A couple days ago, President Obama came to Central New York. I know because the traffic on I-690 was backed up, and I got stuck in the mire on the way home. For some reason (perhaps to avoid State Fair traffic), the presidential entourage — coming from Buffalo and Rochester in Western NY — went across the Thruway, past Syracuse, then came down I-481S and across I-690E to Henninger High School, where there president was to speak. I saw the president’s bus pass in the other lane as I was sitting in the parking lot that I-690E became, so I suppose that’s something. A tweet by CNY Central Weekend Sports Anchor Tom Eschen, Jr., indicates that 481N was the same way. I’m still trying to figure out why they had to shut down an entire arm of an interstate and disable another at rush hour. Fortunately, “rush hour” in Syracuse isn’t that bad to begin with.
During his whirlwind visit to Upstate NY, the president announced his new plan for reducing higher education costs. Basically, he wants to create a new rating system for colleges, and then tie federal funds to the ratings. There’s a little more to it than that, such as a focus on reducing costs through technology — apparently something no academic institution ever considered before — and requiring students to make degree progress within a certain amount of time, which will undoubtedly help those who are working full time and taking classes part time to prioritize their pursuits. The White House blog’s fact sheet has some additional information, but what struck me is how closely it follows this Atlantic article from a year and a half ago.
As part of his plea for a new education deal, the president criticized consumer college rankings lists for wrongfully incentivizing schools,1 and perhaps there’s some merit to his criticism. But does anyone really think that institutions of higher learning won’t try to game a national list tied to federal funding? At the moment, however, it’s impossible to say how well this approach will work, primarily because the president leaves the development of the ratings system up to the Dept. of Education — after his plan is approved. Nothing shouts “responsible lending” like waving your hand and saying, “We’ll worry about the details later.” And Obama certainly wouldn’t be the first politician, or the first lender, to do that.
An editorial at WSJ argues that much of the increase in college costs has come from the very funding programs that Obama is looking to reform. The libertarian in me wants to agree with that, but a true analysis indicates that there’s a more complex answer. Nonetheless, in his book Going Broke by Degree, Richard K. Vedder explains that:
…very little of the additional financial support recently given to state universities has actually been used to reduce the cost of undergraduate instruction. That is, more generous state support does not usually translate to lower tuition costs. Nor does it enable more students to attend college. Lavishing more state funds on higher education does not significantly affect the number of students going to college, or how much they pay for their degrees.
If subsidies aren’t helping to keep tuition costs down now, then rewarding better-ranked colleges and universities with more subsidies won’t help. All it will do is stir the soup a little and slightly shift the amount of money each college gets.
The question remains: What could help? As someone with a daughter who will presumably be starting college immediately after Obama’s full plan goes into effect (assuming it is passed by Congress, which seems likely), that’s more than an idle question for me. Here are some things I think would work better toward actually keeping costs down for students:
Education Savings: The two primary ways to save for college are Coverdell Education Savings Accounts (ESAs) and 529 Plans.
ESAs are federal plans, contributions are not tax deductible, but any gains on contributed funds can be withdrawn tax-free for eligible college expenses. Also, there’s a $2,000 per year limit. Parents able to save that amount would be able to save a maximum of $36,000 over 18 years. That’s a nice chunk, but on average it covers a little more than half of a 4-year degree at a public school, and a little more than 1 year at a private institution.2 Raising the contribution limit, or eliminating a limit altogether, would put parents in a better position to pay for a larger chunk of education costs, reducing the overall amount of student loans and subsidies needed.
529 plans vary by state, and in many states contributions are tax-deductible up to a certain amount, and gains are often free from state income tax if the child goes to an eligible college or university (usually meaning, at a minimum, one located in that particular state). Although these are state-administered plans, they are created from a federal law, and it would be trivial to adjust it to require states to make gains tax-free regardless of where the child goes to school.
Obviously, you need to have money in order to save for education. But if Obama is sincere in wanting to help middle class families, then making saving for education easier is a good place to start.
Encourage Business Contributions: Since subsidies, institutional endowments and other top-down monies don’t seem to be reducing student costs, it would be better to get more money directly to students themselves. One way to do that would be to encourage more industry participation in scholarship programs.
A couple years ago, I toured the Department of Paper and Bioprocess Engineering (PBE) at SUNY-ESF. In addition to being impressed by the facilities and being fascinated by the science behind paper engineering — something I can honestly say I never thought about before taking that tour — I was surprised to learn that full-tuition scholarships are available3 for students who want to study this niche program. Even more surprising: In the 2010-11 academic year, the PBE Dept. saw 100% of its students placed in an industrial job or higher degree program.
