Excellent article by Richard Vedder
I think the American people understand, albeit dimly, the logic outlined by the author in this piece.. Increasingly, state governments are cutting back higher-education funding, thinking it is an activity that largely confers private benefits. The pleas of university leaders and governmental officials for more and more college attendance appear to be increasingly costly and unproductive forms of special pleading by a sector that abhors transparency and performance measures.
Higher education is on the brink of big change, like it or not.
Man, Economy, and Financial Markets
8 hours ago
The Obama administration is well aware that the change is about to occur. They are currently in a regulatory binge when it comes to "for profit" universities. This fall the Department of Ed released a 900 page document of new regulations for only "for profit" schools. This was done under the guise of consumer protection. Some of the regulations the schools include holding for profit schools liable for repayment of student loans for 5 years past graduation. Currently the regulation is for 3 years. Imagine what would happen to state schools if they were held to this standard. Remember schools are not allowed determine how much a student can take. What often occurs is that students with little financial skills will take the whole amount allotted to them through Federal Financial Aid programs. The student then runs up huge financial debts. Making it more likely that they will not be able to pay back the loans. Another issue is facing the for profit schools is the income to debt ratio students will incur. The Dept of Ed is afraid that the students will run up enormous debts and be unable to pay back the loan because the for profit schools are charging too much for programs that lead to careers in lower paying fields. Has the Dept of Ed seen what a Poli Sci major from ASU gets in income when he graduates? I bet that ratio is pretty ugly.
ReplyDeleteThe "impression" or "belief" that higher education has significant public good or positive externalities seems to be an article fo faith. This belief has lead to such extensive public involvement in higher education in the form of subsidy, regulation, tax revenue and other involvement that only a policy wonk might discern.
ReplyDeleteSo, the unintended consequences of this involvement are both unsurprising and perverse.
So, just as the state subsidizes and taxes tobacco production to ill effect, so too does this state expansion of resources directed by central planning to higher education - think majors in art history, dance, linguistics, as well as trades such as accounting, engineering and graphic design - lead to mal investment in human capital.