The New Republic

Hey, my alma mater, Wayne State University in Detroit, was the only college that was specifically dumped on in the article. It appears to have changed since I got my B.A. in History and did grad work in Soviet and American Intellectual History there. I see online that one of my Russian History professors and my American Intellectual History professor/adviser recently retired. Takes me back to when WSU was a good university. The only athletic endeavor they were competent at was fencing--they won a couple of national titles while I was there. And now, just last season, they were in the Division II football title game (they lost). They didn't even have a football team while I was studying there. That might be an indication of how their priorities have changed. Many American public colleges in the past were referred to as "diploma mills." Now we see that some of them are having trouble even issuing diplomas--while they're raising tuition! Almost everything in America has come down to money. I'm glad Obama is finally doing something about schools that see students merely as sources of income. Of course, as the article indicates, the universities will fight him like tigers. Easy money is hard to give up.

- magboy47.

January 28, 2012 at 12:51am

There are similarities between the market failure in health care and the market failure in education. Market pricing and discipline depends on allocating the good or service based on willingness and ability to pay. But for both healthcare and education, we do not want this to be the basis of allocation, for very good reasons. So, we find means of subsidizing. But, after not very long, the providers start to consume the subsidies by raising their prices. Then the subsidies rise, the prices rise, and we are on the spiral to financial oblivion. There is no solution other then some mechanism of price control, so that the providers become price-takers as they would be in a competitive market. However, the mechanics need not be the same in the two markets as they have different structures. The major one is that allowing consumers choice in schools makes more sense than allowing them choice in medical procedures. For schools, there is no scientific basis for deciding what is appropriate, there is greater individuality in fit, greater opportunity to shop without the pressure of health (you know when you are going to graduate from high school, you don't know when you will need medical care), and more opportunity for rational discernment (most people would accept whatever their doctor wants to do if there is a low cost that they can afford). The biggest drive of higher ed costs is that they have the absolutely unique privilege of perfect price discrimination. In what other part of the economy are sellers allowed to look at the financial statements of buyers and decide how much to charge them based on their ability to pay (under the guise of providing financial aid)? The answer is none. The price then becomes whatever those with the highest means can and will pay -- a luxury good -- with the government expected to make up much of the difference for everyone else. Dumb. For medical care, I think we need direct control over the allowed procedures and such and direct control over the price. A market mechanism in that setting is virtually an oxymoron. For higher ed, I suggest that the subsidy, whatever combination of loan and grant, be a set amount, based on income and possibly some measure of scholastic performance (although this is fraught due to socioeconomic differences, but class rank is one way to level those). The only restriction on schools would be that, to be eligible to receive the funding that subsidized students bring with them, the school would be forbidden any form of price discrimination whatsoever, not for athletes, not for scholars, not for no one. No more looking at financial statements, no more price discrimination in any form, discounting, scholarship, whatever. Any third party, independent of the school, that wants to provide scholarship money would be free to do so, but only to the student, not linked in any way to the choice of school (such as only usable at a particular school). I think this would suffice to create a functioning market. And I would think seriously about ending the tax deduction for contributions to higher ed or at least taxing annually any part of mark-to-market income not spend on program. Schools would then have only two uses for wealth: price cutting and/or program. Theory has it, at least, that supply should expand until the subsidies are going to students, not providers, and they would all be forced to compete on uniform price and quality, like profit-making businesses, in order to survive, but the ability to pay would be subsidized. Public institutions would be allowed to discriminate in price between in state and out of state students, but not otherwise.

- roidubouloi

January 28, 2012 at 5:37am

I agree with most of this. The only thing I would add is that student loans should clear with bankruptcy. Obviously that provision is difficult politically and won't fly in this banking climate, but this is Obama working to correct abuses in a market that is private in name only. Similar template to health care. And just as with health care, if your goal is to control costs, then you need to force colleges to control costs. Ideally you would set up a system of public institutions charged with restraining cost and open to all, guaranteeing as close to equal access as possible. The problem then becomes maintaining quality. European nations that are more serious do it this way: we should too.

- chaitless

January 28, 2012 at 5:41am

Taxpayer support of higher Ed has declined in Wisconsin and students are paying more. So Obama targets colleges. Not smart.

- hkaye

January 28, 2012 at 7:50am

Obama should target all private universities, and redirect that funding to public institutions. If it drives private non-profit colleges out of business, so be it. The public should fund only public institutions, and those institutions should be free or extremely low cost.

