Thursday, July 12, 2007

College Cost Reduction Act - Is It The Right Approach To Reduce College Costs?

Yesterday I was channel surfing and I came across on C-SPAN the house discussing the College Cost Reduction Act. A few things have jumped out at me. I haven't put enough thought in to have coherent plan for higher education, so these are just some musings.

I continuously heard almost every Democrat who spoke say that it comes at "no new cost to tax payers." No matter what the issue, I cringe when I hear our leaders talking about something not costing tax payers money. Everything that Congress does costs money. I'm not saying that our government shouldn't spend money on worthwhile issues, but don't talk about it not costing money. "Taxes are the price we pay for living in a civilized society," as Chief Justice Oliver Wendell Holmes Jr said, and I'm fine with that. But I want the government remembering that it is our money they're spending, even if they have cleverly appropriated so as to make it appear that its not coming from out taxes.

The last thing concerning the Democrats, they kept comparing this bill to the GI bill. There is a big difference that should be pointed out, that seems to have been overlooked. The GI bill paid for college for people who served our country. I'm not saying I'm against helping out students, nor cutting college costs, nor improving education. But I do dislike incorrect analogies. It reminds me when I heard presidential candidate in 2004, I forget who, say we need a Marshall Plan for America. The Marshall Plan was foreign aid, you can't give your own country aid.

The bill increases financial aid. Among things, it raises the maximum Pell grant. But some of the Republicans raised an interesting point, as financial aid increases colleges just raise their tuition to capture more of that. I haven't studied the issue in depth, but it is interesting and deserves more analysis. I will whole heartily agree that we need to spend more money on education, both K-12 and higher education, although along with that we need to dramatically improve that education so to ready America for competing in our globalized world. So if financial aid, including student loans, is driving up tuition instead of actually reducing the cost, or at least stabilizing the cost, perhaps we need to rethink how we fund colleges. Perhaps what we need to do is keep scholarships for those who truly can't afford college, but to keep tuition down we give more funding directly to universities. This will keep people in the between qualifying for student aid and being rich enough (or rather their families) to afford college from having to take out more student loans, their only recourse.

That we have so many students leaving college with so much debt is unacceptable. If college tuition was rising at a reasonable rate, with inflation, or at least below the growth in our economy. Parents have some 18 odd years to save up to send their kids to college. If tuition was reasonable and below the growth in the economy, you could start setting a couple thousand dollars away each year tax free in mutual funds, etc., and have a return on your investment which would give you more money to spend on your kids college than if you waited to pay all of it when they hit college. But with tuition rising above rapidly, you're going to effectively lose buying power each year. If the current trend keeps up, tuition costs will more than have doubled in 10 years.

Another interesting point raised is with student loan forgiveness and capping payments. When you forgive loans students don't care how much their education costs and don't factor that into a decision. When I was choosing college, I had to make a choice. I could go to one of the more prestigious schools and go into debt, or I could go to a good school but not the best school in-state and stay out of debt. I chose to stay out of debt. Are students entitled to a blank check for their education, that will cover either a state university for $6000 a year or a private school for $60,000 a year? If I could have gone to any school that I could get into regardless of cost, I would have chosen a more prestigious, expensive school.

Indeed, this is the very problem with the idea of making higher education totally "free." Do we want to move to a merit system where if you can get into a college, you can go for free? And so the best students will all go to the best, most expensive universities for free, and the worse students will go to less prestigious, cheaper universities. If we did that, is the government and thus each tax payer going to cover the costs of expensive schools like Harvard? Or do we put price controls on college tuition, including private schools? Or perhaps we only cover public universities, and hope that there lower tuition drives the cost down of private schools? And if we have a fully tax payer paid (and what money schools can get from their alumni) system, but universities that set their tuition, what will keep costs from skyrocketing even further? We still have the best university system in the world despite our problems, and if our government takes too much of a role in determining their budgets, we will upset that balance. So despite its allure, the idea of free college is riddled with problems.

I'm not sure on a particular solution. Yes, we do need to spend a lot more money no doubt on higher education. But we need to do that without raising tuition a lot more, which more financial aid seems to do. If we are going to compete in the 21st century as a nation, more of our children are going to need to go to college and more of our children are going to need to be better educated in college as well, all of which costs money. In the past we had lots of decent jobs that don't require college degrees. That is changing. The cushy high paying factory jobs with nice health and pension benefits are moving overseas to where they are cheaper. And not only that, many white collar jobs are also moving overseas or being automated. We can no longer let just the smartest children and the children of families who can afford college be the ones getting higher education. We need most of our children to be the brightest not at home, but the brightest in the world, if we are to continue our high standard of living that we have come to expect and perhaps, take for granted.

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