It has been more of the same tired answer. Now we’ve moved on to expanding income base for payment programs and loan forgiveness. This is one of my favorites; this is one of those companies that advertises that you pay them and they help you access federal programs that you are entitled to anyway.

But this is what’s happened. So income-base for payments says if you qualify to pay your loan payments to your income, you are going to pay 10% of your income and then after 20 years we are going to forgive your loans. If you go into the public sector, we will forgive your loans after ten years. And public sector by the way includes non-profits like my own and others; so very loose definition of public-sector forgiveness.

The best part is this: guess who is eligible for loan forgiveness and income- based payment–graduate students who have access to unlimited borrowing. So graduate-school tuition goes through the roof. And, as taxpayers, we start paying for all that loan forgiveness.

Loan refinancing, Elizabeth Warren’s proposal, would allow everybody to refinance at lower rates—a massive, inefficient program that would not target the money to the borrowers who need help the most.

There has been a repeated call for increased state spending, also progressive responses to regulate more. The Obama administration spent a long time trying to regulate colleges more heavily with gainful employment first of all for the for-profit colleges and college ratings.

And now people hear about the free-college proposal and they say oh, that is free college and what does that have to do with regulation? Well if you read it carefully and you read the ideas carefully you see this is a move away from a market where people can take their voucher to any provider they want, public, private, for-profit and a move to direct federal control, direct federal funding of institutions. Conservative reformers need to resist this wholeheartedly.

So what can we do? So four solutions I’ll zip through them quickly.

We need to give colleges a great stake in student success. We do this by giving colleges skin in the game.

Colleges essentially originate loans. You can’t get a student loan unless you are affiliated with a college and you enroll there, but they bear none of the risk if you fail. Only if you get near that threshold do you bear any of that risk.

This proposal would put colleges on the hook for a share of the loans their students aren’t repaying. They’d have to think twice about enrolling people they know that are not going to be successful. They have to think about offering a lot of programs that are not going to lead to good jobs. It sets a basic standard, but colleges have the flexibility to make it. It is not a top-down regulatory approach that says you have to do the following things to improve. It says we are going to hold you to this standard and you are going to have to get there.

We need power consumers with better data on costs, outcome and value. Those are public goods in my opinion. They help the market work. They help serve taxpayer interests and family interests. So in my opinion the feds are sui generis in their ability to collect these data. States could try, but in terms of return on investment and how do people fare in the labor market. States can collect some of it. And some of them are doing it. But they can’t follow people across state lines. So it’s an inefficient approach.

And you can prevent misuse by legislating prohibitions. And I think the key here is to collect these data, open it up to a set of third parties that can make lots of customized rankings and ratings, actually measure what colleges do, not just the selectivity of their admissions process. That is how we rank colleges now. We say, oh, how good were the undergraduates that you brought in? How good are your inputs?

Three, we need to lower barriers to entry. We have an opportunity to redefine what education looks like, who can offer it. We’ve done this a lot in the past. We created land-grant colleges, community colleges, research universities. We’ve been through rounds of reinvention and the problem right now is we are just showing a tremendous lack of imagination as a policymaking community.

My idea is to create a parallel path. Think about the charter school movement. Charter school policy allows new entrants into the markets to offer the same product. The horse trade would apply there too; organizations that want access to this new pathway would get more flexibility about how they offer education in return for transparency and accountability.

And then last, we need to create space for private financing. The idea that we’ve proposed before is what is called an income-share agreement where investors would front the money for education in return for a fixed percentage of somebody’s future income over a fixed period of time.

What does that do? Well, it aligns the incentives of the lenders or the funders with the incentive of the students. The funders only reap a return if the students are successful. So the funders are going to help people navigate toward programs that are likely to lead to a positive return on investment and so on.

But critically, we need to resolve important regulatory and legal questions around the enforceability of these contracts and where would it be, which institution would regulate at the federal level so there is a federal role here for policymakers. So those are four big ideas. I look forward to discussing them.

Andrew Kelly is a resident scholar in education policy studies and the director of the Center on Higher Education Reform at the American Enterprise Institute (AEI). 