- spmull06

January 28, 2012 at 8:43am

A few qestions about "value" and then an observation. Is "value" based solely on the ratio of tuition costs to beginning salary? Average salary over five years? Over a lifetime? Is "value" measured in absolute terms or relative terms? Is "value" measured at the top of the class, the middle, or the bottom? Is "value" determined separately for each discipline? Is "value" determined separately according to a school's primary mission (liberal arts, STEM, etc.)? What is the "value" of any degree from State U with its winning football program? What is the "value" of a humanities degree from Private U? Is "value" of a degree from State U based on the "value" of degrees from other state universities located in states with comparable unemployment? Comparable employment trends? Comparable population trends? What if America doesn't need all these college graduates with degrees and expertise that don't fit a rapidly changing global economy. What if college graduates face an economy that for them will be as bleak as it is for the great swath of low to semi-skilled, (mostly) males who face a dismal future of no or low paying jobs? What if the federal government is subsidizing a declining industry (the higher education industry) when the funds would be much better spent on something with greater potential benefit to America's and Americans' future. What if that is the message Obama was trying to make in the SOTU.

- rayward

January 28, 2012 at 9:01am

Attacking college funding and prices mostly deals with a symptom. College administrators are not necessarily bad people or self-aggrandizing bureaucrats. We need to change the education "business model" to better suit today's economy, technology, and national needs and values. American colleges and universities were modeled after the expensive elite schools of the East Coast and later given research missions by government and industry. Perhaps we should separate the training mission from the research mission? Perhaps we should relax classroom hours requirements and give people more opportunities to be certified on the basis of standard exams and apprenticeships? Of course, modern Internet technology can help facilitate this process.

- amidut

January 28, 2012 at 10:15am

The distinction between "for profit" and "non profit" colleges is very thin at best. Both colleges build new buildings as they see fit, forever expanding at a gluttonous rate. One could argue that salaries and benefits at the non-profits are significantly higher than for profits. What is the difference between for-profit and non-profits? In the end, after all the bills are paid, the for-profits return roughly 5% to shareholders of some kind. Non-profits schools stick that same money in an endowment. These are two shirts made from the same cloth. It's good to see a college scorecard coming. But let's hope the scorecard make its very clear to students that $100K or $150K in tuition spent on a job that will pay $50K a year is not a good return for the student or for government. In fact, the government shouldn't even be making those loans. What the government SHOULD be making loans on is engineering and medicine degrees. Too many of the OWS folks never seemed to have gotten the memo. I'm sure the 4 years at $30K/year was a blast while you were earning your degree in library sciences. But you are forever screwed trying to pay that off.

- seattleeng

January 28, 2012 at 12:17pm

As I mentioned on Noah's blog, one of the primary reasons for increasing tuition is the longterm decline in state funding for high education. For instance, Pennsylvania contributes only 6% of the budget of Penn State, and it's supposed to be a state school and land grant institution. State legislatures know that universities have the option of increasing tuition if necessary, so they cut state funding and let students make up the difference.

- kluhman

January 28, 2012 at 1:44pm

In the Fifties most business schools were separate, private institutions. Now they're just leeching loan funds at public universities. What students in them learn is how to sucker people into buying things that they often don't need. And then there are the accounting students, who sometimes cook books after they graduate. Many of the crooks who helped crash Wall Street in 2008 had their "education" funded by taxpayer loans at public universities. Business students should be at private schools. America's economy was booming in the Fifties without them "learning" at public universities. I agree with seattleeng that loan funding at public (and private) schools should be focused on engineering and medicine. But it won't be. Public universities are making too much loot off business students. And student-athletes. An athlete who wants to turn pro should also have to "study" at his own separate, private school. By his junior year at a public school he should have to sign a letter stating his intent. If he wants to turn pro, make him leave. If he wants to stay, make him get a worthwhile degree, such as medicine or engineering. After all, he's getting a hell of a free-ride deal (4 meals a day, tutors, books, tuition, supplies, top medical care, a little spending money--and double that cost for out-of-state students). But I digress into fantasy. It'll never happen. The salary of the new defensive football coach at the University of Washington in Seattle is more than 4 times the salary that the state's governor makes. And the head football coach makes more than 3 times what his defensive coordinator gets. Priorities here? But I'm still a hard-core Husky football fan. GO DAWGS! Yes, I'm part of the problem.

- magboy47.

