Making College Pay Off


In the United States and every other advanced society today, the share of the population with some level of postsecondary education (college in ordinary parlance) is a key indicator of its educational stature.  Here, as in every other aspect of formal education, America once led the way.  Sadly, today America is losing its edge. We are falling further behind the world’s advanced economies with every passing year, especially when it comes to the emerging generation of young adults.  Some of this erosion is due to rapid postsecondary gains in other countries over the last few decades, but a more important reason is that our progress in this sphere – impressive for four decades after World War II – has essentially come to a standstill.

Overall, the American higher education system is still by many standards better than that of any other country.  Unlike its global counterparts, its institutions are more numerous and varied, making the system as a whole marvelously adaptive to the wide range of cognitive abilities and occupational interests of its students – without resorting to the kind of invidious stratification seen overseas; its facilities are more modern, better equipped, and better maintained than those in any other country; and unlike its lower education (i.e. K-12) sibling, it is not a government monopoly.

That said, for adult Americans to continue to be the best (college) educated people in the world, the U.S. higher education system must change.  There are four generic problems facing the preponderance of American colleges and universities, most of them festering for decades, but getting worse as college enrollment has expanded and student selectivity declined: they admit too many unprepared students, they invest too little in undergraduate instruction, they are too cavalier about graduation rates, and their financing is so erratic that millions of qualified high school graduates don’t even go to college, and those that do are overly burdened with debt.

The Problems Begin in High School

Among these, perhaps the most easily corrected by unilateral college actions is the misalignment between the academic preparation needed to succeed in college – even in narrow technical and professional programs (like computer science or nursing) – and the instructional standards of American high schools.  This is not just a problem for graduates of struggling inner city high schools, but also for a majority of those coming out of schools in middle income suburbs.  Practically the only actions taken by all but the most elite American colleges to deal with this problem is to invest heavily in “remedial” courses, under the hopeful assumption that one or two semesters of catch-up English and math courses can compensate for four years of high school failure.  Not surprisingly, the hope is unjustified, and fewer than a quarter of all students taking such courses ever make it out of the remedial purgatory ready to continue successfully in the regular curriculum.  We now have over four decades of failed experience with the remediation paradigm, yet, in the name of broadened college “access,” we continue to waste vast resources – institutional, public and personal – on this flawed concept.

What should be done instead is to more thoroughly align high school curricula and instruction with college expectations.  Despite voluminous lip service paid to this objective, it is rarely achieved in practice.  There is reason for optimism on this score, however, in a new nationwide effort to upgrade K-12 curricular content, the Common Core State Standards Initiative, currently subscribed to by 45 states.  Given its potential for raising the level of college preparedness across the board, the American collegiate establishment, represented by eight key organizations, should now weigh in on this project to make sure that the standards are adequate and that they are actually being implemented.

The other effective action that colleges could take is to not admit students that graduate from high school without a proven “college-ready” academic diploma.  Even though a majority of American high school graduates are taking high school exit exams today, few of these really screen out the unprepared.  Ideally, all states should make sure their exit exams are truly rigorous, and give academic diplomas only to those sufficiently prepared for college.  Until this happens, the best course would be for colleges to rely on the national SAT or ACT entrance exams, and not admit any students falling below the college-ready threshold (about 1575 on the combined SAT and on the ACT 18 in English and 22 in math).

Cheating Freshmen and Sophomores

Another major failing of American colleges today has been the short-changing of undergraduate instruction, especially for the most critically important freshman and sophomore years.  This dereliction takes two forms.  The one that has gotten the greatest attention from conservative higher education advocates is the problem of “general education,” referring to the liberal arts and sciences foundation which all college graduates, regardless of eventual career orientation, are expected to have.  As it stands today, with notably few exceptions, too many American baccalaureate institutions – including the most selective – are supremely indifferent to which pre-major liberal arts and sciences courses that freshmen and sophomores elect to take and almost as indifferent to the (entirely faculty-determined) content of such courses.

