Obama Is Moving In Exactly The Right Direction To Reduce The Cost Of College
By tinkering with the interest rate on student loans, we can reallocate the cost burden of college between taxpayers and students. What this doesn't do is address the underlying problem that drives affordability: College keeps rising in cost without rising in quality.
Today and tomorrow, President Obama is making proposals that aim to address the underlying problem of cost, because boosting taxpayer subsidies for college isn't an affordability strategy that will work forever.
The proposals are still in the early stage. The key idea is to identify colleges that are cost effective: Ones that have good graduation and job outcomes for students, that hold tuition down, and that serve more difficult-to-reach students, particularly those from low-income families.
Simply publicizing this information may help students make smarter decisions about what degrees to get and where. But more importantly, the president wants to tie federal financial aid to performance on these metrics, so colleges have better incentives to provide a better product.
We'll need to see how the rating systems work when the Department of Education releases them next year. But this is the right direction to be moving in. As with health care, third-party payment causes the education sector to focus too little on cost, and the government needs to make sure that tax dollars are spent efficiently. If we want to make college affordable, the government needs to bend the cost curve, not just write bigger checks.
Jonathan Chait worries that Republicans may obstruct this proposal just because they feel like it. I'm more optimistic. I view scorched-earth Republican opposition to health care reform as having been driven mainly by neither ideology nor animus toward the president. I think the key was a desire to protect Republican constituencies who benefit from the health policy status quo: doctors and Medicare recipients.
In the case of higher education, the constituency getting its ox gored by cost control will be college professors and administrators, hardly a fixture of Republican fundraisers or Tea Party town halls. That bodes well for bipartisan compromise on this issue.