Obama's disappointing college plan
The Washington Post, February 1, 2012
You probably don't think President Obama's new college affordability initiative will leave students with more debt than they incur today. But you'd be wrong.
The president deserves credit for calling out soaring tuition and unsustainable student debt as huge barriers to upward mobility and a strong middle class. But unfortunately, the remedies he sketched in his State of the Union address and in a speech at the University of Michigan last week are textbook examples of proposals meant to signal the president's "values" (and win votes) while doing little to address the problem.
A few facts put the crisis in perspective. In 1980-81, tuition, room and board at public four-year institutions averaged about 12 percent of median family income; for private four-year colleges, the figure was 26 percent of family income (see the nearby table, developed by my colleague Steve Steigleder at the Center for American Progress). That's a pretty serious affordability crunch three decades ago. By 2009-10, however, a year at public institutions consumed roughly a quarter of median family income, while at private colleges the figure had jumped to nearly 54 percent.
This is, to use the technical term, insane.
Little wonder student debt, at $1 trillion, now tops credit card debt for the first time.
The president boasts of having increased the maximum value of Pell Grants to $5,635 next year, up $905 since 2008.
Sounds good. But according to the Department of Education, the maximum Pell Grant in 1976 covered 72 percent of costs at a typical public four-year college. Today it covers about half that much.
In other words, the outer limits of the president's ambition is to leave public colleges half as affordable via federal aid as they were under Presidents Nixon and Ford.
If that's the big picture, what's the president's plan? He'd boost campus-based Perkins loans and target the increase to schools taking steps to slow the growth of tuition. Translation: more student debt, administered in ways that may at the margins reward colleges that have had smaller price increases than others.
There's also a $1 billion "Race to the Top" competition to encourage states to promote college completion and affordability. In a higher-ed system that devours more than $350 billion a year, it's unclear what impact this billion-dollar carrot will have even in hard-pressed state capitols. Obama also wants to extend tuition tax credits, keep student loan interest rates low and create a "scorecard" on what colleges are delivering in learning and post-degree salaries.
Don't get me wrong. These are nice little steps. But in light of the facts above, it's hard to see this package as anything more than tinkering at the edges of tinkering at the edges.
A serious affordability agenda would aim much higher. It would start with honest talk about how zillions in grants and student loans have enabled endless college price increases while bankrolling much "research" of dubious merit, cozy lifestyles for tenured professors and a facilities "arms race" that has little link to teaching and learning.
It would make the world safe for disruptive innovators such as Straighterline, a Baltimore-based firm that offers college classes online via two main models: $99 per month (for all the classes you can take), or $999 for 10 courses for one year. That's right: freshman year for under $1,000, with no government subsidy.
Straighterline offers the general and introductory courses that account for up to a third of enrollment nationwide—subjects such as college algebra, English composition, microeconomics, psychology 101, accounting 101, and U.S. history. The 4,500 students it will serve this year then transfer the credits elsewhere.
Traditional schools raise questions about quality—but they've begun offering online courses themselves, at traditional ripoff prices. "Our cost structure for [online] course delivery is no different than a college's," said Burck Smith, Straighterline's founder and CEO, in an e-mail. "Our prices are low because we don't try to subsidize the rest of a college experience with general education, and we don't burden our courses with the overhead of a campus."
As Smith puts it, technology has allowed many industries to "disaggregate" and "inter-operate." The "product"—say a 10-song CD—can now be broken into smaller parts of a value chain—say a one-song download. These pieces can then be put back together via accepted standards—say, a playlist. Online learning has accelerated the ability to "disaggregate the degree." If allowed to grow free of accreditation, credit transfer and related regulatory and guild barriers, Smith thinks college costs can come down 25 to 40 percent.
"While such price reductions are terrific for students and taxpayers," Smith says, "it will result in college failures, market consolidation and successful new entrants. In any other industry, this would be cause for celebration. What will it be in higher education?"
Obviously there are details to work out, quality metrics to develop and cultures to change. But boldly revamping the business model of higher ed is precisely what leaders serious about renewing upward mobility and preserving the middle class have to pursue.
All of which is a reminder of how timid and inadequate the boundaries of debate are. Is Obama's proposal better than nothing? Yes. Is it better than the GOP's turning a blind eye to the problem? You bet. Will it offer modest help to at least some people? Sure.
But is the president's plan anywhere close to seriously tackling this major national problem?
No. So sorry, Mr. President. Good enough to win reelection just isn't good enough.
(Disclosure: My wife is on the board of an online university, and The Post Co. owns Kaplan, an online education provider that is a partner college with Straighterline.)