There are two likely reasons for this indifference:  first, the overwhelming priority given by students and college administrators alike to the career preparation courses taught in the later undergraduate years – which constitute the primary rationale for students choosing to go to college, the greatest revenue generators for the institutions, and are closely overseen by external disciplinary or professional evaluators – and second, the fierce determination with which the organized faculty guard their prerogative of being the only ones to decide what is being taught.

The first two years of undergraduate coursework are short-changed more fundamentally by the paucity of instructional resources devoted to them.  Well-endowed private universities and the best of the public ones divert resources away from early undergraduate instruction to allow their senior faculty to engage in serious research (on which both the faculty’s and the institution’s reputation depends), and to pay for it.  Less research-driven baccalaureate colleges and community colleges skimp on lower level instruction because they need to conserve their resources to pay for the more expensive upper level and professional coursework on which their reputation rests.  The way in which in almost all American colleges and universities square this resource circle is to cheat their freshmen and sophomores by placing them in oversized course sections and assigning poorly paid “adjunct” faculty and graduate students to teach them.  Given how important the first two years of college are, this state of affairs is scandalous.

Crowning American colleges’ insufficient attention to the quality of the undergraduate academic experience, is their relative indifference as to whether their students make it to the finishing line in a timely fashion – or even at all.  Having chosen to be less selective in admissions, most baccalaureate colleges anticipate a less than complete graduation rate, and congratulate themselves when they exceed their mathematically calculated “expected graduation rate.”  Given their open-admissions mission, almost all community colleges have very low graduation rate expectations to begin with and adamantly reject this as a qualitative criterion.  To be fair, some colleges and statewide higher education systems take pains to preemptively advise their students online as to necessary course-taking and try to assure that all courses necessary for graduation are being offered.  But outside the insular world of institutional graduation rate fatalism and excuse-making, parents, politicians and thoughtful higher education leaders are rightly concerned.

The Affordability Issue

Finally, perhaps the most serious American higher education dereliction is the fact that millions of talented young Americans who would benefit from a college education either don’t go to college at all, or go to an inferior institution, or fail to graduate when they do go – a problem that is much too closely correlated with family social class and income.  Further, most American college students, regardless of talent or family income, now leave school excessively burdened with student loan debt, casting a deep financial shadow on their post-collegiate careers as they pay it off, or on federal financial aid programs when they don’t.  This problem is exacerbated as colleges in the private, non-profit sector keep raising tuition levels beyond the rate of general inflation and divert resources to cross-subsidize favored students or to fund faculty research.

By any standard, completing a college education, even at today’s high tuition rates, is a value proposition for the graduate and for society.  That said, the way in which an American college education is financed today is something of a mess.  America’s colleges and universities, especially in the private non-profit sector, spend more than they need to, and are notoriously opaque and disingenuous in how they reveal and justify what they do spend.  Students and their families go too heavily in debt to pay for college, even at public institutions.  And the largest category of financial assistance – federal student aid – is poorly allocated both with respect to lightening student burdens or raising college academic standards.

Among the leading complaints directed at American higher education today is its presumed “unaffordability” and, by extension, the burden that its cost places on college students’ families (if they are the ones paying it), state governments (that underwrite about half the cost at state colleges and universities) or the federal government (through its student financial aid in the form of need-based grants and subsidized loans).  The recent recession has only further exacerbated the college affordability problem.  States are now so fiscally stretched that they are sharply cutting back direct tax-levy support and raising tuition at state colleges, the federal government is scaling back its financial aid programs, and families battered by unemployment, home foreclosures and shrinking stock portfolios are in no position to take up the slack.

One of the most unquestioned assumptions surrounding the college affordability issue is that it is the inevitable result of the way in which a college education is being delivered today: courses (many of them with small enrollments) set in physical classrooms, taught by well-paid faculty, on leafy campuses with myriad desirable but not necessarily essential ancillary facilities like student unions, fitness centers, museums and stadiums.  This entire arrangement, it is widely believed, is anachronistic and must unavoidably result in a high outlay per student, to be borne at private schools by students’ families and at public ones by the states.  Given this diagnosis, the fashionable remedy is to a) sever the link between college instruction and the college environment and b) deliver much or all instruction online.