January 28, 2012 at 2:19pm

“So let me put colleges and universities on notice: If you can't stop tuition from going up, the funding you get from taxpayers will go down.” But tuition has been going up BECAUSE funding from taxpayers (money allocated by states to education) HAS gone down already. That's what happened to the UC system. There is something I am not getting here.

- Idefix

January 28, 2012 at 7:06pm

I can't believe it! An article on college tuition by Kevin Carey that actually mentions that states have been slashing college budgets! Of course, he is just mentioning that Obama said states should stop doing that, and it doesn't affect his argument one bit. Just a few facts, from my own university: State appropriation as a fraction of budget: 60% in 1990, 45% today Tuition as a fraction of the budget: 8% in 1990, 17% today And the 45% of the budget coming from the state is unusually high for state universities. It is not because the state of Alaska is generous, it is because the university gets significant research funding in only a few disciplines. Many of the big research universities now get <10% of their budgets from their state.

- JEFF FREY

January 28, 2012 at 8:01pm

Oops, Carey actually mentions Michigan's 12% state budget cut as well later in the piece. I missed that the first time through. But as usual he does not seem to process the implications of this, or the connection between the long-term increase in tuition and decrease in state funding for state universities. I don't think the cuts in state appropriations explain all of the tuition increases, but they explain a lot. But its easier to bash colleges and universities, Carey's apparent purpose in life, if you conveniently ignore that fact.

- JEFF FREY

January 28, 2012 at 8:09pm

Very good comments; I would provide good grades for all, especially to Rayward. If we knew as parents or teachers what makes a successful human being (from the point of view of the individual or the society) obviously all humans would live in happy peace and prosperity. As it goes, we all struggle all our lives to be constructive and successful. After high school I went straight to a good college because of good grades and good SAT scores, and then promptly flunked out and ended up on the streets for a while because I was not even close to grown up when I entered college. Was that the college’s fault? Was that my parents’ fault? When are we responsible for ourselves? After attending three colleges, getting married, fathering a child, and working various jobs, I finally ended up with a Masters in Education. Some college students are ready to go and contribute to society. Some need to explore and find themselves. My prejudice is that we pay too much for big names and resumes (such as Harvard, Yale, Princeton, etc.) and provide too little credit and appreciation of how much excellent cost-effective education happens at community colleges and similar less heralded and admired colleges. Too much sizzle; not enough steak.

- skahn

January 28, 2012 at 9:58pm

Decline in state funding for public universities does nothing at all to explain the rise in tuition at private universities. But federal subsidies and perfect price discrimination do.

- roidubouloi

January 28, 2012 at 11:13pm

Mr. Carey works for an education think tank. So perhaps he'd be expected to think more clearly about his own examples. Yes, Wayne State does a poor job of graduating students in six years, but Wayne State also trains students who are often unprepared for college, and need significant remedial training before they can do actual college work. There may be problems in the Wayne State's system, but they certainly aren't all of its own making. The University of Michigan, on the other hand, which had a minimal tuition raise, is widely known to be a public school in name only, with an almost $5 billion endowment, comparable to the University of Chicago. It only receives 17% of its budget from the state of Michigan (by the way Mr. Carey, these facts are readily available with a simple google search on the U of M's own site). It is fine to say that universities and colleges should be penalized if states don't increase funding. But does the president (or his campaign advisors) actually believe this will happen amidst the current fiscal crisis? I teach at the University of Wisconsin, still a relative tuition bargain and a world-class university. The state of Wisconsin under its Republican Governor Scott Walker is slashing our budget (and, effectively, our salaries). Does President Obama think that Walker and our Republican legislature listened to his speech and will now reverse course? This dynamic is playing out in states across the U.S. with Republican dominated legislatures, but also states in fiscal crisis controlled by Democrats. So the president says to California, cut tuition or we will cut your funding, and the Democratic governor and legislature will say: which services for the poor do you want us to cut further to the bone? The President may score points with some independents with this feint (and it is a feint, since no one in the states is in a position to do anything about it in the next several years at least). But many of us who teach in higher ed, and have been under assault for at least the last five years will remember. I want college to be affordable for everyone as well, but cutting funds for students when states are cutting education budgets isn't the answer.

- lfriedla

January 29, 2012 at 7:28am

Probably the greatest bit of sheer luck in my life was attending the University of Michigan Law School before the tuition for out-of-state students, at that time double the rate for in-state, but a fraction of the cost at private law schools, was raised to its market level. Go Blue!

