Tag Archives: College

Why Price Controls Are The Best Way to Keep College Affordable

This post originally appeared in Forbes. You can read it there. It is a follow up to the last post. Ideally, you will read them together.

Every time a person uses the phrase “price controls,” I’m fairly certain the fire alarm goes off at the Cato Institute and the soundtrack to “Requiem for a Dream” starts playing in the lobby. A bunch of policy interns saddle up horses and ride through Washington holding lanterns to alert all of the members of Congress and the news media that someone has proposed the idea.

Yet the best plans for actual higher education reform are centered on exactly that: a system of regulations to control prices. Last week, President Obama proposed to tie federal financial aid to colleges’ performance based on a new college ratings system that takes into account the number of low-income students in attendance, tuition prices, and even outcomes like graduation rates and future earnings of students. Yet the President stopped short of more overt price controls, instead preferring to use the college ratings system only to provide incentives to schools that perform well.

The response from many policymakers and college officials has been to cry foul at the government going too far to intervene in the economy. The President’s plan, however, doesn’t go far enough: if we want to tackle the skyrocketing cost of higher education, price controls are the best option we have for keeping college affordable. [Cue fire alarms at Cato].

This idea might sound radical, but it’s not new at all. Rather, it looks eerily similar to a 2003 proposal by Republican House Members – including John Boehner – that called for a “College Affordability Index” and threatened to eliminate federal subsidies for schools that failed to improve their status. It can’t be that radical of an idea if House Republicans were the ones that were pushing the idea a decade ago. Nor are these types of regulations a new idea in the economy at large: prices for public utilities like electricity and water are set by the public sector, as are the fee schedules for Medicare.

Neither President Obama nor John Boehner will ever use the phrases “price controls” or “price regulation.” The phrases elicit a rather unpleasant visceral reaction, akin to the smell of a well-aged stilton. But they are crucial. Tying federal subsidies to something and using public leverage to stop the upward pressure on prices would finally get at the root causes of price increases in higher education. Continue reading →

Why We Need The Government To Play An Active Role in Higher Ed

This post first appeared at Forbes, where I am now a contributor. You can read it there. Or here.

These days, everyone knows that college is expensive. And everyone has their own idea of how to fix it. When it comes to higher education finance, we’ve become a nation of backseat drivers.

Allow me to drive in the backseat here. College is expensive, and the government’s attempts to help make college more affordable for students has likely driven up prices even more. But there is a solution: Rather than remove itself from higher education, as many libertarian economists have suggested, we actually need — and want — the government to play a larger and more prominent role.

Higher education prices have risen far faster than other prices in the economy: across all institutions, undergraduate tuition, fees, and living expenses more than doubled in inflation-adjusted dollars. At private nonprofit four year schools, tuition and fees have nearly tripled compared to 40 years ago, while at four year public schools costs have almost quadrupled over the same time frame. Public two-year schools, which experienced a huge drop-off in state funding in the wake of the recession (and where most of the higher education in this country takes place), have seen tuition and fees grow nearly 50% in the last decade. Bloomberg estimates that the price of college has increased twice as much as that of medical care since 1978. In short, college has become more expensive – and the price continues to increase.

The reasons for the unstoppable growth in price are many. These include increasing demand for college among students, systemic incentives that encourage colleges to spend money and raise tuition, declining state subsidies in the last few years, increases in “merit aid”, financialization, and the college costs arms race that encourages schools to try to use resources in socially unproductive ways. Continue reading →

What We Talk About When We Talk About Oregon’s Debt-Free Tuition Plan

There has been much to-do about the bill passed in Oregon to form a committee to look at the possibility of passing a future bill for student debt-free college tuition. If you remove the whole middle part of that last sentence and just kind of ignore it, the hubbub makes sense — with student debt causing both personal hardships and macroeconomic ripple effects, the option to offer public higher education and guarantee no debt could be a game-changer.

Some people on the left like this plan. Some people to their left hate it. Some people to the left of the people who are already on the left love it. And most people don’t care one way or another because they have jobs and families and still can’t get over the fact that Kim Kardashian and Kanye West managed to ruin their baby’s life at literally the very first possible moment by naming their kid a direction. A direction!

Now I want to weigh in even if it adds little to no value to the world, which is why Al Gore invented blogging in the first place.

Putting aside the policy nitty-gritty, what is at stake here is whether we think public higher education should be a universal program or an individual luxury good. Most progressives and advocates of increased college access favor the former — rather than pushing tuition onto individual students or groups of students, they prefer public subsidies to fund the majority of public higher ed.

The liberal blogger Matt Bruenig (with whom I have discussed this), however, lays out the case for a different strategy. In his view, only users of college should pay because the non-users are predominantly poor. The benefits of the Oregon plan, then, are that it narrows the group of people paying for college from society at large (in the form of tax revenues) to only users of college — but does not put the onus on any specific individual. Unlike simply increasing tuition for each student, a plan like the Oregon plan puts the cost on the entire group of students that have used the college’s services under the payment plan (any underpayments are covered by the buffer fund paid into by former students). Thus, students under the Oregon plan share the same risk pooling of wider tax-funded programs.

It is not ‘Pay It Yourself’ as much as it is ‘Pay It If You Also Attended College.’ The second acronym is less catchy, but they can hire a team to work on that.

Continue reading →