Federal Meddling Costs Vanderbilt $150 Million a Year

A study by Vanderbilt suggests that the university spent $150 million complying with federal regulations during 2013-14.  Although the details of how Vanderbilt arrived at these alarmingly figures have yet to be released, they should nonetheless be viewed as additional validation that the federal government’s overweening supervision of higher education is making college less affordable for students and their families. Most people would likely agree that making college more affordable is a good objective and the best way to achieve this is to get the government out of the higher-education business altogether.

Growth of Federal Regulations

According to the Mercatus Center’s RegData, the number of restrictions or obligations placed on colleges and universities by federal regulations increased from around 430,000 in 1997 to nearly 583,000 in 2012, an increase of more than 35 percent. This makes higher education one of the most heavily regulated sectors of the economy –only insurance brokers, architects and engineers, and oil and gas extractors face more regulatory burdens and obligations.

A recent report of the Task Force on Federal Regulation of Higher Education, prepared by the American Council on Education, suggests that the Department of Education (DOE) has been engaged in regulatory overreach, as many of the regulations that it has imposed have been executed by fiat. In 2010 for instance, DOE by its own volition mandated that a credit hour be universally defined by seat time.

The department also controversially altered the gainful employment regulation governing vocational programs in 2011, a rule that was struck down by a federal court as arbitrary before it went into effect. Despite the early judiciary setback and the House of Representatives’ staunch disapproval of further regulation, the DOE pressed on with its aggressive regulatory agenda and in 2014 passed a nearly 950-page gainful-employment rule.

The federal government also increasingly imposes regulations on colleges and universities virtually unrelated to educating students, protecting them or providing accountability for the proper use of taxpayer dollars. The Task Force report highlights several regulations of this sort, such as burdening colleges with verification that males are registered with the selective service, distributing voter registration forms, and informing students about laws concerning illegal filing sharing.

DOE also increasingly acts as an unconstrained and unaccountable rule-making body, imposing regulations through sub-regulatory guidance–a process that not only lacks Congressional approval but is also executed without a public-comment period. Such regulations are often enacted through “Dear Colleague” letters or emails. The DOE issued 270 of these letters in 2012, about one per working day.

Costs of Regulation

Vanderbilt is not the only institution that has attempted to estimate its cost of regulatory compliance. Stanford University estimated that it spent $29 million to comply with regulations in 1997. Hartwick College estimated that is spent nearly $300,000 to comply with regulations in 2011-12. Although the cost estimates differ substantially, all three of these institutional studies suggest that regulatory compliance costs amounted to 7-11 percent of their annual expenditures.

Among the 7,022 colleges and universities with expenditure data in IPEDS, the average institution spent $72 million in 2013-14. Conservatively assuming that regulatory compliance amounts to 5 percent of expenditures, the average institution spent $3.6 million to comply with regulations, putting the total regulatory cost of the sector at $25.3 billion.

Let’s put this back-of-the envelope estimate of the regulatory costs in perspective. The total cost burden is equivalent to the size of the economy in Vermont or Equatorial Guinea. These costs significantly affect each student, amounting to about $1,200 per student, or approximately 15% and 9% of the mean enrollment-weighted tuition fees set by public and private 4-year instructions, respectively.

Making College More Affordable

Federal red tape imposes real costs on colleges. The burden of these costs is almost assuredly passed on directly to students in the form of higher tuition fees, given that most economists believe the demand for college education is relatively inelastic, meaning that consumers are not very responsive to price increases.

Growing awareness of this alarming trend is likely to prompt people to point fingers at the DOE, as discussions grow louder over college costs. Indeed, the Task Force report cited above is a step in this direction, calling for greater constraints to be placed on the Department of Education, more transparency in the regulatory process, and a reduction in regulatory burden. Such reforms, which would be an improvement over the existing system, do not address the root of the problem and are akin to rearranging the deck furniture on the Titanic.

A significant amount of the regulatory burden is tied, either directly or indirectly, to the federal student aid programs. Indeed, the growth of higher education regulations has accompanied the growth of federal financing of student tuition. According to the College Board, real total federal aid expenditures amounted to $60 billion in 1997-98, a figure that nearly tripled by 2012-13, reaching $171 billion. The Mercatus regulatory data mentioned above suggests that the number of higher education regulations increased by 35% over this time period.

