Consider this dilemma: The Obama administration, the Lumina Foundation, and numerous state governors have set goals for increasing sharply the proportion of college graduates (or at least the proportion of people with some form of postsecondary training) by 2020-25, while for more than a decade, state-government support for higher education has been diminishing, leading to ever-higher tuition charges and escalating student debt.
The federal government lacks effective tools to change this contradictory financial context because penalizing colleges by threatening to withhold student aid harms only students. That leaves "jawboning" as the main (and ineffectual) recourse. The most recent administration proposal, to redirect campus-based aid (Supplemental Educational Opportunity Grants, Federal Work-Study, and Perkins Loans) to colleges that moderate tuition, is a classic case of trying to wag the dog, as the dollar amounts are too small to offset gains from tuition increases. So what to do?
Several years ago, four of us (Patrick M. Callan, Joni E. Finney, William Zumeta, and I) began wrestling with this dilemma of preserving access and completion for the next generation of college students in an already hostile financial environment. We took a comprehensive look at the changing demography of the next generation of potential college students; at labor-market forecasts of demand for highly educated people; at the institutional capacity to increase enrollments, including distance learning and online education; and at the history and potential policies of federal and state governments.
What we found, as reported in our new book, Financing American Higher Education in the Era of Globalization, is that successful policies of earlier eras are no longer relevant, and that if the United States is to remain competitive in a knowledge-based world, we must examine and rethink the attitudes and incentives embedded in our current system.
Many Americans have yet to realize the extent to which other developed countries have surpassed us in rates of college participation and completion. The United States had a first-mover advantage in developing mass higher education, but since the 1990s our rates have been nearly flat, while countries like Canada, Denmark, France, Japan, New Zealand, Norway, and South Korea have exceeded us in the share of degree holders in the 25-to-34-year-old population. Our research universities remain tops in the world, but they enroll a tiny share of undergraduates, while the vast bulk of our four- and two-year colleges have not kept pace.
If we are to compete with developed and emerging nations, our focus must shift to our broad-access institutions. The recently released federal budget proposal for an $8-billion job-training partnership with community colleges is yet another sign of this new policy direction.
Better known than our relatively flagging completion rates is the changing demography of our youth population. Potential college students in coming decades will increasingly be minority, low-income, and first-generation students. Increasing their rates of attendance and success in college would be challenging under ideal financial circumstances; in the real world of sharply rising tuition charges and heavy reliance on debt, the challenge threatens to overwhelm.
We looked closely at the rationale for trying to increase the proportion of degree holders and found none of the projection methods particularly compelling, at least with regard to specific numbers or percentages. Indeed, some observers have questioned the need to do more. While we do not endorse any given set of numbers, we do argue that the weight of evidence sides with those who seek to raise the percentage of college-educated people in our population. Our economic comparative advantage as a nation will continue to depend on innovation and skilled human capital. Continuing to lose ground to other developed (and developing) nations would be a disastrous outcome.
With regard to future educational capacity, we sought to identify those sets of institutions that might be expected to increase enrollments and degrees significantly, provided they could do so responsibly. As we examined past patterns of enrollment change, it became clear that the major research universities, public and private, are not likely to pursue undergraduate enrollment growth, nor should public policy push them to do so, as they are the least cost-effective institutions for that purpose. Similarly, nonselective independent colleges and universities, while able to absorb some growth, are not likely to contribute significantly to solving the enrollment problem.
Our conclusion is that the focus must be on community colleges, regional public colleges, and the for-profit sector, which has grown significantly in the past decade, accounting now for roughly 10 percent of total enrollment. Reliance on the for-profit sector, however, will require enhanced regulatory and quality controls.
The federal government has more than done its share financially, with outlays on Pell Grants rising from $10-billion in 2000-01 to nearly $35-billion in 2010-11. Additionally, the move to direct lending, eliminating commercial banks as sources of capital, creates the potential for a comprehensive income-contingent loan program, since the banks' opposition to income-contingent lending is no longer relevant. That opens the possibility of handling collections through the IRS, which is important because a truly comprehensive program would require repayments tied to income reported to that agency.
Washington should also explore a new incentive-based matching program to increase state need-based student financial aid. As noted, however, leverage to constrain tuition increases will continue to elude the national government.
Although most states face trying fiscal situations, the responsibility for attaining increased output goals rests firmly on them, and on the institutions within their borders. The value of setting an explicit target for increased degree production is that it allows detailed analysis of what would be required state by state for the nation to succeed. Nationally, to hit the president's 2020 goal would require 8.2 million additional associate and bachelor's degrees beyond current production by then, an average annual increase of 4.2 percent. For most states, a portion of that increase will have to be met by increasing degree attainment in the adult population as well as in the traditional age cohorts.
How are states to achieve those goals? First, the growing focus on degree completion is key, as the wastage in numbers of students who begin but fail to complete programs is a national disgrace. The Paris-based Organisation for Economic Co-operation and Development ranks the United States 15th in degree-completion rate, with roughly one out of every two people who start college going on to receive degrees. Simply cutting those losses will carry us a good distance toward the goal. No single policy will solve this problem, but emphasizing the importance of program completion, providing performance incentives to keep open-enrollment colleges focused on that mission, the strategic use of financial aid, and resisting "mission creep" all have a role to play.
Other tools are early-commitment programs for financial aid to students while they are in high school, support for part-time students in state student-aid programs, use of excess capacity at private nonprofit colleges by helping finance enrollment there, and incentive-based funds for institutions that increase their course- and degree-completion rates. For governors and legislators, meeting the challenge will be, in large measure, a test of political will.
In short, our task is to redesign our 20th-century education system for the challenges of the 21st-century. One could paint this need negatively, as a lost golden age of institutional growth and ever-expanding resources. But for leaders with a clear grasp of the need for change and of the constraints within which they must operate, the prospect, while daunting, will also prove exhilarating.