Friday, August 23, 2013

President Obama's Proposal to Lower College Costs--Is He Just Appointing a Committee on Snakes?

If you see a snake, just kill it-don't appoint a committee on snakes.

                                                                                                      Ross Perot

To his credit, President Obama recognizes that higher education in the United States is broken and needs fixing. The cost of higher education is increasing faster than the rate of inflation, graduation rates are low at many colleges, and the student-loan default rate is catastrophic. 
But what does President Obama plan to do about the problem?  He wants to create a rating system for colleges whereby comparable colleges are ranked based on tuition rates, graduation rates, graduates' earnings, and the percentage of low-income students who enroll.  Ultimately, the President wants to tie this rating system to federal student aid in some way--perhaps providing more aid to students who attend institutions with higher ratings.
As Neal McCluskey of the Cato Institute described the plan, President Obama wants to impose "soft" price controls, creating a regulatory system that will encourage colleges to keep their prices down.
Well, pardon me for invoking  a quote from Ross Perot,  but isn't President Obama just appointing a snake committee instead of killing the snake?
"If you see a snake, just kill it."
Who really believes that President Obama's proposed rating system will help bring college costs down, reduce the amount of money people borrow to attend college, or lower the student-loan default rates?  All President Obama has done is to introduce a new topic to quarrel with Congress about. And no matter what rating system is devised, the colleges will figure ways to game the system--making themselves look better by manipulating the numbers.
No--rather than form a committee on snakes, let's kill the snake and treat the snake-bite victims.  These are things the Obama administration and Congress can do right now that will improve higher education and alleviate the suffering the present system has caused:
  • Report the true student-loan default rate.  The Department of Education's official default rate understates the number of people who are defaulting on their loans.  DOE needs to publish a more accurate figure on student-loan defaults.  At least then we would know the true size of the mess we are in.
  • Kick the for-profit colleges out of the federal student loan program. 
  • Amend the Bankruptcy Code to allow overburdened student-loan debtors to discharge their student loans in bankruptcy under less onerous conditions.
  • Repeal the 2005 law that makes it almost impossible for people to discharge their private student loans in bankruptcy.
  • Stop garnishing defaulters' Social Security checks.
  • Reward community colleges that opt out of the federal student loan program by refusing to allow students to borrow money to enroll.
  • Encourage dual-credit programs whereby high school students obtain college credit for taking college-level courses while still in high school.
And I will go further and make a more radical proposal.  Why not kick all non-public institutions out of the federal student loan program?

Why should the federal government be subsidizing Harvard University, the University of Phoenix, or any other non-public college by loaning money to students who otherwise couldn't afford to attend those institutions? If a student cannot afford to go to a nonpublic college without taking out a student loan, that student should probably be going to a community college or public university.

What would happen if my proposals were adopted?

First of all, most of the for-profit colleges and trade schools would close if they were shut out of the federal student loan program because most of them receive the vast majority of all their revenues from federal student aid.  Personally, I am OK with that.  I think the United States can get along quite well without the University of Phoenix, Walden University, Kaplan University and all the other for-profit institutions.

Second, a lot of non-profit colleges would be forced to close if they were pushed out of the federal student loan program. I'm OK with that too.

A lot of non-profit colleges and universities are affiliated with religious denominations and they served a purpose when they were founded in the late 19th or early 20th century by providing low-cost college options for low-income students. But today most of these little denominational colleges charge $30,000 a year or more  in tuition and fees.  In my opinion, if St. Stigmata College in Jerkwater, Indiana can't survive without federal student loan money, then St. Stigmata needs to close.

Of course none of my proposals will ever be implemented.  Instead, total student loan indebtedness--now at $1.2 trillion--will continue growing. The number of student-loan defaulters will keep rising and the number of people whose lives were ruined by their student loans will keep going up.

And slowly---month by month and year by year--our economy will continue to falter because as a nation we can't figure out how to educate young people effectively and efficiently.


Tamar Lewin. Obama's Plan Aims to Lower Cost of College. New York Times, August 22, 2013, p. A2.

Neal McCluskey. Obama to Control the Price of Ivy? Cato Institute. Accessible at

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