HIGHER EDUCATION AND THE STATE OF THE UNION

President Obama devoted an unusual amount of time to higher education in last year’s State of the Union address, and called for increasing college enrollments and controlling costs. As the next State of the Union address approaches, let us ask: Were the promises and proposals that were made last year fulfilled? The one word answer is “no,” but some clarification is needed.

                The first bullet point on material issued by the White House Press Office last January following the State of the Union states that the President proposes “to reform student aid to keep tuition from spiraling too high…” What has happened to tuition? According to the College Board, public four-year school sticker prices rose 4.8 percent this past fall, and the “net” price that includes scholarship aid rose 4.6 percent. For four-year private schools, the net price increase was an extraordinary 5.8 percent. Since inflation is about 2 percent a year, it implies that tuition, in inflation-adjusted prices, rose somewhere between 2.5 and perhaps 3.5 percent — at least the average increase for the last 25 years. Absolutely no slowdown in tuition increases from historical trends occurred, even after allowing for Pell Grants and other grant aid.

                Second, the President promised a “$1 billion investment” to incentivize states to fund higher education, revamp state financing, etc.  Putting aside for the moment whether dropping more money from airplanes onto college campuses (or the equivalent) is the proper approach, the proposed legislation died — killed not by the Republican-controlled House of Representatives, but by the U.S. Senate, Harry Reid (D-Nevada), proprietor.

                Third, a minor “First in the World” proposed competition (funded at a mere $55 million, a rounding error for Washington budgeters) was watered down dramatically, so not worth a lot of discussion.

                Fourth, “the Administration will create a College Scorecard for all degree-granting institutions…” An apparent beta version of the Scorecard has emerged, but at least one December U.S. News and World Report article interviewing  student users showed that they found it, relatively speaking, incomprehensible, filled with jargon used by educrats and the chattering classes, but not by denizens of the real world.

                Fifth, “We will also make an updated version of the ‘Financial Aid Shopping Sheet,’ a required template for all colleges….to make it easier for families to compare financial aid packages.” In reality, only 500 schools (enrolling 13 percent of students) have put it on their web sites, and many prestigious universities (e.g., Northwestern, George Washington, Tulane) have not adopted it. It has not been made mandatory as promised.  Bottom line: a mostly unfulfilled promise.

                Sixth, “the President is also proposing to begin collecting earnings and employment information for colleges, so that students can have an even better sense of… post-graduation outcomes.” I was excited by that, the one constructive thing I really applauded. Alas, it has not happened –at all. The IRS, Social Security Administration, and state employment agencies collect useful information that would permit collection to occur, but the Obama Administration has again not come through.

                Seventh, “Keep student loan interest rates low.” Eureka!! Here is something that DID happen. But for what purpose? To allow more students to join the 48 percent of college graduates holding jobs the Bureau of Labor Statistics says require less than a college degree? To aggravate a massive college underemployment problem? To entice more students into deeper debt? To me, it is almost the moral and economic equivalent of a drug dealer enticing a new customer by offering the first purchase available at a reduced price.

                Eighth, “double the number of work-study jobs.” Didn’t happen. Ninth, “maintain our commitment to college affordability…” by extending the American Opportunity Tax Credit, first enacted as part of the so-called stimulus package in 2009. That was achieved in the “fiscal cliff” bill recently passed. However, liberals decry tax-credit bills as inefficient ways to induce college attendance that mainly benefit the affluent, while conservatives decry them as open invitations for colleges to raise tuition fees to capture the funds. Both are right. Goal achieved –but it should not have been.

                In short, the Obama 2012 State of the Union higher-education promises remain mostly unfulfilled, and when they were, have had mostly negative effects.  So now the question is: What should the President say in the 2013 State of the Union Address?  Here is what he should, but probably will not, say:

  • Our publicly funded education system is expensive, inefficient, and poor in achieving desired results. We should back off federal financial-assistance programs that are Byzantine in their complexity and spectacularly unsuccessful in helping the poor which they were originally designed to assist;
  • The arbitrary goal of becoming number one in the world in the proportion of college adults with degrees is a mistake; we should tailor educational opportunities to student abilities and desires on the one hand, and labor-market realities on the other;
  • The federal government should neither entice state governments to increase nor decrease efforts for higher education; that is a state, not federal responsibility.

                My prediction is that the president will, roughly, do the opposite of what I suggest, with the same poor (but expensive) results obtained from previous years of dropping money indiscriminately on arguably the most inefficient sector of American society.

Richard Vedder is Director of the Center for College Affordability and Productivity, teaches economics at Ohio University, and is an Adjunct Scholar at the American Enterprise Institute.

 

               

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Posted by: Richard Vedder

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