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Outflanking Democrats on College Costs

The opinions expressed by columnists are their own and do not necessarily represent the views of

Many political debates in the upcoming presidential race will play out this way: The Democrat will offer "X for all," and the Republican will respond, "Do you have any idea how much that's going to cost?" That's the way nearly all political debates are engaged -- usually to the disadvantage of Republicans (and the public fisc).


That's why I wished, while attending a panel on higher education reform sponsored jointly by the Ethics and Public Policy Center and The Bradley Foundation, that every Republican candidate in America had been listening.

The Democrats have a tried-and-true formula (which is actually false, but work with me): They promise to spend more on education to make it more accessible. President Obama has proposed to make community college "free."

The Democrats' approach has created massive debt (student debt now stands at $1.2 trillion, outpacing all consumer debt except mortgages). That's worrisome. But as Andrew P. Kelly of the American Enterprise Institute stresses, that is not the most telling problem with the Democrats' approach.

The deeper problem is that the system Democrats have put in place steers benefits to those who don't need them while leaving many others with no good options.

Due to federally subsidized loans, tuition growth has hugely outpaced family incomes since 1970. Bloomberg reports that over the past three decades, college costs have risen "four times faster than the increase in the consumer price index."

Many lower- and middle-income Americans are aware that college or some post-secondary training would improve their income prospects (the income premium for a college degree is substantial, though stagnant), but their options and their information are both limited under the current system. Forty percent of those who take out loans for college do not repay them. The prospects for those who attend some college but fail to get a degree are dismal. "Some college" counts for little these days, while the debt is no less real.


Some Republicans (such as Rick Santorum) have responded by suggesting that college isn't important. That's hard to square with the data on income and other measures of well-being. (Of course, if our primary and secondary schools were better, college might not be so crucial, but that's a topic for another day.)

Kelly stresses that the tax credits and loans extended under, for example, Obama's "Income-Based Repayment" plan include many graduate students. In effect, all taxpayers wind up subsidizing the educations of people who are or soon will be in the highest income brackets. Elizabeth Warren's loan forgiveness plan suffers from the same disability: It's poorly targeted.

At the same time, 37 percent of federal loans go to students at colleges with very low graduation rates. The schools pocket the tuition, and the students struggle with the debt. Under the current system, there is no incentive -- no skin in the game -- to encourage colleges to help their students succeed and get a degree. If colleges were on the hook for at least part of the loan (under 5 percent has worked in the mortgage market), they would focus more on helping students to graduate. Schools could receive a bonus for Pell grant students to prevent them from limiting their exposure by rejecting poorer applicants.


Beyond reforming the student loan system to target it more narrowly to those who really need it, there are other reforms that would help to make college and/or training more accessible and affordable.

1) Give students (i.e. consumers) more information about how much a degree from a particular institution is actually worth. A number of states including Texas, Florida and California have begun to do this. Graduation rates, jobs secured by graduates and costs should all be available like nutrition information on a granola bar.

2) Permit private financing schemes. Sen. Marco Rubio has endorsed the idea of permitting employers to subsidize the education of students in exchange for the promise of some years of employment (as the armed services do).

3) Smash barriers to entry. Federal rules combined with outdated accreditation standards keep the old brick-and-mortar monopoly alive. Online courses (as Alexander Tabarrok of the Marginal Revolution blog detailed) have the potential to revolutionize education. The benefits of online courses flow particularly to those who cannot, for family or economic reasons, afford to attend traditional colleges. Other possibilities abound, such as specialized boot camps for tech training -- typically an intense 10-15 week skill course run by a consortium of companies.


The current higher-ed system mostly serves the interests of the already well off. If Republicans are smart, they will speak for the rest.

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