College Debt is Busting the Budgets of a Generation – It’s Time for Change

The policy discussion over how to address college costs is faring almost as poorly as the discussion of health care costs that occurred several years ago. There is clearly a recognition that something is dramatically wrong, but the political left and right are miles apart in how to fix it.

Conservatives view the higher education as a service in vast need of a little creative destruction. The underlying idea of college has changed little over the past 200 years in the sense that the model remains one of a teacher lecturing students in a brick building on a grassy quad. And yet costs have soared. Thomas Frank writes for Salon:

The price of a year at college has increased by more than 1,200 percent over the last 30 years, far outpacing any other price the government tracks: food, housing, cars, gasoline, TVs, you name it. Tuition has increased at a rate double that of medical care, usually considered the most expensive of human necessities. It has outstripped any reasonable expectation people might have had for investments over the period. And, as we all know, it has crushed a generation of college grads with debt. Today, thanks to those enormous tuition prices, young Americans routinely start adult life with a burden unknown to any previous cohort and whose ruinous effects we can only guess at.

While the cost of college soars and the size of student debt escalates the product that colleges are offering is dramatically cheapened. Rather than compete based on metrics like the job prospects of their graduates colleges are in an arms race over campus amenities – who has the nicest gyms, the swankiest dorms and the best dining hall spreads.

All of those contribute to the dramatic increases in college cost and yet students are largely nonplussed. Part of the problem is that the federal government has done its best to subsidize college, an effort that President Obama contributed to last month by expanding on a plan to cap loan payments as a percentage of income. But shielding Americans from the true cost of a product leads to the exact same problems we see in health care – soaring costs.

Creating generous loan programs that encourage families to disregard price when choosing a college, was no doubt done with the highest of motives, but it has only served to take away college’s incentive to keep tuition low. Slapping away the invisible hand doesn’t solve the problem, it only pushes it until later.

Florida Sen. Marco Rubio laid out some of these challenges, and more importantly, some solutions in a speech last week.

“Instead of taking steps to make higher education more available and more affordable, we pour resources into a system that is expensive, inaccessible and graduating too many people with unemployable degrees,” Rubio told a crowd of college students at Hillsdale College.

One of the solutions he laid out was to reform the process of accreditation, which no longer works to insure quality and instead allows existing colleges to engage in cartel-like behavior to keep competitors at bay.

“So I have proposed that Congress establish a new, independent accrediting process designed to open the door for more innovative and affordable schools,” Rubio said. “I have proposed ways to help [students] package the free tools all around [them] into an employable degree – tools such as online resources, apprenticeships, mentorships and personal study.”

Rubio is not alone. He is only one of a growing generation of conservative reformers who don’t believe that the federal government is the one-size-fits-all solution to America’s problems, but rather that conservative reforms can harness markets and consumers to overhaul staid institutions.

Those reformers are beginning to introduce ideas like Income Share Agreements as a supplement to student loans, using online options to break down barriers to entry, supporting alternatives like occupational certificates and associates degrees, and forcing colleges to provide and compete based on the success of their graduates.

These are ideas that can address the root of the disease, not merely its symptoms. Unfortunately, if the health care reform debate is a true analog to the educational reform conversation, we have a long and rocky road ahead