Colleges love the flow of taxpayer money stemming from the federal student aid programs, but they hate the strings attached in the form of regulations. Lying in bed with the beast is hardly cost-free. And colleges have certainly not been saintly stewards of taxpayer money. A recent report from the Federal Reserve Bank of New York is the latest study to provide evidence in favor of the Bennett Hypothesis (named for former Secretary of Education William Bennett) that federal student aid incentivizes colleges to raise tuition.

The only viable long-term solution to make college affordable is to get the federal government out of financing higher education and allow the free market to do its work. This will reduce the justification for regulating colleges, reducing these costs. It will also reduce the perverse incentives for colleges to increase tuition to capture more revenues. Additionally, it will create a more competitive and innovative higher education sector, making college more affordable for millions of students.

We Have Too Many Colleges, So Cut Federal Funding

We have clearly oversold higher education. Through subsidies and political hype, we have prodded huge numbers of students to flock into colleges and universities. Naturally, those institutions also expanded in number and in the volume of students.

Now that it is becoming evident that a college degree isn’t necessarily a good investment and for many is a terrible waste of time and money, many schools are struggling, causing Washington Post writer Jeffrey Selingo to write a July 20 column, “How many colleges and universities do we really need?”

Selingo correctly observes, “At too many colleges attended by the vast majority of American students, costs are spiraling out of control and quality is declining.”

That’s right. As we’ve poured more and more government money into college “access,” schools have pocketed much of the money and gone on a spending spree – and then increased their tuition and fees, leading politicians to cry that they must increase student aid more to keep higher education “affordable.”

And it’s true that quality has declined.  A high percentage of today’s students (*far higher than, say 40 years ago) are academically weak and disengaged. To accommodate such students, most schools have lowered their academic standards and allowed the curriculum to degenerate into a hodge-podge of trendy, often frivolous courses.

I agree with Selingo’s diagnosis, but not his proposed cure. He writes, “What we need is a federal commission similar to those that have been tasked with closing military bases over the years. In the case of higher education, this commission wouldn’t just recommend colleges for closure, but it also could identify where mergers or alliances could produce the best solution for clusters of struggling institutions.”

That is a bad idea. Federal political meddling is the very reason why we have the problems we do. Looking to still more of it to solve those problems is extremely naïve.

The main problem is that the analogy to closing military bases is a poor one. We had quite a few bases that were unnecessary. But while quite a few public colleges and universities suffer from low graduation rates and job placement overall, it is often the case that some parts of those schools are worthwhile. A college’s English major might be a joke but its biology major academically solid. Swinging a political – and a federal commission will certainly be highly political – is apt to chop away the good with the bad.

Selingo does suggest that the commission doesn’t just have to close schools, but could also recommend mergers and alliances. Fine, but school administrators can and have been doing that. Why expect better results from appointed commissioners than from school officials who have more direct knowledge and stronger incentives to make good decisions?

Instead of a top-down solution, we need a bottom-up solution. We’ll continue to have enormous waste and inefficiency as long as the federal faucet keeps pouring easy money into higher education. Shut off the faucet and then the invisible hand of market competition will get busy.

The weakest students will stop enrolling without the subsidies. When they stop showing up, administrators will have to prune away the worst majors and departments that cannot be sustained. Cost-saving mergers and alliances will be more avidly explored, but administrators who are best positioned to assess the pros and cons.

A doctor knows to always look for the root cause of an ailment and to deal with it – not just ameliorate the symptoms. With higher education in America, the root cause is the fact that easy money has terribly distorted the decisions of both students and school officials.  We must deal with that.

Federal Aid Drives up College Costs, Study Finds

The federal government is now admitting that its own financial aid is partly to blame for rising tuition, reports Blake Neff in The Daily Caller:

A new report by the Federal Reserve Bank of New York has found that the massive investment in grants and student loans by the federal government is a major contributor to the unbridled growth in the cost of attending college.

College tuition rates have consistently risen faster than inflation for some 25 years. One theory for the rise, dubbed the “Bennett hypothesis,” was put forward by Ronald Reagan secretary of education William Bennett, who argued that hikes in government student aid simply gave colleges a free pass to hike tuition.

