Commentary

Team O’s Denial on College-Cost Crisis

Want to do exactly the wrong things to fix US higher education? You can’t do much better than the recent offerings from Education Secretary Arne Duncan. To a system blackout-drunk on taxpayer money, the Obama administration would deliver even more booze while only whispering about tough love.

Speaking at a Nov. 29 Las Vegas gathering of financial-aid administrators, Duncan addressed exploding college costs, a problem highlighted by Occupy Wall Street protesters angry over rising student debt. He lauded loan forgiveness and repayment reduction, and exhorted colleges to do, well, something to become more efficient.

While trumpeting the bogus claim that the average college graduate will earn $1 million more over his lifetime than someone with just a high-school diploma, he didn’t even hint that taxpayer-funded student aid (including easily forgiven loans) enables schools to blithely raise their prices.

In short, Duncan said all the wrong things.

Start with the “million-dollar jackpot.” While there is an average net gain for those who actually complete four-year degrees, the “$1 million prize” doesn’t factor in lost earnings while in college, the high cost of schooling or other variables. Include those, and the average lifetime premium is probably closer to $300,000. And, by definition, roughly half of all grads won’t even hit that average.

Yet the real problem is this: Only about 57 percent of people who start four-year programs finish within six years, and most of the remaining 43 percent will probably never graduate. So lots of people will gamble for $1 million, but few will win.

Of course, the jackpot isn’t the only reason millions keep paying even as tuition skyrockets. There’s something even bigger: ever-expanding government aid.

Between 1985 and 2010, inflation-adjusted federal student aid rose from about $30 billion to about $140 billion, a 367 percent leap. Pell Grants alone ballooned from $8.1 billion in 1985 to $41.7 billion in 2011.

Add various tax credits and deductions to that, and it’s no wonder college prices have inflated even faster than health care: Government has ensured that ever-higher bills can be paid.

But hasn’t the real culprit been declining state support for colleges, forcing schools to raise prices? Duncan cited that one, too; it’s another dodge.

Consider: State funding doesn’t much affect private colleges, yet their tuitions perpetually boom. Plus, while public institutions do raise their prices when state support falls, they also raise them when support is rising.

Anyway, state and local support hasn’t been gutted. From 1985 to 2010, inflation-adjusted state and local funding rose from about $54 billion to $75 billion. Support only appears to drop when looked at on a per-pupil basis, because higher-education enrollment has also ballooned.

Which brings up the last point: The Obama administration has set the goal of leading the world in the percentage of the population possessing a college degree.

But the reality is that we’ve already got armies of people in college who’ll never finish. There’s little reason to think we could get even more people in and through.

But there’s a plan to deal with that — sort of. Duncan says the administration will “challenge” schools to improve their graduation rates. Great.

Colleges’ most likely response will be to run warm bodies through to graduation, while giving them few if any college-level skills. Indeed, we’ve been seeing this for years, with literacy for degree-holders dropping and earnings for people with only a bachelor’s degree falling, too.

Ultimately, none of Duncan’s prescription will make college much cheaper or more effective. Only taking the jet fuel — federal student aid — out of college pricing, and being frank about the real value of higher education, could do that.

But Duncan didn’t even hint at such things — because that would really be tough love.

Neal McCluskey is associate director of the Cato Institute’s Center for Educational Freedom and author of the study How Much Ivory Does This Tower Need? What We Spend on, and Get from, Higher Education.”