Posted by Shyam Moondra
Recently, President Barack Obama proposed a plan to make college education more affordable. The Obama plan has some good elements but overall it falls short of what is really needed to control the sharply escalating college tuition and fee. Aside from the ever increasing health care cost, the only other cost which is not showing any sign of slowing down is the cost of college education. The high cost of college education is affecting the finances of an increasing number of middle-class families that are not rich enough to be able to afford to pay ever increasing tuition and fee nor poor enough to qualify for financial assistance in any meaningful way.
The following are the reasons why the cost of college education is getting out of whack:
• In recent years, the compensation of the Presidents of colleges and universities has increased by a factor of 4-5, in line with the excessive compensation increases of the executives at the private sector corporations.
• The concept of tenure is making it impossible to fire non-productive faculty members whose compensation in recent years has increased at thrice the rate of general inflation, with some professors making more than $1 million a year. The guaranteed job security, irrespective of job performance, is not a prescription for achieving the best possible education per dollar of expenditure. Even presidents and prime ministers don't have a guaranteed job; their re-election is dependent on their job performance.
• More and more universities and colleges are spending more and more money on sports activities. Building new stadiums and showering athletic departments with lavish budgets have become fashionable these days. Now the desirability of schools is judged not based on academic standing but based on the popularity of their sports teams.
• The endowments of many colleges and universities have grown big enough to match the annual budgets of many countries running into billions of dollars, and yet these schools are spending proportionately less and less on financial aid.
Up to this point, the government has introduced tax credits and provided more funding for student loans to help many families pay for college education, but that's just the wrong approach. Rather than finding ways to pay for inflated tuition fees (which only encourages schools to increase the tuition even more), the government needs to find ways to roll back the artificially inflated tuition by at least 30%. The Obama administration and the Congress need to push for a higher education reform legislation that will have the following elements:
• Limit the compensation of the administrators of the colleges and universities.
• Craft the tax laws in such a way so as to penalize the institutions that increase the tuition fee in excess of the general inflation rate. The Obama plan withholds financial assistance to the schools that don’t control tuition increases, but that’s not quite the same thing as making them pay higher taxes.
• Impose hefty taxes on rich school endowments that do not spend a specified minimum portion of their incomes on helping needy students with financial aid. Those schools that fail to spend the required minimum amount must surrender those funds to the government to be used as part of its student loan program.
• Limit how much money educational institutions can spend on sports activities. This whole radical trend of sportization of educational system is forcing the schools to increase tuition fee to be able to cover the ever increasing budgets of their athletic departments.
• There are just too many universities and colleges, duplicating the administrative overhead and other expenses for common functions. We should find a way to encourage the institutions to merge to reduce common costs and pass along those savings to the students.
• A consideration should be given to regulate the tuition and fee of colleges and universities via federal or state-level Public Education Commissions, in the same manner as many utilities are regulated today via Public Utility Commissions.
While Obama deserves credit for focusing on the critical issue of affordability of higher education, his approach of throwing more money at the problem, at a time when the Congress is in no mood to add to the budget deficit, falls short of what is really needed to get the college education cost under control.