Many Americans, especially those who are working, raising families, or otherwise strapped for time, might benefit from a non-campus based college experience, but there is a lot more to college than classroom instruction which is why we will still want as many students as possible getting their education in a campus setting.  And as to online instruction, there is a place for it in a college education, but in terms of educational benefit, it can never entirely replace taking courses with a live instructor, surrounded by live classmates, in a traditional physical classroom.

Just as almost no one tilling the vast K-12 education reform garden suggests doing away with our traditional elementary and secondary school facilities, there is no need today to do away with our traditional college campuses.  In fact, these places are in many ways among the most glorious of American institutions, and the envy of the rest of the world.  Nevertheless we need to definitely rethink what goes on in them, and how they are financed.  If the key question being raised these days is whether we can still afford – at least on a mass scale – the traditional campus-based college experience, my answer is a resounding yes, if we undertake certain reforms in the underlying structure of collegiate financing.

To start thinking about higher-ed reform, we should start with the generally unrecognized fact that at a typical American campus, an undergraduate college education of good quality is not necessarily all that expensive.  Tuition price inflation has its origins in the private, non-profit sector through the ripple effects of too many affluent high school graduates trying to gain admission to America’s highest prestige institutions.  Flooded with more applicants than freshman openings, these institutions ration their seats in the first instance by selectivity and secondarily by price.  The resulting tuition windfall is then spent on underwriting faculty research and certain high cost professional specializations, massive cross-subsidization of needier but otherwise qualified students, wasteful indifference to the cost of personnel and supplies, and building construction sprees.  Tuition at these elite institutions, rising at a rate well above prevailing inflation, then becomes a benchmark for the rest of the private higher education sector, and indirectly even for religiously affiliated and subsidized state universities.

College is Not That Expensive

As a former administrator of the State University of New York, the United States’ largest unified system of higher education, I know what it costs to deliver a quality college education.  According to a recent, highly detailed analysis of revenues and expenses at every SUNY campus and its benchmarked national peers, we find, for example, that at the State University’s most highly regarded undergraduate school, SUNY Geneseo, where students receive an exemplary education delivered by well-credentialed full-time faculty in small classes, on a highly attractive, amenity-laden, well-maintained campus, the total yearly per student cost – excluding room and board, but including hidden fringe benefits and debt service – comes to $15,777.  Its benchmarked peers across the U.S., with comparable standards and amenities, spend $16,379.  In contrast, average tuition (not including room and board) at private non-profit colleges today ranges from $25,600 (in the South) to $36,800 (in New England).

That spread of ten to twenty thousand dollars is both enormous – and unnecessary.  Apologists for the private colleges will claim that after cross-subsidization, needier students pay hardly more than they do at the state schools, but in the meantime the tab for this surcharge is picked up by the federal government (in financial aid) and the hapless families of full-pay students.  In any case, whatever the pros and cons of cross-subsidization, it should not obscure the fact that, at give or take $15,000 a year, college today is nowhere near as costly as it is made out to be.  The corollary of this observation is that we needn’t sacrifice the many benefits of a traditional campus-based experience for the next generation of American college students on the altar of “affordability.”

The Solution

We can tackle the aforementioned problems through a single policy lever, one already under government jurisdiction: federal financial aid.  The United States, unlike most other countries, has a very elaborate – and well-funded – system of financial aid for college students, primarily federal, with varying levels of assistance provided by the states.  What is missing, however, are some key features that, without any increase in aggregate expenditure, could make financial aid more broadly available to all who could benefit, reduce post-graduate financial burdens, motivate higher student achievement in high school and college, and raise collegiate academic standards.

To begin with, financial aid should be made more simple and equitable to access, without cumbersome (and often unfair) family means-testing; charging lower rates of interest; and tying repayment to earnings rather than, as is currently the case, a fixed repayment schedule (that can be deferred, but at great future cost).  Then, financial aid could be allocated with much greater attention to academic outcomes, both with respect to educational institutions and their students.

