Don’t Fear The Higher Ed Bubble, Obama Will Keep Reflating It

A few years ago, the country became aware of a “bubble” building in higher education, as it had in housing.

Excessive demand – based largely on easy credit, government subsidies and the overselling of a college education – caused academia to expand unsustainably.

Then came the economic downturn. With underemployed graduates and dropouts increasingly unable to repay loans, state legislatures cutting appropriations, and innovative competition making inroads, the bubble appeared ready to burst, or at least deflate.

That could mean – so the theory goes – devastation for traditional academia: declining enrollments, with some colleges forced to close, perhaps; a shift in emphasis from academic to vocational courses; more online education; an end to faculty tenure, and other drastic changes.

Now, however, it might be time to rethink that scenario. President Obama’s re-election could postpone any such bubble deflation. Given his penchant for rewarding big supporters, he is likely to make sure academia is taken care of.

University employees gave overwhelmingly to the president’s reelection campaign. Indeed, four of the 10 largest donors to his campaign, according to Federal Election Commission records reported on the web site, were the collective employees of the University of California, Harvard, Columbia and Stanford.

Cash might be the least of academia’s contribution to the president’s reelection. Universities also provide Democratic votes. Registered Democrats outnumber Republicans by three or four to one among faculty, according to survey data; in some departments avowed communists outnumber registered Republicans.

Not surprisingly, studies show that students’ political beliefs often move to the left during their college years. It shows in their voting: according to USA Today’s post-election analysis, the president won 59.8 percent of the 18-29-year-old vote.

The president is not one to forget such help. His tendency to reward supporters showed in the 2009 automobile industry bailout. The biggest beneficiary was the United Automobile Workers union, one of his party’s most ardent backers. Between 2000 and 2008, the UAW gave $23.7 million to Democrats, only $193,540 to Republicans.

Once in office, the president acted swiftly to protect the UAW. His administration arbitrarily gave higher priority to union pension funds than to other unsecured claims; unions got $21.4 billion more than they would have under ordinary bankruptcy proceedings, with 55 percent ownership of Chrysler and 17.5 percent of GM.

This time around, President Obama likely will come to academia’s rescue, if needed. He already made several moves to bolster higher education funding in his first term. For instance, he nearly doubled the federal Pell Grant program, from $19 billion in 2009 to $36 billion for 2013.

Another proposed gift to higher ed is student loan forgiveness. House Democrats introduced a bill (H.R. 4170) this year that would place limits on the amounts students must repay annually, forgive all loans after 10 years of repayment, and provide quicker forgiveness in exchange for work in the public sector. This move, if adopted, would perpetuate the excessive demand, as students realize they can borrow a lot now and repay only a little later on.

The president has also shown an inclination to aid his Ivory Tower benefactors by going after their competition: for-profit schools.

In 2011 the administration proposed a “gainful employment regulation” limiting the participation in student-aid programs of for-profit schools that fail to meet certain standards. Equally poor-performing nonprofit schools would not be penalized. While that regulation was struck down in federal court, Sen. Tom Harkin (D-IA) launched an “investigation” – some would say witch hunt – of the for-profit education industry.

Even more-radical ideas also might see daylight, such as a federal takeover of higher education from the states or universal free higher education. These schemes aren’t as far-fetched as they sound; the federal government has been incrementally moving into education – both post-secondary and K-12 – for many years.

In fact, almost anything is possible, now that President Obama no longer has to worry about re-election. He regularly bypasses Congress through executive orders and bureaucratic regulations, and throws money at problems.

His first-term payoff to higher education may be just a down payment on future largesse. If so, the bubble could continue to expand indefinitely. At least, that is, until the Treasury’s printing presses break or a major financial collapse occurs.

Jay Schalin is director of state policy analysis at the John William Pope Center for Higher Education Policy ( in Raleigh, NC.


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