Now, the New York Fed’s research suggests there’s some merit to the idea, and that it means the government could be spending billions on education to no effect.

“While one would expect a student aid expansion to benefit recipients, the subsidized loan expansion could have been to their detriment, on net, because of the sizable and offsetting tuition effect,” the paper concludes.

On average, the report finds, each additional dollar in government financial aid translated to a tuition hike of about 65 cents. That indicates that the biggest direct beneficiaries of federal aid are schools, rather than the students hoping to attend them.

As Neff notes, this finding is consistent with some earlier studies on the subject, such as a 2012 paper by Harvard and George Washington University economists, and a 2007 paper that found that higher Pell Grants drove up tuition at private schools as well as out-of-state tuition for public schools.

Earlier, Andrew Gillen, research director of the Center for College Affordability and Productivity, also reached the conclusion that federal financial aid fuels college tuition increases. In a colloquy on Gillen’s research, I concurred in this conclusion, while also noting that increased federal regulation has also fueled tuition increases—as have rules and red tape imposed by states and accreditation agencies. (A recent report by college presidents notes that under the Obama administration, the Education Department has flooded the nation’s schools with new rules that have never been properly vetted or codified, in violation of the Administrative Procedure Act.)

Education analyst Neal McCluskey of the Cato Institute cited four additional studies showing that increased government spending on student aid results in large tuition increases.

In 2011, Virginia Postrel wrote at Bloomberg News about how federal subsidies intended to make college more affordable have instead encouraged rapidly rising tuitions.

By subsidizing college, federal financial aid diverts young people away from vocational training that receives fewer subsidies but can lead to jobs with better pay and more value for America’s economy. In City Journal, Joel Kotkin described the increasing demand (and correspondingly attractive pay) for workers in manufacturing, who often need vocational training rather than college educations.

Yet states spend billions of dollars operating colleges that are little better than diploma mills in terms of academic rigor, yet manage to graduate few of their students—like Chicago State University, “which has just a 12.8 percent six-year graduation rate.” “Our colleges and universities are full to the brim with students who do not really belong there, who are unprepared for college and uninterested in breaking a mental sweat.” Nearly half of the nation’s undergraduates learn almost nothing in their first two years in college, found a 2011 study by experts like NYU’s Richard Arum, and 36 percent learned little even by graduation. Although education spending has mushroomed in recent years, students “spent 50% less time studying compared with students a few decades ago.” As George Leef of the Pope Center for Higher Education Policy noted, the National Assessment of Adult Literacy also indicates that degree holders are learning less.

Wastefully run colleges can now increase tuition even faster, at taxpayer expense, as a result of the Obama administration’s recent expansions of the Pay as You Earn program. The Pay as You Earn program limits borrowers’ monthly debt payments to 10 percent of their discretionary income. The balance of their loans is then forgiven after 20 years—or just 10 years, if the borrower works for the government or a nonprofit. It will cost taxpayers a lot, while doing nothing for most student borrowers (who will experience tuition increases as a result), and it will favor imprudent borrowers over prudent borrowers.

In February 2015, the Obama administration revealed that its expansion of this program will cost taxpayers more than $9 billion.

Most students chose inexpensive colleges or borrowed modestly, meaning “the average graduate’s debt level of $27,000” is no more than “the price of a car.” They will not choose to participate in this program, since they would pay more, rather than less, by paying ten percent of their income for years, which could add up to much more than $27,000 over a 20-year period.

But, imprudent borrowers who borrowed much more than that for useless majors will likely participate, since they will now be able to limit their payments to a fixed percentage of their discretionary income, and then have the unpaid balance remaining after 20 years (or just 10 years, if they go to work in the federal bureaucracy) written off at taxpayer expense, no matter how huge the unpaid balance is. The result is that they will pay the same amount over 20 years (or 10 years) no matter how much their high-priced college charged in tuition—eliminating any incentive for such colleges to keep costs under control, or to keep their tuition from escalating at a dramatic rate. Georgetown Law School gamed the Pay as You Earn Program to make taxpayers absorb the entire cost of educating of its left-leaning “public interest law” students, through creative accounting.

