There's a debate among economists about why a college degree is worth so much. That the credential is valuable is not in doubt. According to the Pew Research Center, college graduates earn about $17,500 more annually than high school grads. Why?
The "human capital" school believes that students learn valuable skills in college that employers are willing to pay for. The "signaling" school doubts that the content of a college education is really that marketable. They argue that employers are interested in the traits -- diligence, intelligence, self-control -- that a degree reflects.
For decades, politicians have bought votes with promises to make college "more affordable." They passed legislation with names like the "College Cost
Reduction and Access Act" and the "Ensuring Continued Access to Student Loans Act." There are Pell Grants and Stafford Loans, and much more besides.
Shockingly, colleges and universities have increased their prices more than any other sector of the economy except health care, which is also -- surprise! -- highly subsidized. As Anya Kamenetz writes in "$1 Trillion and Rising," a report for Third Way: "Since 1978, the cost of college tuition has increased faster than the consumer price index in every single year. That's not true for any other item in the basket of consumer goods."
Student loan debt now exceeds all other consumer debt except mortgages. Default rates have reached a 20-year high, with as many as one in six borrowers failing to repay his or her loans. Taxpayers pick up the tab. Just since 2007, the average debt has increased by 43 percent to $26,000. The overhang of student debt is slowing the economy, some argue, as debtors put off purchases of cars, homes and other goods in order to service student loans. For the 30 percent of debtors who don't graduate, the added debt carries no offsetting reward in higher wages.
What have colleges been spending all of that extra money on? Between 2001 and 2011, according to The Wall Street Journal, the number of college and university administrators grew 50 percent faster than the number of instructors. Presidents of public research universities earned a median income of $441,392 in 2012.
Facilities at many colleges have become country-club lavish, with hot tubs, climbing walls, lazy rivers, movie theaters, sushi bars and single rooms with attached bathrooms. Universities across the country have been on a building spree. Dubbed the "edifice complex" by Richard K. Vedder, who studies college spending, much of it has been financed by debt.
Though both Republicans and Democrats have participated in the political pandering that created the higher-education bubble, Democrats have less room to maneuver in seeking reform. As with K-12 education, the universities that profit from current arrangements are the Democratic Party's constituents. President Barack Obama's approach has been to forgive outright the debt of students who work for the government, thereby increasing the burden on taxpayers (most of whom did not attend college).
The sky-high cost of college is a worry for many middle-class families. (Have you seen the financial advisers' ads targeting parents of newborns?) Republicans are likely to have the reform field to themselves for a while.
Mitch Daniels, who taught the Republican Party valuable lessons in management as a successful and highly popular two-term governor of Indiana, is now doing the same for academia as president of Purdue University.
For the third year in a row, Purdue has frozen tuition rates. President Daniels (I know, it has a nice ring to it, but let that go) explained how he did it. As USA Today explained, "There was no secret sauce, just a little sensible pruning that would be ordinary in the business world but seems alien in much of academia, where a steady flow of federal aid guarantees a steady flow of students at seemingly any price." Purdue consolidated some of its administrative positions. It chose a higher-deductible health care plan. It cut food service costs by switching providers and hiring part-time students to do work formerly performed by full-time employees. In short, it acted as if it cared about consumer, i.e., student satisfaction.
Republican governors of Texas, Wisconsin and Florida have called for $10,000 degrees at their public universities. Not $10,000 per year, but $10,000 total, which would return college, inflation-adjusted, to what it cost in the 1970s.
Kamenetz urges that a combination of online courses, fewer nonacademic perks, cutting administrative bloat and focusing on graduation, not just enrollment rates, would make college what it should be -- a boon for the poor and middle class. The current system, which burdens taxpayers, graduates and -- most painfully -- dropouts, with massive debt is uneconomic, unjust and unsustainable.