Student loans are a big deal this election season, as evidenced by the roaring applause whenever Obama mentioned college affordability during his speech Thursday night at the Democratic National Convention. Obama promised to “work with colleges and universities to cut in half the growth of tuition costs over the next 10 years,” partly by withholding federal aid from colleges that fail to keep tuition down and produce good educational outcomes.
How government resources are spent on higher education is a tricky matter, one that’s hotly debated by both political parties. While we agree that it’s good to incentivize colleges to reduce costs, there are other goals we must also consider. How the government structures federal aid packages to colleges is a reflection of the educational values it holds dear. We see three main values, low costs among them, that must be considered in how federal aid is spent on higher education.
First, Obama is of course right to value low costs. Tying federal aid to tuition rates will force colleges to prioritize and optimize. Especially at large state schools that have highly decentralized bureaucracies, there is plenty of room to cut costs, which can lead directly to student savings. For example, the Ohio State University once saved $20 million merely by switching to common vendors for pens, copiers and shipping. Previously the university’s individual 14 colleges had chosen vendors on their own. Obama’s plan will hopefully lead to a serious and rigorous examination of operational costs at all universities.
However, costs cannot be cut to the point of sacrificing quality. Second, we propose that federal aid be tied to student performance metrics. A troubling trend in the last few years has been the failure of debt-saddled students to find work with their expensive degrees. Nowhere is this phenomenon more alarming than among the graduates of for-profit colleges, which usually produce abysmal student outcomes and waste taxpayer dollars. Therefore, federal aid must also correspond with performance, ensuring that schools that help its students graduate and find jobs are rewarded. This measure will also make colleges spend its limited resources in the most effective ways.
Third, federal aid must also be used to better access from the student level. We commend Obama wholeheartedly for advancing a number of other higher education initiatives, such as doubling the amount of money spent on Pell Grants, grants for students from low-income families. He was also wise to keep interest rates low for federal Stafford Loans. Even if American universities significantly cut costs, there will always be discrepancies between the tuitions of community colleges, state universities and private institutions. This third access-based piece of federal policy should work to cover that discrepancy, guaranteeing that a student’s financial background does not limit his educational opportunity.
Costs, quality and access should be the three main considerations when crafting a federal policy toward college affordability. The ultimate goal is to foster universities that efficiently meet the educational needs of its students—from vocational to liberal arts studies—while ensuring that any child can aspire to any degree, regardless of finances. After all, education should be the great enabler of social mobility, not a mechanism by which current classes are reproduced.