We Can End the Student Loan Mess

By Diana Furchtgott-RothJared Meyer

This month, as 1.8 million newly minted bachelor’s degrees are handed out, most graduates will be coming off the stage with much more than a fancy piece of paper. Seventy percent will take an average of $27,000 in student loan debt with them as they try to build their careers after college. Disinherited

This debt carries major consequences. One recent graduate, Annie Johnson, who is $70,000 in debt, told us this:

My student loan bills are nearly $900 a month. I see a quality-of-life difference between myself and my friends who do not have student loan debt. Saving is really hard when living expenses are added to my student loan payments. I know this is already setting me back in terms of retirement savings. My future options are limited since, in order to advance my career, I have to go back to school. But to go back to school, I would have to add to my debt.

This recent graduate is not alone. Almost 40 million people have student loan debt, which is the only category of household debt that continued to rise during the recession, and fifteen percent of borrowers default within the first three years. The 90-day delinquency rate on student loan debt is 11 percent. This is higher than the delinquency rate for residential real estate loans (3 percent) and the credit card delinquency rate (7 percent).

Since 2004, overall student loan debt increased by 325 percent, while all other categories of non-housing debt decreased by 5 percent. Over that time, the number of borrowers owing between $50,000 and $75,000 has doubled, and the number of borrowers owing more than $200,000 has tripled.

I Went to College for This?

The class of 2015 differs drastically from the class of 1993. In the early 1990s, fewer than half of students needed loans before they could walk across the stage to receive their diplomas. These loans averaged below $10,000 in constant dollars, which is about one-third of today’s average debt loan.

Student loan debt is much more difficult to repay when graduates cannot find jobs. Even though employment prospects for college graduates are better than those of non-graduates are, their futures are not always sunny. Over 8 percent of graduates younger than 25 are unemployed, compared with 3 percent of graduates older than 25. Before the Great Recession hit, only 6 percent of recent college graduates were unemployed. Back during the last year of the Clinton administration, this number was just 4 percent.

But the unemployment rate does not capture the full, bleak picture. Almost 44 percent of recent college graduates are underemployed, compared with 34 percent in 2001, according to the New York Federal Reserve. Now, over 115,000 janitors and a quarter of retail salespersons have college degrees. Is it any wonder that Wells Fargo found that one-fourth of millennials do not think college was worth the cost?

While some policymakers, including Senator Elizabeth Warren (D-MA), are pushing the government to forgive or refinance outstanding student loans, this would do nothing to stop the real driving force behind skyrocketing student loan debt—the increase in college tuition. College tuition has increased by 1,180 percent since records began in 1978—while food costs have risen only 240 percent over the same period.

Washington Increases the Cost of College

In our new book, Disinherited: How Washington Is Betraying America’s Young, we argue that outstanding student loan debt in excess of $1 trillion requires those in Washington to think beyond ordinary solutions and to put everything on the table—including the $165 billion that the federal government spends annually on its college grants, student loans and tax credits. Though well intentioned, instead of making college more affordable for low-income students, these programs create incentives for colleges to increase their costs.

The U.S. Treasury Department found that for every dollar provided in tax-based aid, scholarships fell a dollar. Automatically providing student loans through the government (as the system has worked since 2010) or offering loans at low interest rates subsidized by the government increases the demand for college education. These low rates allow schools to raise tuition costs exponentially—and they have been doing just that.

The federal loan program is best understood as an individually tailored subsidy for each school, because loans are awarded based on how much it costs to attend a given college. The more a college raises its tuition, the more loan money the government will make available to students for tuition. This is termed the “Bennett hypothesis,” after former Secretary of Education William Bennett.

Currently, all direct undergraduate federal loans carry the same interest rate of 4.66 percent—regardless of borrowers’ past academic performance, choice of school and field of study, and future career prospects. Varying the interest rate with a combination of these crucial indicators would provide an incentive for students to pick schools and majors that better fit their skills, potential and ability to repay.

Though Washington does not have a proven track record of correctly setting interest rates, reforms in this direction would help to reduce the amount of student debt, increase the number of graduates, and lead to higher repayment rates. Rates that vary based on possibility of repayment serve as important signals to perspective students—and as a way to hold colleges accountable for their students’ futures. The current one-size-fits-all interest rate coveys the same signal to each student, even though the right type of education differs drastically from person to person.

