Hakuna, Adobe Stock Images After enjoying many decades of high public support, higher education in the U.S. is in serious decline. Polls show that a sizeable percentage of the populace now doubts that college is worth the cost and that it contributes to the public good. Enrollments keep falling, and the luster that a college degree used to confer on graduates has become tarnished, especially since recent events indicate that, instead of helping them mature, college turns them into ideologically obsessed activists.
What has gone wrong?
In his latest book, Let Colleges Fail, economics professor Richard Vedder employs his insights to answer that question. The book’s subtitle, “The Power of Creative Destruction in Higher Education,” further elucidates his point of view. Consumers enjoy the results of markets where wide-open competition prevails, because the drive to succeed weeds out entities that fail to provide good value for the money. The problem in higher education, Vedder observes, is that competition is greatly hampered. Colleges can get into financial trouble just like failing businesses, “but, typically, third parties come to their rescue—governments allocate emergency funds and private donors respond to appeals for support,” he writes.
The higher-education system is riddled with features that protect the status quo and retard innovation. Moreover, the higher-education system is riddled with features that protect the status quo and retard innovation. Americans should therefore embrace changes that would allow much more competition than we now have.
One of the most glaring problems, Vedder argues, is the escalating cost of college attendance. For most of our history, nobody talked about the cost of college, because it simply was not a problem. In the past, college was not very expensive (even at prestigious schools), and its cost was actually decreasing as a percentage of average income. But that changed in the 1970s. People began to complain about rising tuition rates. What was the cause?
By raising tuition, schools are able to spend huge amounts on things of dubious educational value, such as administrative personnel. Vedder explains that the cause was government policy, specifically the federal government’s subsidies for college attendance through grants and easy loans. Once that kicked in, college officials took advantage of the new circumstances and charged more. Colleges are overwhelmingly non-profit institutions, but that doesn’t mean they don’t want to maximize the inflow of money. The cost of attendance steadily rose.
By raising tuition, schools were able to spend huge amounts on things of dubious educational value, such as administrative personnel. For example, not only do college presidents often now have chiefs of staff, but so do provosts and other administrative bigwigs. Vedder, who has been on college faculties for 60 years, points out that those people used to somehow get their work done by themselves. Yet the number of administrators of all kinds has soared to the point where they sometimes outnumber the faculty. Are they doing anything to improve student outcomes? Seemingly not, since many students now coast through college with scant gains in knowledge or skill.
In no other industry do we find so many dissatisfied customers as in higher education. So what should we do? Vedder has a lot of suggestions.
First and foremost, he argues that the role of government in higher education must be drastically reduced. In our earlier history, government did not subsidize higher education, and it was a terrible mistake to begin. Why did we? People argued that college was a “public good” and that we would not have enough students going unless the government encouraged them. At one time, even the stalwart free-market advocate Milton Friedman agreed with that. But later in his life, Vedder writes, Friedman changed his mind. Instead of subsidizing colleges as supposed “public goods,” he thought that we should perhaps tax them as “public bads.”
Vedder argues that the federal government should completely stop its financial-aid programs. They lure into college many students who would be better off working and/or learning elsewhere. Could we adjust to such a drastic change? Yes. Necessity is the mother of invention, and students with academic ability and ambition would swiftly find other ways of financing their post-secondary education. Private lending would be available to students who seemed likely to be able to repay their loans. Another possibility is income-share agreements, where lenders advance students the money they need for college in return for a promise to repay a percentage of their earnings later. Both of these alternatives to government financing would inject needed financial discipline into the lending process and hasten the demise of schools that merely slap useless credentials on their students.
Suppose that getting the government entirely out of financial aid isn’t politically feasible at this time—then what? Vedder suggests that we would get the benefit of market incentives if we changed the law so that schools would be allowed to take federal loan money only if they agreed to be responsible for students who did not repay. If we adopted that policy change, he writes, “universities would have to make a decision: Is a student applicant likely to repay his loan, or are we likely to get stuck with the repayment ourselves? Schools would be forced to act closer to what businesses do all the time—assess probable costs and benefits.”
Vedder argues that the federal government should completely stop its financial-aid programs. Vedder also observes that we have very poor information about the results of college education. Sure, we know how many students get various degrees, but we don’t know how much they learned. We could change that by instituting a test, the National College Equivalence Exam. This would be a standardized test of knowledge that educated people ought to have, given at the end of high school and again in college in the student’s final year. With that information, students could choose more intelligently among schools; such a test would also create a strong incentive for colleges to raise their standards. We’d benefit from competition to increase quality.
Wouldn’t professors put more effort into their courses if they were paid directly by students? Turning to the faculty, Vedder suggests that we should change their incentives, away from the current “publish or perish” mindset that prevails at many institutions. The problem is that professors put relatively little effort into teaching and far too much into their research work. At many colleges and universities, they have light teaching loads so they’ll have time to write articles and books that supposedly expand knowledge in their fields. Of course, their research might be valuable, but in many fields we are far past the point of diminishing returns. Much of the research is on extremely esoteric subjects, and virtually nobody reads it. Is the added cost in having to employ more professors worth it? School officials need to think about that.
And here’s another incentive-related idea: Wouldn’t professors put more effort into their courses if they were paid directly by students? That used to be the case at some universities, and Adam Smith observed that professors were less apt to slack off when they were paid by their students rather than by the university. Vedder thinks that Smith’s idea would inspire better teaching.
He also observes that many colleges and universities have become ideological monocultures, where students regularly hear criticism of American traditions, hardly ever hear any defense of them, and experience a campus climate that is hostile to anyone who dissents from orthodox “progressive” theories. To revive the spirit of free inquiry, he suggests that college leaders sponsor debates over serious topics, thus modeling the kind of academic exchanges that young Americans hear infrequently these days.
One more of the many good suggestions in the book—stop relying on accrediting agencies to uphold educational quality. They do a bad job; in fact, they scarcely try. True competition would do far more to ensure that students aren’t wasting their time and money.
The main point of the book is that the systemic changes that would allow colleges to fail are the same ones needed to free them to do their best at educating students. If we are able to cast off the stultifying effects of government meddling in higher education, we will get better results at less cost.
George Leef is director of external relations at the James G. Martin Center for Academic Renewal.
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George Leef
