Higher-Ed Bloat: Blame the Subsidies or the Spending?

Illustration courtesy of Mother Jones
Illustration courtesy of Mother Jones

College students should be angry. Skyrocketing tuition threatens to ruin their prospects of moving out of their childhood homes as they take on massive debt just for the privilege of entering a cage match in the battle for nonexistent jobs.

And politicians are finally starting to notice.

Republicans appear to have drawn first blood. Conservative pundits often cite this report from Downsizing Government, an arm of the Cato Institute, which gives the impression that students should blame colleges bureaucracies and the addle-brained liberals who’ve thrown money at the problem in the form of increased Pell Grant awards and greater access to student loans—thus destroying the delicate efficiency of the free market. By increasing aid to students, those stupid liberals have given those money-grabbers to fund their programs by raising tuition – which is exactly what most college presidents have done.

This trend is undoubtedly true. However, it’s also exactly what Republicans wanted.

Increase Competition – Run Colleges like a Business

The Cato report has two big problems. The first is its focus on federal aid – most public colleges receive a great share of their funding from states, as in Minnesota State University (and land-grant universities like the U of M also receive substantial state funds).

The second is that it lumps together federal aid to students (the lion’s share) and direct aid to higher-education institutions.

For decades, conservatives have called for defunding public higher education institutions and using the money saved to fund students directly in the form of vouchers. This would force colleges to “compete” for funding by appealing directly to the students. Private colleges bellyached that the lower cost of public schools gave them an unfair advantage. In the early years, conservatives actually called it the “high tuition, high aid” model. Of course, this did not go over well (because it is stupid) and was routinely thwarted in state legislatures before even getting out of committee.

Fortunately for Republicans, the recession in the 1990s put states in a budget crunch and many, including Minnesota, froze or decreased funding for higher education institutions and called on college presidents to raise tuition as a source of funding. The dramatic tuition hikes affected many current students, prompting Congress to lift caps on student borrowing – temporarily (Ha!). This also began the trend of IRA-inspired, tax-free College Saving Plans, which could help parents send their kid to Carleton ($62,000 a year) if they both started contributing the $3,000 maximum each year on their third date.

In effect, Republicans at the state level got their wish—colleges competing for student dollars (vouchers in the form of student loans and massive college saving accounts)—by passive-aggressively blaming a budget crunch. Former Minnesota Gov. Tim Pawlenty perfected this method by ensuring future deficits. (His budgets always used optimistic/unrealistic revenue projections).

Who Benefits from All This?

Not students. Not middle-class parents.

Public colleges and universities? Maybe. But only if by benefit you mean they spend more time fund-raising and advertising to attract students in their Battle Royale for tuition dollars against private colleges. You also have to ask if universities serve the public by developing costly, specific programs in response to specific businesses. Bolstering nursing programs is great, but who really benefits from a program specifically geared toward manufacturing Arctic Cat snowmobiles?

The big winners are established destination schools like Carleton, who draw students from families who start planning to send their kids to college minutes after conception. Those 529 plans are great for these folks.

The private for-profit colleges go after the loan dollars without regard for creating student debt. In past decades, they scammed people for their Pell Grant funds, but now the rewards are higher—as are the consequences for the students being scammed—than ever.

Bankers. Even with Direct Loans, someone has been contracted to process them. Although not eye-popping or outrageous, this is an easy, lucrative gig.

Businesses are also a big winner in all of this. Not only do they have access to a desperate workforce, if they buy their own for-profit college, they can actually get the federal government to pay for skills specific to their workforce—the stuff that used to be called on-the-job training.

Archduke Franz Ferdinand
Archduke Franz Ferdinand

Direct Your Anger Properly

It’s easy to mock a central system office with so many VPs that you should make trading cards and try to catch them all like Pokemons. But when a conservative takes the fat cat bureaucrats to task in a profile questioning why the Assistant to the Archduke of the State University Parking operates a For-Profit Parking Prison—or anything else that is clearly worthy of derision—reread some history and remember who thought defunding colleges was a good idea in the first place.

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