- roidubouloi

January 29, 2012 at 8:54am

Just to be snarky, and largely speaking to a different frame, but I can't help but comment on this: "Obama’s proposal creates a dilemma for Congressional Republicans. " No he hasn't. All evidence suggests that now that Obama supports it, they will oppose it tooth and nail. The most extreme example is the insurance mandate, that scant years ago was the official GOP position, but now is the death of freedom. Likewise this will become big government interference in the free market, possibly even some faceless beauracrat coming between you are your degree. It does bring into question the GOPs sincerity on prior stances. One could construct a plausible argument that they mostly didn't care, and their positions were just defined to attempt to gore some Democrat Oxes.

- Nari224

January 29, 2012 at 9:12am

As one who has been teaching writing as a tenured faculty member at a regional campus of Indiana University for 15 years, I appreciate the thoughtful challenges above. It's easy to see this whole question simplistically--unless you're in the middle. I want to reiterate a couple of the points that seem most salient to me: Our funding is increasingly based on a numerical index that is equated with "value": how many students we can graduate in the shortest amount of time. It's easy to meet this definition of value when you cherry-pick the students you accept. It's not so easy when part of your mission is to provide opportunity to students who may or may not be equipped to zoom through their college courses on the first try. Should we just not admit them? That certainly would be easier. Is it really the solution we want? And it's comparatively easy when most of the students you admit can can concentrate on being a college student. A depressing number of our students work vastly more than they should. They do it because they are returning to increase their skills while holding down a job they can't afford to give up. They do it because they have children. They do it because they have to contribute to an extended family. Not only must they work, they often have family responsibilities that sometimes amaze me. And more than we know probably don't have health insurance. It's not at all uncommon for our students to "stop out" for a year because they just don't have the money, even with student loans, or because they've had a family health catastrophe. We also serve many students with disabilities that may have barred them from attending more prestigious schools. I hear heartbreaking stories of incredible effort every term. Our students can't shop around for "value." They have binding ties here--jobs, family--and in fact part of our mission is to serve students who are tied to the local community. So the idea that competition will necessarily benefit them is suspect. The jury is out on the supposed easy solutions, some of which we are being encouraged to adopt. Let them do it all online? That may work well for lecture courses, in which they may just read the PowerPoint notes and show up for the tests. But the extent of the trade-off between online and face-to-face interaction with peers and instructors in courses like writing or basic math, not to mention courses like ethical reasoning, where classroom discussion has traditionally been central, has not yet been established. Daniels has promoted community colleges as solutions, but, despite good effort and good will, these institutions provide a different atmosphere than the four-year colleges: larger class sizes in writing, instructors without advanced degrees, for example. An advanced degree isn't a guarantee of quality, of course, but when B.A. graduates with GPAs in the C range in their majors are hired because they're more affordable than candidates with a master's. . . .? Meanwhile, the state slashes appropriations, salaries stagnate so that our ability to attract the best teachers suffers, morale sinks. . . . get 'em in, get 'em out is the mantra we're increasingly hearing. I'm all for retention; it's crucial. And I'm all for assessment to ensure learning on this assembly track; believe me, we do plenty of it. And I'm glad to say that our administration works mightily to support our efforts to serve our students well. But year after year, every dollar is scrutinized as if the fate of the Western world depended on it in an effort to keep some semblance of true value in place. Somebody has to pay for it. Ultimately taxpayers do, regardless of how they do it. Either they pay taxes to support higher education, they pay higher tuition to make up for what taxes no longer cover, or they pay the costs of an uneducated workforce. The legislature and far too many voting citizens of Indiana don't understand this basic equation. I'm not sure more access to college will increase that kind of understanding, but maybe it couldn't hurt.

- vanderso

January 29, 2012 at 11:12am

If something is good, whether it be health care, fine wine, or college education, then it's only logical that more of it must be better. Or not. One of the paradoxes of life is that those closest to something often have the least amount of vision about it. And I'm not referring to self-interest, but rather perspective. I don't doubt that an auto mechanic believes the engine in the 1957 Chevy is the answer to our transportation woes. When I was in college, over 40 years ago, I took a political science course for fun. One day the professor informed the class that the wealth of a nation could be measured by the number of students majoring in political science. Let that sink in. At the time, many colonies, especially in Africa, gained their independence, and sent their brightest kids to America to get a college education so they could return home and help build the new nation. Problem was, most studied economics or liberal arts. Why would they do that? They were copying the European colonialists. At the time I didn't appreciate just how smart, and insightful, was that political science professor. Maybe I should have majored in political science. No, like those new African nations and the European colonialists, America can't afford it.

