Scaling Back Tuition Hikes
Federal taxpayers provide some $65 billion a year in loans, grants, and tax credits to help students attend college, no matter what tuition must be paid.
But what if that huge government largess could be used as an incentive for higher education to help hold down tuition increases?
The idea seems to be gaining currency in the Bush administration. It wants any school receiving public money to be held accountable for its efficiency and results. And colleges certainly need a push in that direction.
Over the past decade, tuition prices have risen far beyond the rate of inflation or increases in family income. Poor families, especially, have seen a dramatic rise in the percentage of their income spent on college tuition. Both taxpayers and parents of school-age children need federal help in using market incentives to push more cost-cutting reforms on colleges.
This month, Education Secretary Rod Paige plans to issue a "strategic plan" that will include a call to achieve "cost efficiencies and cost reductions among postsecondary institutions." The department wants the average national increase in college tuition to drop to 2.5 percent by 2004. That's less than half this year's rate of increase at private colleges, and about a third of the rise at public ones.
Imposing federal controls on tuition increases would be too meddlesome. But schools that are able to avert hefty increases can be rewarded by the government providing more aid to students attending those schools.
Instead of competing for star professors and the best students, colleges would be nudged to compete in lowering costs and the price of tuition. Such a market approach might even launch a reform of the much-abused tenure system that keeps many inefficient professors on staff.
Although it's difficult to prove, the rise in federal aid over the past few decades may have had the perverse effect of pushing up tuition: More money and more applicants can lead to less incentive to trim costs. The growth in aid exceeded the growth in tuition during the '90s, the same period of greatest tuition increases.
Designing an incentive system to use federal aid as a lever for slowing tuition hikes won't be easy. The first step is to set a standard for data about tuitions. And the government needs to collect more information. Colleges that don't cooperate should be on a list of schools where students would not receive the most generous aid.
Keeping tuitions low will increase the number of Americans with college degrees, and that's essential for a knowledge-based economy. On average, people with a bachelor's degree earn 80 percent more than those with only a high-school diploma.
Americans can't afford to see tuition aid misspent at inefficient schools. If colleges want to accept students on federal aid, they can accept a federal incentive for cost-cutting.