Granted, this is a small program in a small state college, but it shows that meaningful business partnerships can be developed to help students pay for college. While there are many other industry scholarships, endowments, fellowships, and other programs available, tax breaks that encourage even more programs would help students more directly than anything in Obama’s plan.
Another way that business contribution could be encouraged is by increasing or eliminating the limit on tax-free employer educational assistance (i.e., tuition reimbursement). Currently, that limit is $5,250 per year.
Other Options: It’s not popular to say, but I’ll say it anyway: College may not be for everyone. It wasn’t for my brother, who went for a year, then left to join the navy. For those who aren’t militarily inclined, there are also a variety of trade schools and certificate programs that can quickly provide real-world skills without the expense of a four-year degree. There are plenty of other anecdotal examples of people who didn’t go to college and made out fine.
That said, having a college degree generally leads to better jobs. Even much-maligned studies, like my own English degree, tend to have pretty decent premiums. The trick is figuring out if what you want to do requires a degree, and if so, what kind. Then, find ways to reduce tuition yourself.
There’s already been a move toward providing and participating in online programs, which are generally far less expensive for both students and educational institutions. U.S. News & World Report started ranking online degree programs a couple years ago. Massive open online courses (MOOCs) through sites like Coursera have appealed to a sense of personal edification by providing university-level classes online for free. Signum University, which contains The Mythgard Institute where I am pursuing an MA, falls somewhere in-between online offerings by brick-and-mortar schools and free MOOCs, the goal being to obtain an actual degree at a much reduced cost to the student.
Finally, there are a number of programs out there that tout themselves as alternatives to traditional collegiate programs. NYC-based Enstitute places “fellows” in technology-related internships, at the end of which they’ll purportedly have a digital portfolio that they can then use to get a job. On the other side of the country, UnCollege is a “gap year” program for people who feel underwhelmed by institutional learning. Degree of Freedom is a project by Jonathan Haber to take the one-year equivalent of a bachelor’s degree through MOOCs, and I remember being intrigued by Josh Kaufman’s Personal MBA idea a few years ago — though I’m sure many would consider the idea of reading so many books somewhat passé in this enlightened age of online lectures and forum discussions. There are plenty of other examples of such alternatives.
The fact sheet for Obama’s plan includes calls for increasing technological innovation. As seen here, there already is a lot of innovation happening, both within and beyond the bounds of brick-and-mortar colleges and universities, and the fact sheet lists even more. The question remains, if so many new innovations are being developed, why does the federal government need to step in to subsidize them? The stock answer would be to have more (and more better) such programs, but that’s wishful thinking. My prediction is that some colleges will continue to be innovative regardless of whether Obama’s plan passes, and others will end up fudging their technology expenditures to make it look like they’re innovating so they don’t lose federal funding. I hope I’m wrong on the second half that prediction.
Final Thoughts
Back in June, John Tamny at Forbes argued that people go (or send their kids) to college for connections, not learning. I’m skeptical because I’ve always enjoyed the learning part, and the true answer probably lies somewhere between our views.
Either way, school costs likely will continue to rise regardless of how efficient colleges and universities become or what ranking they receive from the Dept. of Education. That’s because Obama and his policymakers are looking at college the way leftists look at pretty much everything, as though value is a product of labor plus the cost of materials. But value is in the eye of the beholder, and sometimes that beholder is 18-to-22 years old and is really bad at assessing value. Actually, most times it’s that way.
Footnotes
1. “There are also plenty of existing league tables that rate colleges, but Obama criticised private-sector rankings such US News & World Report for ‘sometimes rewarding universities for raising costs’.” — Obama proposes new college ranking system in effort to bring down costs, The Guardian, 22 Aug. 2013
2. “For the 2010–11 academic year, annual current dollar prices for undergraduate tuition, room, and board were estimated to be $13,600 at public institutions, $36,300 at private not-for-profit institutions, and $23,500 at private for-profit institutions.” National Center for Education Statistics, Fast Facts
3. “The Syracuse Pulp and Paper Foundation,
funded by paper and allied companies, offers up to full-tuition scholarships to eligible students. The Foundation also provides liaison between industry and the College so that the curriculum stays relevant to industry needs and current technology.” — Paper Science and Engineering is for you! [PDF]