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February 02, 2012 7:46 PM Getting to Affordable, the Heritage Foundation Way

By Daniel Luzer

The Heritage Foundation does not like President Obama’s new plan to try and reduce college tuition. While Heritage thinks Obama is focusing on an important issue, the organization says that his reforms “will not only fail to fix the problem but is also likely to compound it by blunting the competition that is needed to shake up the world of higher education.”

Among other things, Obama’s college reform proposal calls for a federal program that will give states generous financial rewards for getting college tuition (or more precisely the net price students pay for college) down.

According to the research report written by Heritage’s Stuart Butler:

Moreover, the extensive and expensive system of federal aid for college has actually exacerbated increases in the total cost of college. This is because colleges can boost tuition when such assistance enables students to offset part of their costs. To be sure, better-targeted student aid can help specific groups of students afford college, but increasing total aid, as the President proposes, will tend to increase—not decrease—the sticker price of college.
The antidote to this trend is not for the federal government to tweak college assistance. It is to encourage the mounting competition to the current cozy system coming from new and far less expensive higher education business models. Competition—not further involvement from the Department of Education—will transform higher education and sharply reduce costs in the future.

While the financial-aid-causes-colleges-to-increase-tuition theory is somewhat questionable, Butler has an interesting idea. Is innovation the solution? Perhaps.

It’s a risky idea, however; what country has been able to cut the cost people pay to go to college by reducing regulations on higher education? Find me one.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer

Comments

  • allaboutedu on February 03, 2012 4:03 AM:

    This plan is useful resources and this information for who are all reading this pages.

  • jonas on February 05, 2012 4:28 PM:

    First, @allaboutedu: huh? Second, it's not clear what Heritage envisions as "competition" here. Is it really possible to open up an institution somewhere in Boston that can offer everything Harvard does, but for 25% less? What would they cut back on? Faculty salaries? Just have computer terminals loaded with Google instead of a library? Then they're in no way "competing" with Harvard, just offering a far lesser product for a lower price. The best place to encourage "competition" is to expand the community college system. Right now, demand for the kind of training and education CCs provide is growing, but states and counties are cutting funds year after year, thereby starving our educational system of precisely the kind of competition Heritage talks about -- offering alternatives to high-priced universities and four-year colleges.

  • pQuincy on February 06, 2012 11:15 AM:

    In addition, a good deal of what drives tuition at private schools is brand maintenance, not production costs. Almost all colleges actually don't cover their full costs of undergraduate education through tuition of course...though that cost includes supporting a good deal of a university's research mission, which combines a public good with a branding value.

    The branding race (in which more prestigious, more expensive, and more exclusive tend to go together) has relatively little to do with undergraduate education, moreover. Nobel prize winners don't usually teach many undergraduates, and when they do, there's no reason to think they do it especially well (some will, some won't). But the brand on your diploma has huge consequences for future earnings, and that brand is enhanced by (very expensive) Nobel Prize winners.

    The importance of brands has soared in higher education over the last decade, and in case after case, increasing costs have led to an _increase_ in applications, showing that few 'consumers' of undergraduate education are particularly cost-sensitive. This may change, of course, and inability to cover high costs is a major constraint on some families, as well. Johnny Mediocre who is upper-middle class can get into a decently branded liberal arts college by paying the full load, but that's not an option for Jimmy Mediocre from a lower-middle class family. There's a complex set of determinants, and I rather doubt that the Obama plan would have more than a marginal influence, as a wide range of institutions would adapt to it, as they have adapted to Federal financial aid, to shifting loan regimes, and so forth.