THE DAILY PROGRESS: Mandates burden higher ed., increase costs

Career College Central Summary:

  • In 2013, President Obama declared, "We've got a crisis in terms of college affordability and student debt." He recommended his three-part Plan for Making College Affordable, “a better bargain for the middle class."
  • His three proposals are: pay colleges for students' performances; promote innovation in colleges; and help students manage and make loan payments.
  • These noble-sounding goals intuitively appear useful. It makes sense not to give financial aid to students who are abusing that generosity. A system to prevent such waste would help. Innovation is positive by definition. Promoting it could help decrease costs and increase quality. And college graduates who drown under college debt break our hearts. Helping students avoid compromising their future finances is an honorable objective.
  • All that said, Obama should not have given that speech.
  • The federal government has only two ways to encourage change: money and mandate.
  • When it uses the money lever, it incentivizes behavior through a monetary reward. In Obama's college plan, this would mean flooding colleges with grant money to pay for innovation. Colleges would propose an inventive scheme, apply for the money and then implement the plan. But with the federal government as the judge, these so-called innovations will be whatever looks good on a federal grant request, not what actually would be helpful in a university classroom.
  • This is straightforward rent-seeking and will cost a university hours of effort to create and implement ideas students may not even care about.
  • Alternatively, when the federal government uses the mandate lever, it encourages the desired behavior by force or fine. In Obama's college plan, institutions would be required to meet some minimal standards to receive federal aid. Colleges would have to conform to one way of educating. The diversity of collegiate choices would gradually become lost.
  • In both cases, either the lure of free money or threat of a fine will change a college's driving guidance from rational incentives of pleasing its students to irrational rent-seeking from the federal government.
  • It is not in the best interests of any of the parties involved — the students, the parents or the college — to involve the federal government in defining best practice in the higher education industry.

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