Government Is Behind the Curve
Put more courses online and limit federal student loans to four years of undergraduate work
November 17, 2011
President Obama wants the United States to have the world's highest proportion of college graduates by 2020. But is a college degree still worth what it once was? Less than 60 percent of students at four-year institutions graduate, and many who do are in fields that don't require a degree--two statistics that indicate a potential oversubscription in college.
But the president, parents, and employers place tremendous importance on obtaining at least a bachelor's degree. So students take on thousands upon thousands of dollars in debt to get their foot in the door for a job interview.
There is little pressure on students to choose a course of study that will reap returns on their (or taxpayers') investment. The Obama administration recently announced that students can no longer be required to pay more than 10 percent of their discretionary income on loan repayments, and student loans will be forgiven completely after 20 years. With the knowledge that taxpayers will be the ones on the hook for repaying delinquent loans, students can pursue that overpriced degree in women's studies without worrying about its actual value.
So the question goes beyond whether a college degree is still worth it. The real question is whether the federal government should be continuing to increase subsidies for students to attend college on the backs of American taxpayers.
Higher subsidies are problematic in many ways. Third-party payments inflate costs by making students less sensitive to increases in college tuition. Ever-increasing subsidies also remove any incentive for colleges to be remotely concerned with saving money. Uncle Sam stepping in as Rich Uncle also creates a vicious lending cycle: Washington increases subsidies, giving students a false sense of purchasing power. This enables universities to raise tuition, sending students scrambling for more loans--all of which does nothing to address the college-cost issue.
Worse, increasing federal subsidies shifts the burden of paying for college from the student--the person directly benefiting from having attended college--to the nearly three quarters of Americans who didn't graduate from college. And the price tag for the Obama administration's most recent overreach is steep: $575 million per year, the Congressional Budget Office says.
Government is again behind the curve. While more and more universities (such as MIT) are moving to put college courses online, the president wants to subsidize the old model, which has precluded the most underserved students from having access to college while adding to the astronomical cost of college for students everywhere.
Instead, the administration should consider reforms such as limiting access to student loans to four years of undergraduate work. States should push more public universities to put course content online. These are the types of reforms that would ultimately help to pop the higher-ed "bubble." That would do far more to reduce costs and increase access than any federal meddling ever could.