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InsiderOnline Blog: August 2013

Obama’s Higher Education Plan Isn’t the Change That’s Needed

On Thursday, President Obama announced a plan to tie federal financial aid to government ratings of colleges’ value. That means, as Lindsey Burke puts it, that we’re going to have “the federal government handing out subsidies based on a rating system designed by the people handing out the funding. What could possibly go wrong?” What will go wrong, she goes on to explain, is that the people deciding how to rate college value are going to be the lobbyists for higher education, not the students and families who are the consumers of higher education. [The Foundry, August 23]

As economist Richard Vedder has argued, the problem with higher education is its peculiar non-profit structure—itself a product of government policy—that induces the schools to compete for students on the basis of reputation rather than teaching quality. That focus on reputation leads schools to spend money on all sorts of things that have no relation to learning. Students are not sensitive to the higher prices those costs entail because the value of the degree lies largely in obtaining the credential (made more valuable when the school enhances its reputation) not in the learning—and also because students don’t pay the full cost of their education anyway. In this set-up, trying to fight costs with subsidies is like trying to put out a fire by pouring gasoline on it. [For an example of this argument, see: “Why Are Recent College Graduates Underemployed? University Enrollments and Labor Market Realities,” by Richard Vedder, Christopher Denhart, and Jonathan Robe, Center for College Affordability and Productivity, January 2013]

New technologies are only now beginning to disintermediate and unbundle the university model of higher education—just like they have done to newspapers, theatres, book stores, record stores, and most other pre-Internet modes of content delivery. But standing in the way of that transformation are accreditation policies and government subsidies that protect the university from model-based competition. [See: “Beyond Retrofitting: Innovation in Higher Education,” by Andrew P. Kelly and Frederick Hess, Hudson Institute, June 2013]

A one-size fits all college scorecard designed by the federal government can only be an additional hurdle.

Posted on 08/23/13 03:44 PM by Alex Adrianson

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