- rayward

January 29, 2012 at 1:21pm

lfrieda makes a very good point, which I'd like to reiterate: state colleges and universities may well have unimpressive retention and/or graduation rates in a pure comparison with others, but those rates may be in fact quite presentable when one looks at the different capabilities of the entering student bodies. In some states, the high schools do a good job of preparing students for college, and in others a public attitude of casual disinterest in the meaning of education means that young people often arrive at their state university without the necessary tools and awareness to make their undergrad years reasonably successful. This situation parallels those theories of affirmative action in which colleges and universities are pressured to make good the years of incompetence and prejudice that some minorities have suffered earlier in places that higher education is not in charge of. If we hold state universities' feet to the fire, then we need to hold secondary level education's feet there too, otherwise it's like trying to increase the water flow at the nozzle of a hose rather than at the spigot.

- ironyroad

January 29, 2012 at 6:08pm

The affordability of higher education for the society as a whole and the extent and justification for support of public higher education are really not the same issue. Just as health care is becoming unaffordable for the society, so too higher education, especially private higher education. I think the skyrocketing cost of higher ed generally is the result of the same sort of market failure that afflicts healthcare. Just as controlling health care costs frees resources to extend health care coverage, if we retrieved the money that is being blown in private higher ed, we would have more resources with which to support public higher ed -- a very good and democratic aspiration.

- roidubouloi

January 29, 2012 at 7:14pm

Roidubouloi brings up the cost of private higher ed, and raises a good question. I don't know what things look like inside their budgets, but I do know that faculty at the premier private institutions have a pretty sweet deal compared to those at most state institutions, with correspondingly higher pressure to produce high-profile research or intellectual work. There is another factor roidubouloi does not mention (but ironyroad alluded to it), and I think it is an important one. However you might judge the output of a university, the biggest predictor of successful graduates may well be the qualifications of its incoming students. Assuming, that is, that the university actually challenges those students. To be at the top you need to get the best students and to stay at the top you need to be seen as giving them a better education than the universities in lower ranks. Universities that want to be at the high end are in fierce competition for the very best high school graduates. To get these students, they have to offer something that is attractive for them. That may be an elite name or status (e.g., "Ivy League"), a more challenging curriculum and more intellectually exclusive student population, a reputation for having highly successful graduates, a small student-faculty ratio with more personalized instruction (e.g., a small liberal arts school), etc. All of the features that are attractive to the best and brightest students cost more money to deliver. One can debate whether prospective students and their families should value these things, but it seems human nature that they do. Not every university is trying to be elite, but the impacts of the competition trickle down at least into the ranks of the average state universities. Some states have clearly tiered state university systems, which is one way of keeping ambitions under control. Take a look a the student body at a lower-end open admissions university or one with modest admissions standards -- there are diamonds in the rough there and really good students who can't afford better (maybe more of the latter as time goes on). But there are a lot of students who wouldn't make it at a top school, and if you try to teach them material at the same level it just doesn't work for most. The result is that the students at the schools that start with only the top students end up demonstrably better prepared than students at the lower tier schools, on average. If you look at graduate school, the gap is still there, but it is a lot narrower. Mostly that is because the graduate admissions process everywhere selects to a higher standard than for undergrads. Note -- all of my arguments are based on my experiences in science. Perhaps it is different in liberal arts, although I suspect it is not when you account for the fact that a good liberal arts education is really teaching you how to read, write and reason, rather than how to do some specific thing that is easily marketable.

- JEFF FREY

January 29, 2012 at 11:47pm

lfriedla, Good point. More than a third of Detroit high school students don't graduate. As an urban university, Wayne State gets a lot of its students from Detroit, and even many of the city's high school graduates are unprepared for college work.

- magboy47.

January 30, 2012 at 1:04am

I am glad to see some comments along the lines of mine, but think that this point cannot be belabored enough – taxpayers should not be subsidizing private universities. All public monies should go to public institutions. If private universities were therefore beyond the reach of the average person, the average person could still choose to attend a low-cost public university (or it what would be low cost if all public funds were directed to them). If that means that private institutions must close, as is bound to happen with fewer people able to borrow, so be it. The government exist to provide adequate services, not luxury ones.

- spmull06

January 30, 2012 at 10:31pm