Failed Policies are Fueling a Higher Education Racket

failed-policies-are-fueling-a-higher-education-racket

Last week was National School Choice Week, which gave millions of Americans the chance to discuss and learn about how we can increase education freedom for everyone between kindergarten and their senior year of high school.

But what happens when high school graduates decide to take the next steps in their education? They encounter skyrocketing college tuition and a rigid system that offers few educational options. Just as in K-12 education, these problems are in large part the result of failed government policies that have served to constrict competition and vastly inflate costs.

Federal Student Loans: Fuel for the Fire

In 1970, you could attend Harvard University for $4,070 per year. Today, the cost of tuition has risen to $43,280.

Sure, just about everything was cheaper in the ‘70s, but the cost of attending college has vastly outpaced inflation over the decades. According to a report by the College Board, even after adjusting for inflation the cost of tuition and fees for private nonprofit four-year universities has more than doubled over the last 30 years. For public four-year universities, the cost has more than tripled.

Consequently, young people are being forced to take on larger and larger student loans. The average household’s student debt shot up 828 percent between 1999 and 2016, compared to a mere 24 percent rise in credit card debt. Graduates of the class of 2016 were saddled with an average of $37,172 in student loans.

Ironically, the explosion in student loans and federal aid is one of the primary factors driving up tuition in the first place. As early as 1987, then-Secretary of Education William J. Bennett wrote that “increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that federal loan subsidies would help cushion the increase. . . . Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.”

Expanding federal aid gives colleges few incentives to keep costs under control. Rather, the influx of federal money has only encouraged institutions to cut their own needs-based aid programs and caused states to reduce their higher education appropriations. A 2015 study by the National Bureau of Economic Research suggests that expanded student loans are the biggest driver of tuition hikes, accounting for a 102 percent rise in tuition between 1987 and 2010.

Like so many well-intentioned government programs, federal student aid is only exacerbating the problem it was designed to solve.

The Rigged Accreditation System

Another factor behind rising tuition is a rigged accreditation system that stifles competition and often prevents students from getting an education that is tailored to their life situation and professional goals.

To be eligible for grants and financial aid, colleges must be approved by a federally sanctioned accreditation agency. These accreditation agencies are largely staffed by members of schools already approved by the Department of Education, creating an obvious conflict of interest. We are, in effect, asking schools to approve institutions that will compete with them for students and federal aid money.

Imagine that every time someone wished to open a new coffee shop, they first had to seek approval from the local Starbucks. Starbucks could find plenty of reasons to deny such requests (for the good of coffee drinkers, of course!). And while no one outside the Starbucks Board of Directors would seriously propose such a scheme, it’s not very different from how college accreditation works in the United States.

Just like any cartel, the accreditation system allows schools to raise their prices more than would be possible in a truly competitive marketplace. It also kills innovation. Millennials are increasingly turning toward new models of educational delivery like Massive Open Online Courses (MOOCs) and online coding “bootcamps,” but because such courses aren’t recognized by accreditors, they are ineligible for financial aid. Even colleges that are already accredited must often seek written approval before introducing changes to their academic programs or delivery of instruction.

Reforming Higher Education for the 21st Century

As tuition continues to outpace inflation and accreditors stifle innovation, it’s clear that our higher education system is too costly and inflexible to serve the needs of modern day students. It’s time for young people and their families to demand change.

First, we must get the federal government out of the student loan process so that we can halt – or even reverse – the unsustainable rise in tuition and fees. Without federal money to fall back on, colleges would need to lower costs and bolster their own financial aid programs to attract students.

Second, we must reform the accreditation system so a broader array of educational options is eligible for financial aid, from online courses to trade apprenticeships. Moreover, states should be empowered to approve new accreditation agencies that can compete with those sanctioned by the Department of Education.

These reforms would lower costs for students while putting new educational opportunities at their fingertips. But until legislators act, the higher education racket will continue burying millions of students in debt.

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David Barnes

David Barnes

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David Barnes is the director of policy for Generation Opportunity.

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