There’s a Way Out of This Mess

Some innovative private companies already realize this reality. Upstart and Pave, a new breed of lenders, provide a technological platform that allows those with available money to invest in young people and their human capital. With these lenders, investors are repaid through percentages of borrowers’ monthly salaries for a period of up to 10 years following graduation. To determine individual rates (usually between 4 percent and 7 percent of incomes above a certain threshold); companies calculate likely future earnings based on university, major, grades and professional experience.

With this business model, students have an economic incentive to choose degrees in high return, in-demand majors such as engineering or computer science, because it means their repayment will be a lower percentage of their future salary. Investors also have incentives to mentor those in whom they have a financial stake, which helps young people to succeed. If the loan recipients’ careers take off and their salaries increase, the investors’ returns rise.

Until the underlying reason for increases in college tuition is addressed, student loan burdens will only continue to grow. In a time of high under- and unemployment among college graduates, artificially increasing the costs of college though the current system of federal student aid programs leaves many graduates hopeless and suffocating under heavy debt.

Diana FurchtgottRoth is a senior fellow at the Manhattan Institute and a columnist for RealClearMarkets.com.Jared Meyer is a fellow at the Manhattan Institute.

Why College Today Is a Mishmash

Kevin Carey is convinced that online learning has created a watershed moment in the history of higher education.  Not since Johannes Gutenberg assembled an ensemble of movable type, meltable alloy, oil-based ink, and a screw press in 1439 has there been such a moment—or so says Carey in his new book, The End of College: Creating the Future of Learning and the University of Everywhere.

It is a strong assertion that rests on the relatively fragile facts of no more than twenty years of shaky experiments with the new technology.  If we stick with the Gutenberg analogy, online learning is still in the era of incunabula, that period before 1500 when artisans were still working out what to do with the printing press.  As often as not the early printers set aside Gutenberg’s movable type in favor of a carved wooden block for each page.  Woodblock printing could retain some of the delicate beauty of medieval ornamented manuscripts, but it couldn’t compete with the speed and economy of production and the ease of correction of movable type.

A Serious Man

Kevin Carey is among the handful of contemporary writers on higher education who merit serious attention.  He is far from alone in his enthusiasm for online learning and his belief that it will transform higher education.  But he is a far better writer than other enthusiasts and his book deserves the attention of even those who view the new technologies as a mere diversion from more important things.

In the second chapter of The End of College, Carey compresses into 25 pages the history of the university from the founding of the University of Bologna in 1088 to the floodtide of degrees from American colleges and universities in 2012.  It is a neat performance, free of ponderous explanation, narrowing swiftly to the matters at hand, and yet touching nearly all the key matters.  The modifier “nearly” is needed because Carey (deliberately I suppose) skirts the topic of how universities have been shaped by and helped to share broader political and social movements.

A word on this before turning to Carey’s actual subject.  Carey is alert to how higher education has always responded to the changing needs for “intellectual capital.” The medieval university, he writes, arose out of particular circumstances that brought students together in towns where knowledge could be organized and shared.  Universities were from the start the seedbeds of what we would now call transnational elites.  But they also became seedbeds of nationalism, romantic revolutionary ardor, and later Marxism.  In the United States, the history of higher education has been interwoven in complicated ways with religious aspiration and various egalitarian movements, including efforts to advance the rights of women and racial minorities.  It would seem difficult to explain the history of American higher education over the last half century without treating race and racial preferences as a central topic. Yet the topic is entirely missing in The End of College—as are the topics of campus radicalism from SDS to BDS; the sustainability movement; free speech controversies; and the politicization of higher education.

These blind spots are no less evident in Carey’s other writings on American higher education.  Perhaps it is best to say that he knows his audience, which is liberal, self-satisfied, and not perturbed that colleges and universities have become leftist monocultures.

