Federal higher-education policy is a mess — bad for many students, bad for the taxpayers. Regulations discourage new kinds of postsecondary education that might be more effective for today’s labor market.
Education Secretary Betsy DeVos has been tackling that problem and in a new Martin Center commentary, Preston Cooper of the American Enterprise Institute examines her ideas.
Crucially, DeVos wants to allow new kinds of postsecondary education programs to receive federal student aid money. She wants to, Cooper writes, “encourage the growth of competency-based programs, whose degree requirements focus on learning skills rather than completing semesters.” That sounds like a good idea, since many of the traditional, semester-based college degrees do very little to raise the levels of skill and knowledge that people need. Why not allow competency-based programs to compete with them?
The problem, of course, is that new programs will probably mean an increasing the outlay of federal dollars and attract some of the scammers who managed to cash in on the old programs.
Cooper explains:
Recent history is full of warnings about adding federal dollars to higher education. Unlimited federal lending to graduate students, for instance, has encouraged the growth of low-value graduate programs, even at prestigious institutions. Federal aid fueled a for-profit college bubble, which led to enormous government losses when large for-profit chains such as Corinthian Colleges failed. Freely available taxpayer money attracts the unscrupulous as well as the innovative.
So there is an inevitable tension between innovation and guarding against the squandering of taxpayer money on loans that won’t be repaid.
In a true market, innovators are free to enter and either succeed or fail on their merits and lenders carefully weigh risks and rewards of extending loans to students. Sadly, the heavy hand of Uncle Sam has deprived us of a true market in higher education. Cooper is right on target, writing,
Both the federal government and the private market face a tradeoff between supporting innovative new ideas and shielding themselves from losses on bad bets. But private lenders minimize this risk through careful scrutiny and rigorous performance standards. By contrast, the Education Department often fails to balance these objectives because it has no incentive to. When the federal government gets it wrong, students and taxpayers, not bureaucrats, suffer the consequences.
Congress could step in rather than allowing the administrative state to dictate policy, but it long ago ceded its constitutional authority. Besides, the politicians would probably make things worse. After all, it was Congress that make the initial blunder of putting Washington in the higher-education business.
Cooper concludes,
DeVos should move forward on her innovation-promoting agenda, but with a healthy amount of caution and concern for taxpayer protection. While there is plenty of scope for policymakers to improve our higher-education system, they should also recognize the limits of their abilities.