Here is a broad outline of how federal financial aid could be restructured to achieve these objectives:

  •  Any American high school graduate with an academic diploma would be eligible for a low interest college loan for as much as the full cost of an undergraduate education.  Loans would be extended for up to five years for students enrolled in four year baccalaureate programs; up to six years for those enrolled in five year programs (like architecture and engineering); and up to three years for community college students.  Requiring applicants to have an academic diploma ensures that they are ready for college-level work.  Setting time limits on loans motivates timely completion.
  • All applicants would be able to receive loans large enough to cover full tuition at a public undergraduate college, net of typical levels of state support.  Those who choose to declare family-independent status would be eligible for loans large enough to also cover living expenses for the duration of their tuition coverage. Family-independent applicants would not be subject to means-testing or family income documentation.  The idea here is 1) to encourage college students to be seen as independent adults (regardless of age), neither advantaged nor handicapped by family circumstances; and 2) to encourage students to study full-time and not be distracted or delayed by the need to work.
  • The maximum value of a loan would be set at 50 percent of the full prevailing average cost of educating undergraduates at U.S. public colleges (inclusive of personnel benefits and capital facilities but exclusive of research and graduate education).  Most U.S. states currently underwrite about half of the full cost; federal aid should not result in reduced state effort.  Ideally, the aid ceiling will motivate private institutions and more expensive public universities to practice cost discipline and make subsidization of scholarships and research more transparent.
  • Interest rates would be set at the government’s cost of borrowing: long term treasury bonds (currently 2.60 percent); or what the government charges banks (federal funds rate, currently 0.25 percent).  There is no reason for the government to make a profit on student loans, nor should banks be treated more leniently than college students.  The government’s “profit” will be realized in higher future tax revenues generated by the higher human capital created.
  • Repayment details: To concentrate the minds of students and college administrators on college completion: any student that graduates in good standing (the equivalent of a 3.0 – i.e. B – grade point average or better) would have up to 50 percent of their loan forgiven.  All remaining loan amounts both for those in the loan forgiveness program and those ineligible because of non-completion, could be repaid through the federal income tax system, in proportion to annual income.  The loan forgiveness program would be financed by the funding currently allocated to Pell and other direct grants.  The idea is that under this proposal all students, including the most disadvantaged, would be able to attend college, to affordably repay their loan debt and, if they managed to graduate, to benefit from a grant at least as valuable as what is available to them today.
  • College quality:  Loans would be approved only for attendance at qualified institutions.  Qualifications would include, as they do now, regional accreditation, but also graduation rates, class sizes, percentage of full-time faculty, and student performance on nationally normed exams (taking a leaf from national K-12 aid strings).  This would have the effect of making all American higher education institutions more attentive than they are currently to the quality and resources devoted to undergraduate instruction.


This set of proposals can be quite easily aligned with current federal expenditure levels.  Last year, all federal aid to college students totaled over $140 billion.  Of this, nearly $104 billion was in the form of loans, at various rates of interest and directed at various categories of student eligibility.  The rest, nearly $37 billion, was in the form of grants, again under various eligibility criteria but with the majority aimed at low income students.  Let’s begin by looking at using federal loans to increase – and make more fair – access to a college education.  The aggregate current federal outlay of $104 billion is large enough – without any increase in the total amount of disbursed – to enable every qualified American high school graduate, at any level of family income, to receive a very low interest loan to cover the entire cost of four or five years of tuition (at a public university – or a private one with a scholarship), and for those declaring family independence, to underwrite living costs for the same period.  With respect to the loan forgiveness proposal, justified both by the need to motivate students and college administrations to focus on graduation and to reduce post-collegiate debt burdens, this could be funded with current federal grant appropriations, even with graduation rates projected to rise because of the program.

American higher education remains the model for the world, with more and better institutions, a more richly varied mix of institutions in terms of mission and access, and for most of its history, serving more of the country’s citizens than postsecondary systems anywhere else.  Nevertheless, America’s higher education complex is not without some serious faults, but ones that can be remedied fairly easily – if we have the will.


  • Peter Salins

    Peter Salins is University Professor of Political Science at Stony Brook University and director of its graduate program in public policy.

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