Over at The New Republic I discuss how the K-12 part of Mitt Romney's recently-released education plan is highly focused on markets and student choice. The higher education side is, too, where it’s arguably more appropriate. College students are adults (although many just barely) who in theory can choose among a vast array of institutions. Romney is right to say:
“Students and their families must also be given the information they need to intelligently weigh the costs and benefits of the many options available to them. Better information about products and services helps consumers make more informed choices, and nowhere is this as important as when students consider a postsecondary education. Despite requirements that colleges and universities report volumes of data to the U.S. Department of Education, there is no simple way for students to access that data and interpret its implications.”
From there, however, Romney calls for repealing President Obama’s two signature higher education initiatives: reforming the federal student loan system and cracking down on abusive for-profit colleges. Prior to 2010, the federal government spent billions of dollars paying private banks to make student loans that the federal government then guaranteed against default. Now it saves money by issuing loans directly. Since banks are still free to lend money to students in the private debt market whenever and however they like, Romney’s call to “embrace a private-sector role in providing information, financing, and education itself” presumably means restoring a wasteful system of corporate welfare. Romney characterizes the so-called “gainful employment” regulations that will penalize for-profit colleges whose graduates can’t make enough money to pay back their loans as “ill-advised.” These regulations have already been watered down after a year of intense industry lobbying and subsequently denounced by many student advocates as too weak.
And in the part of his plan that amounts to pure doublspeak, Romney responds to mounting anxiety among students and families about rising college costs by declaring that “a flood of federal dollars is driving up tuition and burdening too many young Americans with substantial debt.” Or, switching metaphors, “We must stop fueling skyrocketing tuition prices that put higher education out of reach for some and leave others with crushing debt.” As Romney notes, college tuition has risen sharply since 2008 and Obama has responded by supporting large increases in funding for Pell grants, tax credits, and other forms of student aid. The clear implication of the flooding / fueling theory is that tuition rose because of Obama’s spending on student aid, and that cutting said spending--as is all but inevitable under the Paul Ryan budget framework that Romney supports--would cure the higher education price disease.
Econ 101 supports the basic observation that when the government subsidizes a market good, the subsidy is ultimately split between the producer and the consumer. This isn’t so much a problem to be solved as a well-understood consequence of achieving the larger social goal of making higher education broadly accessible to students of modest economic means while supporting colleges and universities in the production and dissemination of knowledge. It’s also likely that, among for-profit colleges that receive 90 percent or more of their funding from federal aid, marginal increases in federal grant and loan amounts produce commensurate hikes in tuition. To be sure, constantly-increasing college prices are a major problem for which colleges themselves bear significant responsibility. So do state legislatures that have disproportionately cut college budgets.
But that’s a far cry from saying that cuts in Pell grants and federal loan limits during a time of high unemployment and rapidly increasing college prices will impose some kind of immediate salutary discipline on the higher education market and save students money. It won’t. Bending down the higher education cost curve is a long-term project. Cutting federal aid in the short-term will deny access and opportunity to huge numbers of low-income and out-of-work students at precisely the time that they, and the nation, need higher education most.