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Doing Something—But What?

Kenneth Pomeranz, July 2013

President Obama’s approach to college affordability is not new. In fact, it seems to come from a 1988 episode of the BBC comedy Yes, Minister: “We must do something. This is something. Therefore, we must do it.” It may be doable, since it targets groups that are not politically powerful. But it avoids the real financial issues, and it will exacerbate an equally serious problem: the declining quality of the higher education that many students receive.

The affordability of any purchase paid for over time has three elements: the initial price, the terms at which one borrows, and the borrower’s likely future income. The increase in real dollar college costs, after financial aid has been taken into account, has actually been rather modest over the last 20 years: 1.6 percent per year for private colleges (1992–2012) and 2.3 percent per year at public four-year colleges. Costs have gone down by 0.3 percent per year at community colleges.1 Most of the problem has been with the other two legs of the tripod. Real incomes have been stagnant for most Americans, and the terms on student loans have—despite intermittent improvements—deteriorated. The real interest rates for student loans are generally higher than 20 years ago, while real interest rates for most safe borrowers are lower. (It is very hard to avoid eventually paying your student loans, but you can stretch them out.) Both maximum and average Pell Grants, adjusted for inflation, are up slightly over those 20 years, but these increases are not enough to compensate for other changes, and affect very few students with family incomes over $50,000.2

Moreover, cost increases at public colleges—where most Americans go—mostly reflect not spendthrift deans, but increasingly tight-fisted state governments. Real dollar state funding per full-time student in higher education declined 26.1 percent from 1990–91 to 2009–10.3 At the University of California (UC), where I used to teach, total real dollar expenditures per student were almost exactly the same in 2010–11 as they had been in 1990–91—but maintaining that level required roughly quadrupling the (pre-financial aid) real price of tuition and fees.4 (If you are wondering where the money went, answers vary by state, but tax cuts and prisons top the list.) There is waste at universities, as at any large institution, but overall, the problem is not a failure of cost containment: especially when you consider that colleges’ biggest single cost—highly skilled labor—is one that they already get relatively cheaply. (Even tenured professors—mostly PhDs from elite schools, who could have attended equally elite professional schools—generally earn much less than they could have, though they have made their choices and receive many non-financial benefits; no one need cry for them. Many adjunct and part-time faculty, however, are also highly qualified, and grossly underpaid.) In short, the president’s proposals are squarely aimed where the problem isn’t, at least from the point of view of students and their parents. It may be better targeted from the point of view of legislators who do not want to face their role in creating the problem, much less spend money undoing it—but why we should encourage that behavior escapes me. Despite the recession, the US’s real GDP is about 65 percent higher than it was in 1992 (40 percent higher per capita), so why take it for granted that the public contribution to higher education has to be lower than it was then?

Since this point runs counter to the myth that only for-profit businesses control costs effectively—a myth the White House reinforces by suggesting that we need their new ranking system to make colleges “step up to the plate”—here’s some supporting arithmetic.  Suppose that back in 1991-2, state university X got 75 percent of its revenue from non-student sources—a not atypical figure. (At the University of California, the figure was  slightly higher.)  Now, cut  that revenue by the national average of 26.1 percent over the next 20 years.  To recoup those losses entirely from your students, you need to collect 78.4 percent more from each of them.  However the actual 2.3 percent average revenue increase at public four-year colleges over the last 20 years yields only a 58 percent revenue increase, well short of the 78 percent that would have been needed to offset state cuts. This, by the way, is all in real dollars: add inflation and you would have needed to increase revenue per student by 192 percent over the last 20 years. Go back through another decade’s worth—in which overall prices rose by roughly 60 percent—and you would have needed an increase in nominal revenues of well over 350 percent from 1982-2012 just to offset inflation plus the last 20 years of cuts.

Unrealistic cost-cutting expectations have a predictable effect: quality declines. For example, when I started teaching at UC Irvine in 1988, most teaching assistants in large lecture courses were responsible for about 30 students; that number has more than doubled. So discussion sessions often ceased to be discussions, and writing assignments (which take lots of time to correct) were slashed.5 And many schools have cut more than UC, and/or started from a much lower base. Across the country far more classes are taught by “freeway flyers” who lack office space, time, and money for professional development and other support services. Students are increasingly unable to get into the classes they need—and so take longer to graduate, or even give up.

There is, to date, very little evidence that the technological fixes the president invokes will help much. MOOCs may cut personnel costs, but so far they have extremely high dropout and failure rates. (The White House cites a few online experiments that have worked well so far, but one would expect some successes out of many attempts—just as some charter schools clearly work, even though studies show that on average they underperform compared to public schools. Until we know what made the minority of cheap courses that have worked well do so, and know that we can replicate whatever that is, counting on technology to solve our problems is just wishful thinking.) New technologies can indeed raise quality when combined with traditional, labor-intensive teaching—but then they do not cut costs. Dreams that new technologies will make quality education cheap are not new: correspondence courses using mail, radio, television, tape cassettes, and so on have all been touted at some point or other as the miracle cost-cutter. Maybe this time will be different, but it is foolish to assume that it will—and the president should use his bully pulpit to encourage a realistic discussion of the costs of quality, rather than feeding fantasies of future free lunches.

The White House also has some suggestions that do not rely on techno-dreams. Letting borrowers cap repayment rates at 10 percent of their income would be a positive step; so would making it easier for troubled borrowers to know what their options are. The 2010 reform of student loan procedures was also a big improvement. Increased scrutiny of for-profit higher education—which has by far the worst record of providing affordable quality, and has thus created a very disproportionate share of the unsustainable-debt problem—has been helpful, and should be intensified.

But most of the other August 22 proposals that do not rely on dubious savings from unproven technologies consist of shortening time to degree by granting credit for college courses taken while in high school or for prior learning experiences, and digitally matching students with classes that seem to fit their previously expressed desires and abilities “in a similar manner to the way Netflix or Pandora draw on users’ past experience to guide movie or music choices.”6 The first of these two strategies can be helpful, and already exists to some extent, but it has limited potential: granting credit for college-level courses completed before entering college may shorten the student’s path to a credential, but it does not in itself provide any education.

The second proposal, like this plan in general, misunderstands that education is about more than getting a credential, or even about acquiring skills for the student’s first job. It is also about providing the depth and breadth of vision, the critical thinking skills, and the awareness of a broad range of human possibilities that will enable people to react to as yet unknown challenges, be good citizens, and contribute to their communities—both those they already recognize and those they cannot yet even imagine. That is why most schools have general education requirements. If my past choices insure that Pandora never exposes me to rap or the harpsichord, so be it; but, especially in a democracy, education that I miss has consequences for others. Indeed, this is why it makes sense for higher education to be, in large part, a public responsibility. (If college were solely about increasing students’ future earning power, there would be a much stronger argument for having students pay for all of it.) One suspects that the president knows this—he is, after all, the son of an anthropologist, and received an education that went well beyond the narrowly instrumental one that he seems to accept here. But by brushing aside serious quality concerns while ignoring the real nature of affordability problems, he has instead chosen to simply “do something.”

—Kenneth Pomeranz is University Professor of History at the University of Chicago and current president of the American Historical Assocation.