When Big Government Goes to College

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The Wall Street Journal
By: William McGurn
April 19, 2011

The more the feds try to lower the cost, the worse the problem becomes.

Poor Sarah Lawrence. Well, maybe poor isn't the right word.

In an entry just posted on the Inside Higher Ed Web page, the president of Sarah Lawrence College gamely addressed what has become this liberal arts school's most notorious distinction: a price tag of $58,716 (including tuition, fees and room and board) for 2011-12, which makes it America's most expensive college.

In her essay, president Karen Lawrence (no relation to Sarah) argues that the issue is not price but value. She acknowledges the premium that her school commands, but likens it to the price differential between something "hand-crafted" and something "produced on an assembly line." And the sticker price is misleading, she says, because the school's average financial-aid award to students is more than $34,000.

Her defense, of course, reflects the received wisdom of most university presidents. It's also true that there are many other colleges right behind hers in the $50K-a-Year-Club: 100, according to the Chronicle of Higher Education.

To the howls of parents outraged by these prices, Washington responds by saying it will send more federal dollars--with no thought that easy government money might itself be part of the problem.

Right now the incentives for our colleges and universities are all wrong," says Ohio University economist Richard Vedder, who runs the Center for College Affordability and Productivity. "It's wrong for colleges, who have no incentive to keep down costs. It's wrong for students, whose needs are ill-served by loans and grants that go directly to the school. And it's wrong for taxpayers, whose dollars are making education more expensive without expanding opportunity for those who most need it."

Translation: If you are a mom or dad with college-age kids and you think the system is rigged against you, you're right.

The way it works now is that people the universities deem rich pay the full sticker price. This might be thought to help subsidize the poor, says Mr. Vedder, but the college population today in fact has a lower percentage of people from the bottom income quintile than it did in 1970 (notwithstanding a massive increase in federal aid).

Meanwhile, those in the middle scrounge for subsidies--like Pell Grants and federal loans--that are not keeping up with the tuition inflation they are causing.

What a waste of human talent. Compared to other countries, the strength of American higher ed has been its institutional diversity: our state colleges, our community colleges, our Catholic colleges, our Harvards, our Hillsdales, and yes, our Sarah Lawrences. In almost every other aspect of American life--media, communications, shopping--our institutions today offer Americans more options and flexibility than they did two decades ago. In higher ed, by contrast, we're stuck on the same one-size-fits all model that worked back in the decades when only the very privileged went to college.

A good start would be a new structure for college financing that promoted genuine opportunity without feeding the inflation it is supposed to solve. President Obama, alas, seems wed to the same government-heavy approach he had for health care. Indeed, the "reform" he signed last spring--restructuring federal grants and loans--will likely fuel rising costs as schools absorb that money, spend it on their own priorities, and continue to raise tuition at rates that outstrip the Consumer Price Index.

That's unfortunate because with a little imagination and the right incentives, the possibilities are endless. Take Pell Grants. Right now, a college student who graduates in four years with a perfect 4.0 grade point average gets less money than a student who takes six years and squeaks by with a 1.9. A more competitive--and imaginative--Pell Grant might tie it to performance, and maybe even give a cash bonus to a student who graduates in three years.

Or what if we allowed a private firm like Google to pay for a student's bachelor's degree in exchange for, say, 10% of that student's earnings for a set period after she graduated? Michael Poliakoff of the American Council of Trustees and Alumni suggests another possible reform: having federally approved accrediting agencies stop measuring inputs, such as faculty-student ratio, and start conducting performance audits of outputs such as what a university spends on instruction versus administration, what its graduation rate is, how its graduates fare in employment, and so on.

As usual, the Democrats have rightly pointed out a real problem--and proposed a government solution that only makes things worse. As usual, too, Republicans understand the flaw with the Democratic answer--and respond with the same but less (because they are, after all, fiscal conservatives). The rest of us look at the price tag for Sarah Lawrence and wonder: In what kind of world does that make sense?

Write to MainStreet@wsj.com.

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This page contains a single entry by CFED published on April 19, 2011 3:21 PM.

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