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Archive for August, 2012

Harvard College was established in 1636. For the next 200 years Harvard, six other members of what became the Ivy League and a few religious schools were the only colleges in America. Attendance at these schools was almost exclusively a rich man’s privilege. The first government funded public universities were established after passage of the Morrill Land-Grant Colleges Act of 1862, which aimed to make higher education more easily accessible to the citizenry of the country. Unlike the Ivy League schools, which provided a broad liberal arts and religious education, the land grant schools redefined higher education to have more practical applications. They were designed to be agricultural and industrial colleges.

Roughly 80% of American college students now attend public colleges and universities. These schools have a long tradition of  being essentially free and open to all. Despite that tradition, today public school students, or their families, typically pay about $10,000/year in fees, and room and board are not included. Many private schools now cost more than $40,000/year.  College costs increased 439% over the 25 year period from 1982-2007, compared to inflation of 106%, and outpacing even healthcare cost increases of 251%.

The reasons for the rise in higher education costs are many, but the primary one is the lack of productivity growth. Unlike the industrial and agriculture sectors, higher education is essentially unchanged from its 19th century conception. It is labor intensive and not subject to the demands for ever increasing efficiencies which after inflation have reduced the costs of manufactured and distributed goods such as electronics, clothing and food.

Higher education cost increases have been largely made feasible by government Pell Grants and the federal takeover of education lending. These now allow any citizen not convicted of major crimes to obtain funding without any assessment as to ability to repay this debt, much as no documentation loans fueled the sub-prime credit crisis, so essentially, we already have a higher education entitlement.The Department of Education spends about $30 billion/year for various higher education programs, grants and aid, and has now largely pushed private lenders out of the $1 trillion student loan market.

Even with this public support, 82% of college students now take out college loans to pay for a higher education that is far from perfect (see my post Grading Higher Education). If having more of our population attain a college education is the best way for America to increase our collective wealth and economic vitality, why do we saddle our young adult college students with debts that are the modern equivalent of indentured servitude, or an excess mortgage? Public universities should revert to their traditional function of providing good practical educations at very low cost.

The established model of education is under pressure given its accelerating costs, its reliance on public funding and institutional resistance to recognize new education-delivery techniques through technological advancements. At the same time, making education more accessible would be a giant step towards addressing income inequality and social inequity, because education level attainment is the best long term predictor of economic success. So how do we pay for low fee public education for more of our young adults?

Merely imposing more cost containment features will not be sufficient to significantly lower the costs of higher education. We need to reinvent what a college degree means in this century. Americans will need to adapt to new social and economic realities. Online classes have already become part of an extended curriculum for many students. In an iTunes version of public education, relevant learning experiences will originate from the large building down the street, from a music studio in Lincoln Center or a lecture hall at Oxford. Critical thinking skills will still need to be developed by working in close interaction with educators who can correct papers and offer individual advice, but online lectures for most courses will permanently reduce the demand for bricks and mortar. Likewise, expensive library systems in a digital age are essentially unnecessary. Relatively new online ventures such as Coursera and Udacity already have over a million students taking free college classes from well known professors including many from elite schools.

In order to provide the incentives for public schools to control their costs, funding should be capitated for each student and paid directly to the schools much as we fund public primary and secondary schools. Taking only the existing expenditures on higher education at the federal level, this would equate to about $1500/student. State and local funding of public schools added another $85 billion, or $4300/student. Numbers vary every year, but public spending on higher education from all levels of government on the 20 million or so students is roughly $5800/student/year. So we aren’t talking about a lot more in costs; it’s a rethinking of how to spend that money in a vastly more efficient way.

If we are to re-imagine higher education as a low cost publicly funded “privilege” and entitlement as much as a primary and secondary education, we should then question why we should also continue to fund private higher education? Private universities should should be granted the standard student capitation rate much as charter schools are funded, or vouchers are provided for private schools in some districts. Beyond that, let private schools fund their own students.

If you get accepted at Harvard, then it should be up to Harvard to provide grants or loans that make it possible for you to attend. After graduation, you would owe Harvard or its bank, not a federal agency. Such debts could be discharged in bankruptcy, so real credit decisions would need to be made by loan officers, perhaps making it harder to fund art history majors, but easier to provide funds for engineering students. If Harvard declines to provide adequate funding, then you don’t go there. There would be some bright but poor (or middle-class) students who can’t go to Harvard. Instead they’ll have to go to UCLA or Rutgers. Why is this a tragedy? It might even end up as an improvement as state universities find themselves able to enroll more of the very best students, and private universities redesign their cost structures to adjust to a different funding model.