Politics & Policy

To Improve Higher Education, Scale Back Federal Involvement

(Dreamstime)
Senator Lamar Alexander’s proposals for reform are a beginning.

America’s colleges and universities are terribly inefficient and excessively expensive, foster relatively little learning and ability to think critically, and turn out too many graduates who end up underemployed. These and related problems have grown sharply in the half century since the Higher Education Act of 1965 heralded a major expansion of the federal role in higher education, but some mildly hopeful signs are now emanating from Capitol Hill. In three papers issued by his staff, Lamar Alexander (R., Tenn.), chair of the Senate Committee on Health, Education, Labor, and Pensions, and a former university president himself, has indicated that he wants to do potentially three useful things as the Higher Education Act comes up for another reauthorization.

First, he seems to embrace the idea that colleges should have “skin in the game”: They should face financial consequences for admitting, and then failing to graduate, students who default on loans and have marginal educational backgrounds indicating that they were clearly ill prepared for truly higher education.

Second, he views the accreditation system as broken and seems to agree that the current binary approach — you either are accredited or are not — needs reform.

Third, he wants to change the federal data system, potentially providing consumers with some useful information, such as what the graduates of XYZ University earn, say, two years after graduation. I suspect that the Department of Education can tell you how many Hispanic female anthropology professors there are in Georgia but that it is clueless whether students have learned anything in college or how graduates of each college fare in labor markets. I am reasonably certain that U.S. News, Forbes, and other magazines that rank colleges get far more hits on their websites than does the taxpayer-funded U.S. Department of Education College Navigator website. (Full disclosure: My research organization does the rankings for Forbes.)

Federal attempts to deal with these and other pathologies have been largely unsuccessful. The Spellings Commission (2005–06) made a few modestly constructive proposals, but they went nowhere. Congressional action in the past decade has been mostly counterproductive. Three examples: Congress generally expanded the dysfunctional federal student-loan system while mostly removing private financial-sector involvement. Congress has forbidden (on bogus privacy-concern grounds) federal data collection that could provide better measures of institutional performance. And it has acquiesced in Obama-administration rules leading to serious violations of due process for students accused of inappropriate sexual conduct.

You don’t have to go far to illustrate the points that Senator Alexander seems to be making. It is 5.3 miles from the U.S. Capitol to the University of the District of Columbia (UDC). Federal-government data suggest that only 5.7 percent of full-time students at UDC graduate in four years at this fully accredited school, and that well over 18 percent of borrowers default on their loans within three years, considerably above the already-high national average of 13.7 percent. Why does UDC receive the same level of accreditation as, say, nearby Georgetown or Johns Hopkins? Shouldn’t a school with such high levels of loan default face some negative consequences? After all, its admission decisions and instructional efforts contribute to the default problem burdening taxpayers. And why can’t the feds, whose Social Security Administration and IRS collect vast amounts of income data, tell us whether the relatively few graduating from UDC in fact typically end up making a decent living?

Accreditation in particular reeks with problems. The accrediting agencies are largely governed by boards whose members receive paychecks from the very institutions being accredited, creating massive conflict-of-interest problems. Rarely do academically sub-marginal schools lose accreditation and therefore access to federal aid. Detailed accreditation reports — outlining school weaknesses and problems — are often kept from the public. Some evidence suggests that the accrediting agencies are biased against new start-up colleges, particularly those started by for-profit companies. Colleges spend large amounts of resources providing accreditors with information. To what end?

#related#There are some useful things that Senator Alexander can propose that might mitigate some weaknesses in higher-education policy. Still, it is important to recognize that Washington is far more the problem than the solution to the current afflictions of American higher education. Alexander’s reforms do not even touch the largest single policy mishap — the totally dysfunctional federal student financial-aid programs.

Tuition has skyrocketed in the era since federal student-loan and grant programs started to become large in the late 1970s. Colleges have effectively confiscated federal loan and grant money designated for students and used it to help fund an academic arms race that has given us climbing walls, lazy rivers, and million-dollar university presidents — but declining literacy among college students and a massive mismatch between students’ labor-market expectations and the realities of the job market. Before these large programs began, we did not have nearly half of college graduates taking jobs usually filled by those with only a high-school education, nor did we have, as Richard Arum and Josipa Roksa suggest in Aspiring Adults Adrift, a majority of graduates financially dependent in part on their parents two years after graduating.

Originally, the primary goal of the federal student-aid programs was to improve access to college for lower-income persons. Here, the record is one of total failure: A smaller percentage of recent college graduates come from the bottom quartile of the income distribution today than was the case in 1970, when federal student-assistance programs were in their infancy.

Real, effective reform, then, requires us to rethink financial aid. Long-term, the feds should exit the business. New private approaches to financing higher education (e.g., income-share agreements) need to be legally protected and encouraged. In the short term, tuition tax credits and the PLUS loan programs should be axed, and eligibility criteria for student loans tightened — shorter periods of loan eligibility and (gasp) even some penalties for poor academic performance and carrots for doing well. We could reduce the program costs substantially (perhaps 50 percent) without reducing assistance to truly low-income students.

There are no free lunches. Users and providers of university services need to feel the pain associated with academic non-performance. Growing federal involvement in higher education has brought rising prices, falling quality, and student underemployment. While it is perhaps politically impossible to radically change the federal student financial-aid programs now, the Alexander move is an important first step to rethinking how we finance higher education in the U.S., and a precursor of bigger changes that could come if the Republicans win the White House.

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