Posts tagged with: College tuition

Dr. Richard Vedder, the Edwin and Ruth Kennedy Distinguished Professor of Economics at Ohio University and the director of the Center for College Affordability and Productivity, recently addressed the topic of federal aid and the cost of higher education, an issue that has received some attention on the PowerBlog as of late. Vedder critiques federal aid initiatives like the Pell Grant, which today helps the middle class more than the poor, but saw a twofold size increase from 2007 to 2010. Vedder’s article, titled “Federal Student Aid and the Law of Unintended Consequences,” levels a string of critiques against the current system and ultimately argues for a complete re-examination of federal student aid programs. A portion of his argument his excerpted below:

In the real world, interest rates vary with the prospects that the borrower will repay the loan. In the surreal world of student loans, the brilliant student completing an electrical engineering degree at M.I.T. pays the same interest rate as the student majoring in ethnic studies at a state university who has a GPA below 2.0. The former student will almost certainly graduate and get a job paying $50,000 a year or more, whereas the odds are high the latter student will fail to graduate and will be lucky to make $30,000 a year.

Related to this problem, colleges themselves have no “skin in the game.” They are responsible for allowing loan commitments to occur, but they face no penalties or negative consequences when defaults are extremely high, imposing costs on taxpayers.

In the conclusion of his article, published in Hillsdale College’s monthly speech digest Imprimis, Vedder notes the good intentions with which federal aid programs were established. Unfortunately, these good intentions do nothing for the effectiveness of the system, now responsible for more debt than credit cards. With the debt crisis handcuffing so many Americans, a strong sense of moral urgency–paired with sound economic thinking–is necessary in rethinking the future of student aid in America. Vedder’s article is a useful start.

The Obama administration has placed a high priority on making higher education affordable. In January, President Obama spoke to students at the University of Michigan about steering American colleges and universities towards more “responsible” tuition costs.

It’s an admirable goal. According to the College Board, from the 2001-2012 school years, college tuition and costs at public universities increased at 5.6 percent a year more than the cost of inflation. For the 15 percent of consumers responsible for it, college debt totaled $900 billion in the third quarter of 2011, according to a recent Federal Reserve Bank of New York report. Such staggering figures invite questions not only about debt, but ones of morality.

The Bible does not shy away from the issue of debt. Psalm 37:21 demands that debtors pay back what was borrowed. In both the Old and New Testaments, the system of debt is likened to slavery. The issue carries moral implications for both borrower and lender. With as many outstanding college debtors as there are graduates (also from the NY Fed study), the financing of American higher education is not sustainable on its current path.

But Obama’s proposed plan, which includes a $10 billion addition to three federal grant programs, complicates itself through size and scope. Obama’s plan is performance based. It will apply sweeping categorical evaluations to public colleges and universities in varying fiscal circumstances. Schools that constrain net tuition increases will be rewarded. Those that don’t risk losing federal assistance.

The proposal forces the White House into the contentious and ongoing debate about the funding of state universities. Many states, California, for instance, have already imposed massive tuition increases as a result of equally enormous cuts to state aid.

Instead, look to Texas, another state that has faced significant education-related budget struggles in recent years. At last month’s SXSWedu conference, Texas A&M-San Antonio introduced an affiliation with Alamo Colleges, a group of local community colleges, and local high schools to give a number of accepted high school juniors a college degree at the age of 20, all for under $10,000.

The partnership, which was detailed by Thomas K. Lindsay at National Review Online, offers a bachelor’s degree of applied arts and sciences in information technology. The A&M system of schools has also announced plans to offer two additional degrees under the same program. With continued success, the model could potentially be expanded to suit a range of degrees.

The Texas A&M model, unlike the Obama administration’s, is locally-based and promises an efficient, cost-driven approach to higher education. It presents a model of loaning and spending that may be closer to Scripture’s ethical call for fair and honest fiscal relationships.

If more public colleges and universities follow suit by establishing programs similar to A&M-San Antonio’s, the nation could take a large step towards a more educated population with a strong sense of fiscal and moral responsibility.