Washington Offers Bad Ideas for Higher-Education Cost Containment

Published April 1, 2008

Worried about the rising cost of a college education? Never fear, your Washington politicians are here to save the day, ever eager as they are to please during a presidential election year.

Unfortunately, their remedies, contained in the Senate and House versions of the Higher Education Act reauthorization soon to be reconciled in conference committee, almost certainly will bring the Law of Unintended Consequences into play.

Politicos of both major parties are embracing a form of tuition price control that should work just about as splendidly as all exercises in government price control over the past 38 centuries–that is, disastrously.

Wrong ‘Rithmetic

One bright idea is to require the U.S. Department of Education to post online and on paper a “watch list” of those institutions of higher learning where tuition-and-fee increases are running above average. This Wall of Infamy is intended to provoke outrage and force the offenders to curb their profligate ways.

There is one little problem. The cheapest colleges are far more likely to wind up on the hit list than the priciest ones.

That is a matter of simple arithmetic: A $500 tuition hike is a far bigger percentage increase at a little Bible college charging $10,000 a year than it would be at an Ivy League bastion where tuition is $40,000. (Of course, arithmetic is not one of Washington’s strong subjects–note all the pork-barrel earmarks and soaring deficits.)

Hidden Details

To analyze the impact of this proposal, The Chronicle of Higher Education conducted an in-depth examination of college tuitions in Massachusetts, the home state of Sen. Edward M. Kennedy (D), one of the advocates of higher-education price controls. The findings confirmed that arithmetic rocks.

In 2006-07, the average tuition increase for private colleges in Massachusetts was 5.9 percent. The Chronicle reported the state’s most expensive institution, Bard College at Simon’s Rock, increased its tuition by $1,420, or 4.4 percent–to $34,804. It would not have made the congressional Wall of Infamy.

Meanwhile, the state’s least-expensive private institution, Boston Baptist College, hiked its tuition by $943–to $8,277 per year. That was a 12.9 percent increase; hence, it would have incurred the wrath of Washington’s price controllers.

The Chronicle found similar disparities around the country.

Meddling in Markets

At the 11th hour, before the full House voted 354-58 on February 7 to approve the bill, House Democrats stripped out the watch list. However, they added draconian measures to require colleges with offending tuition increases to turn over confidential records to the U.S. Secretary of Education and tell her how they would mend their ways.

The itch to intervene in higher education markets in order to score points with tuition-payers is bipartisan, unfortunately.

In 2005, when Republicans controlled Congress, Rep. Howard P. (Buck) McKeon (D-CA), chairman of a key higher education subcommittee, advocated withholding student aid from colleges that failed to curb tuition increases. Now, the reauthorization engineered by House Democrats would give extra Pell Grants to colleges that limit tuition hikes.

Creating the Problem

Both carrot and stick approaches ignore the economic reality that massive federal aid is what distorted the higher education market and helped fuel price inflation in the first place.

While the White House is opposing “tuition price controls” devised by congressional Democrats, the Bush administration has shown its urge to dabble in other ways. For example, it sought to use federal oversight of accreditation agencies to require assorted “outcomes” measures for the wide mix of colleges and universities.

As Cato Institute scholar Neal McCluskey observed in an October 28 EdNews.org article, it is ironic that conservatives who historically have warned against federal control of education now want “to use government to control arguably the freest–and most envied–education market in the world, with its thousands of largely independent colleges and universities.”

The vibrant consumer choice within higher education stands in stark contrast to the dreary public monopoly in elementary and secondary education.

As for rising college costs, savvy consumers have recourses such as expanded use of low-cost community colleges and distance learning. They are not going to find help from posturing politicians.

Robert Holland ([email protected]) is a senior fellow for education policy with The Heartland Institute.

For more information …

“Conservative War on Good Education,” by Neal McCluskey, EdNews.org, October 28, 2007: http://ednews.org/articles/18983/1/Conservative-War-on-Good-Education/Page1.html