How To Make Higher Education Cheaper

Universities all throughout the country are complaining about University cut backs, students are protesting, and everybody is worried about the increased cost of higher education, especially for the poor.

Writing in the Washington Post, James C. Garland, president of Miami University in Ohio, identifies the problem and recommends how to fix it: replace inefficient subsidies with efficient subsidies,

Part of the problem is that state higher-education budgets are not targeted efficiently. By way of comparison, consider the food stamp program, which in 2004 paid out $27 billion directly to 24 million low-income Americans. Imagine if there were, in its place, a food subsidy program by which the government paid that $27 billion directly to supermarkets. Under such a program needy families would benefit little, because most of the savings would be passed on to customers who didn’t need help. That would be an inefficient use of public money.

But this is precisely what happens in public higher education. When states pay their universities to hold down tuition charges, they are indirectly subsidizing wealthy and poor students alike.

So how do you fix such inefficient subsidies? Replace them with efficient subsidies:

First, turn all or part of each public four-year university into a private, nonprofit corporation, with legislation to protect research grants and centers and to honor personnel and pension obligations.

Second, phase out each school’s subsidy over, say, six years, to enable campuses to grandfather in current students and adjust to the new environment.

Finally, reallocate the freed-up subsidy dollars to scholarships for new undergraduate and graduate students. The scholarships, valid at any accredited four-year college in the state, would go primarily to middle- and low-income students, with some reserved for engineering majors, math teachers and other groups that meet state needs.(emphasis added)

What would this accomplish, you ask?

Consider the consequences of this change:

Middle- and low-income students’ degree costs would significantly decrease; others would pay a larger share of their college costs.

Universities and colleges would scramble to attract scholarship-holding students. Students would choose schools that offered them the highest-quality programs, the most value and a competitive tuition. Colleges that lost market share would either improve their offerings, lower their prices or risk going out of business.

Lacking an automatic pricing advantage, formerly public colleges would raise tuition to make up their revenue shortfall, but no more than the market would allow.

Competition would force campuses to become increasingly lean, efficient and strategic.

With social forces driving higher education irreversibly toward privatization, Secretary Spellings’s commission should focus on smoothing the transition. Doing so creatively would not only ameliorate the college affordability problem but would also advance the fairness and social good that lie at the heart of a stable democracy.

The full article can be found here. Economist Arnold Kling has more.

8 Responses to “How To Make Higher Education Cheaper”

  1. Jack says:

    So really what we are talking about is another socialist scheme to redistribute wealth from those who earned it to those who didn’t.

    One unintended consequence of this policy would be that those who could afford to pay full tuition would increasingly find the incentive to attend what used to be more expensive but what would now be competitively priced private colleges, compelling. The public universities would get all the poor students and the rich kids would be concentrated in private schools that would suddenly have money to hire the best professors. The kids coming out of the private schools would be in the greater demand and would command higher salaries and society would be further stratified with a decrease in social mobility.

    The rosy outcome predicted by socialists would once again fail to materialize. When will they ever learn?

  2. Mitch Wagner says:

    Good heavens, HispanicPundit endorsed a plan for the creation of n*npr*f*ts … and then got called a Socialist.

    I have clearly fallen into the Bizarro World.

    So really what we are talking about is another socialist scheme to redistribute wealth from those who earned it to those who didn’t.

    Virtually no one attending college has earned their wealth, unless you count choosing your parents wisely as earning wealth. If that is the case, then Paris Hilton is the hardest-working woman in the world.

    The public universities would get all the poor students? That’s exactly how it was in my father’s day. He was born poor, and received a completely subsidized education at City College of New York, courtesy of the GI Bill. CCNY was so overwhelmingly poor, and ignorant, that anti-Semites said the acronym stood for Christian College Now Yiddish.

    But my father received an excellent education at CCNY, and worked hard all his life, and as a result retired with comfortable economic assets.

    Likewise, Nobel laureate physicist Richard Feynmann was kept out of some Ivy League schools due to anti-Semitism, but eventually found a home at Princeton and, later, CalTech. Feynmann was, like my father, poor when he was a child, and benefitted from an academic scholarship.

    Universities have always operated partially out of business motives, and partially out of social conscious. Nobody becomes a college professor to get rich. Universities fight for the best and brightest students of any economic class, in part because they know that smart people will tend to succeed economically, and successful alumni are their best donors and marketing tools.

    Am I allowed to mention “social conscience” here, or does that make me a Socialist?

  3. cindylu says:

    I realized after reading this that the guy who wrote this is president of a private university, that is STILL highly subsidized by the federal (and maybe even state) government. Let’s say if he was president of USC, students there can get Cal Grants from the state, if they’re California residents, as well as a grants, loans and work-study from the federal government.

    Right now, I’m just glad that the governor wrote into his budget a $75 million buy back for grad, undergrad and professional students at Cal State Universities and University of California. Of course, you don’t even pay your fees, so you got nothing to worry about there.

  4. Yes, but my (graduate degree) fees are paid by a corporation, on the other hand, it will be you and I, and all of the other tax payers of California that will be paying for the governors new budget increase.

    Oh and, I am still paying back my undergraduate student loans!!! 🙁

  5. oso says:

    That sure is nice of your company to pay for your graduate studies. I wonder if the head of the company is a well known liberal.

  6. I don’t think it matters much, I doubt he does it for altruistic reasons; he does it because he has to do it to remain competitive. When everybody else in the field does something good for its employees, you have to do it too, or else you risk losing some of your best employees to the other companies.

    In other words, this is yet one more area where competitive forces are much more powerful than charity forces, all for the betterment of the employees. 🙂

  7. […] This is why you won’t find me on the picket lines asking for more funding for Universities, and instead find me squarely on the side of those who reduce University funding and instead find efficient means to help the poor pay for college tuition. Filed under: General, Economics, Education by HispanicPundit | […]

  8. […] So what is my solution? I propose we take the middle ground. If your goal is a higher percentage of minorities and disadvantaged youths attending college, then why not directly subsidize them? […]

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