What Charles Eliot Did

What does perturb Carey is that American higher education is a mishmash of efforts to achieve three competing goals:  vocational training, the research enterprise, and the liberal arts.  None of these is accomplished especially well, although the liberal arts come off the worst.  Carey places the blame for the mishmash at the feet of Charles Eliot, the Harvard University president who in 1869 invented the “elective system,” and who also made the bachelor’s degree a prerequisite for admission to Harvard’s graduate and professional schools.  The elective system, soon copied at almost every other college and university, meant the demise of the core curriculum and its replacement by an expensive and expansive collection of courses that led to limited learning and incoherent programs.  In Carey’s assessment, Eliot also opened the door for the faculty to be made up of research specialists who have no training in or necessarily any aptitude for teaching.  The de-emphasis on the core curriculum and the dominance of research over teaching are two sides of the same coin.

But that coin is burnished to a golden gleam with the rhetoric of liberal arts education, endlessly deployed by college presidents who have redefined the “liberal arts” as whatever their institutions happen to be doing at the moment.  Learning to “think critically” covers just about any contingencies short of grunt labor, but maybe that too if the labor is spent sorting recyclables or undertaking other sweaty tasks on behalf of social justice.

Rich in Characters and Ideas

In the 2013 spring semester, Carey enrolled in the MIT online course, The Secret of Life, taught by biology professor Eric Lander.  The course was one of those that MIT made available as a MOOC through the Harvard-MIT online collaboration, edX.  Carey was enthralled by this enormously difficult course, and despite his non-science undergraduate and graduate education, stuck with it, problem sets and all.  The End of College carries The Secret of Life through most of its chapters as Carey weighs its lessons and does the writerly equivalent of turning over proteins and amino acids to see how things fit together.

It is a book rich in characters as well as ideas.  The portrait of Stephen Joel Trachtenberg in chapter 3—the former president of George Washington University and one of the people who unleashed the terrific price spiral that has turned American higher education into a cul-de-sac of campus luxury, student debt, and intellectual mediocrity—is fair-minded and finely etched.  Carey’s conversation with Trachtenberg is one of a dozen or so encounters that he draws on to develop his thesis that the old university—what he calls “the hybrid university”—is on the way out and that the new online thing, “the university of everywhere,” is on the doorstep.

Is it really?  The End of College is the best-argued case I have seen yet that digital learning will transform higher education.  Carey is fully aware of the inertial resistance to that transformation.  Our existing colleges and universities have strong institutional reasons to impede it even as they incorporate some of its technology.  And there are deep sources of social and cultural resistance from a public that is invested in the older forms of credentialing and prestige.  “The hybrid university will not disappear tomorrow,” he writes, “but they (hybrid universities) have been ripping off parents and students for decades by shortchanging undergraduate learning.”  There are sober thinkers on the other side of this, such as Andrew Delbanco, who have argued the crisp opposite:  that online education is the barbarian that threatens to despoil undergraduate learning.

The barbarians, if that is what they are, have now found their most eloquent champion in Kevin Carey. Let the contest begin.  Unleash the broadband of war.  Let MOOCs mix it up with Morrill; Gutenberg grapple with GitHub; and edX close quarters with Eliot.  However this works out, Carey acquits himself well on the topic at hand.

Give Up Your Citizenship for $100,000 over Four Years?

By Gabriella Morrongiello

As recently as 2014, illegal immigrants in 22 states are eligible for lower-cost, in-state tuition at public colleges and universities.

While students residing legally or illegally in states such as California, Texas, Maryland, and Virginia are eligible for in-state tuition, legal immigrants, international students, and U.S. citizens from out of state continue to pay out-of-state tuition, often costing several thousand dollars more.

For instance, out-of-state tuition at the University of Virginia (UVA), a public institution in Charlottesville, Va., ranked second highest in the nation in 2013, according to Daily Progress. The annual cost of tuition for out-of-state students attending UVA is currently $36,720, more than double the in-state tuition rate of $10,016 offered to Virginia residents. Similarly, tuition at the University of Maryland (UMD), a public university in College Park, Md., costs out-of-state students $20,145 more annually.

Campus Reform asked out-of-state students attending UVA and UMD–both of which offer in-state tuition to illegal immigrants–whether they would consider renouncing their U.S. citizenship to become “undocumented students” eligible for in-state tuition.

WATCH: Students shred their social security cards, become “undocumented” for in-state tuition. 

This article was originally published in Campus Reform.