The Right Needs To Adopt This Revolutionary Higher Ed Reform Plan Now

The Right Needs To Adopt This Revolutionary Higher Ed Reform Plan Now

The higher education system is rotten to its core — economically, ideologically, and spiritually. Instead of tinkering around the edges, it's time for conservatives to actually fix the root problems.
Willis L. Krumholz
By

Far too many pundits believe culture is upstream from politics. That might be true, but bad policy is often upstream of culture. And it is shocking how often Republicans use the “culture” trope as an excuse for long-running inaction and lack of serious thought on needed policy changes.

One such example is higher education. Speakers such as Heather Mac Donald have done an excellent job of highlighting examples of the far-left bias that is prevalent at America’s higher ed institutions. Conservative YouTube channels are great at highlighting the perils of conservative speakers attempting to speak on various campuses.

But few address the elephant in the room. Taxpayers are heavily subsidizing the entrenched and blatant anti-American and anti-Christian bent in our colleges and universities.The huge budgets of these colleges — and their ability to pay professors well over six figures to teach for only several hours a week, only during the school year — is entirely the result of choices our elected officials have made.

The Predictable Rise of College Costs

It started in 1965, when as part of Lyndon B. Johnson’s fateful Great Society, Congress passed the Higher Education Act. Among other things, the legislation introduced subsidized student loans to increase the number of Americans attending college, and it has been reauthorized multiple times since. Ever since, the terms of those loans have become more generous (the subsidization has increased).

The effects have been predictable, and many did predict them. For example, Democrat Sen. Daniel Patrick Moynihan, early in his career as a policy wonk, warned the system would lead to higher college costs.

Generally speaking, more money chasing after something raises its price. But the money chasing after higher ed is uniquely dulled of its price sensitivity. Borrowers are young and have little perspective about how much they are borrowing. These young, subsidized borrowers are also robbed of price signals, as everyone gets the same rate no matter what major he or she chooses.

That explains why college tuition has increased far more than inflation since the 1965 law passed. And subsidized student loans explain at least half — and probably as much as 80 percent — of this increase above the rate of inflation. Here’s The Economist on the subject:

The price of college has risen more than four times faster than inflation since 1978, easily outpacing doctors’ bills. Much of this cash has been wasted on things that have nothing to do with education — plush dormitories, gleaming stadiums and armies of administrators. In 1976 there were only half as many college bureaucrats as academic staff; now the ratio is one to one.

Too Many People in College Who Should Do Something Else

Nevertheless, Congress certainly succeeded in its goal of more Americans attending college: Almost 70 percent of high school graduates now enroll in college, and the percentage of Americans aged 25 to 34 years old who have a secondary degree has moved from about 25 percent in 1990 to almost 50 percent today. But although college on average still provides a positive return on investment, that return has dropped significantly. Here’s The Economist, again:

By the universities’ own measures, this [binge of money and increase of administrators] has produced splendid results. Students are more than twice as likely to receive ‘A’ grades now than in 1960. When outsiders do the grading, however, they are less impressed: One study found that 36% of students ‘did not demonstrate any significant improvement in learning’ over four years of college.

For many Americans, the return on college is negative. Part of this is because many Americans going to college are ill-suited for it. For example, 40 percent of American students fail to get a four-year degree within six years of enrolling.

Even for students who graduate, some degrees or majors are often worthless. Broadly defined arts degrees at 30 percent of colleges in a study offered worse returns than plugging the money into a longer-duration (longer-term) Treasury bond, which barely breaks even or even loses money after inflation.

College Degrees Are Mostly Signalling Devices

Even for students who should be in college, and who choose majors with significant earnings and employment prospects, college is far too often an expensive resume-sifting tool for potential employers. The Economist explains, “Degrees are also signalling devices. The premium includes the income-boosting effects of personal characteristics that are more likely to be held by those with degrees, not because they acquired them at university, but because they possessed them on admission.” It continues:

As degrees have become more common, their importance as signalling devices is rising. Recruiters, who pay none of the cost of jobseekers’ higher education, are increasingly able to demand degrees in order to screen out the least motivated or competent. A recent study by Joseph Fuller and Manjari Raman of Harvard Business School found that companies routinely require applicants to have degrees, even though only a minority of those already working in the role have them. This increases the graduate premium — but by punishing non-graduates rather than boosting the absolute returns to degrees.

In other words, students are often paying more for their employer to be able to cheaply interview job candidates than they are for skills they couldn’t have gained in the workforce, while making money instead of paying money. The Economist’s researchers “find only a weak link between higher shares of graduates in an occupation and higher salaries. For around half of the occupations that employ higher shares of graduates now than a half-century ago, real wages have fallen.”

Higher Ed Institutions Are Also Indoctrination Factories

Worse, the left loves the current system of higher ed subsidization — not because of the economic benefits, which are increasingly hard to justify across the board, but because the American college experience is an ideological indoctrination factory.

Students at the University of Minnesota receive books to read that include “Capitalism’s War on the Earth,” but nobody teaches them that the worst environmental degradation ever seen has occurred in communist, centrally planned economies such as the Soviet Union and (now) China.

Educators teach students that Christians pioneered the mistreatment of women and that marriage is a patriarchal fabrication, without teaching them how badly pre-Christian paganism treated women, and without teaching them how the early church singlehandedly elevated the status of women and children.

At my alma mater, Bethel University in St. Paul, Minnesota, a history professor spent an entire class attempting to prove Americans weren’t really on the side of justice and right in World War II. I told the professor that your average plumber, carpenter, or factory worker was now far smarter than the class — most of whom went on to be K-12 teachers. And I was right.

These are anecdotes, but they aren’t fringe examples. They are commonplace in modern-day academia. Today’s college students can flip a coin as to whether their professor is a neo-liberal or a neo-Marxist, but that’s about it. That leaves at least half the country unrepresented, and it threatens the lessons previous generations have bled to transmit to our nation.

You’d think it couldn’t get worse, but it does. The current system delays adulthood for at least four years and then burdens young Americans with debt, just when they should be starting their lives and families. This certainly suppresses or delays family formation and child-rearing, and probably, on the margin, increases the number of sexual partners Americans have before they are married.

A Clash of Higher Ed Plans

Tennessee GOP Sen. Lamar Alexander, the former George H.W. Bush education secretary and former president of the University of Tennessee system, has walked out his plan to reauthorize the Higher Education Act. Alexander would simplify FAFSA, an assistance program for low-income students, and simplify repayment plan options, both laudable goals.

But Alexander would also swap a rule that looks at the income versus debt of colleges’ graduating students, which is ostensibly unfair to “for-profit” colleges, for a rule that looks at loan repayment rates. Why not do both? And Alexander wants to pull student loan payments directly out of paychecks, just like federal payroll taxes. In other words, aside from giving Democrats ammo to lob at Republicans on the wage-garnishment idea, Alexander is intent on preserving the status quo.

Meanwhile, Sens. Bernie Sanders and Elizabeth Warren, both running for president, have a higher-ed plan: Warren’s would pay off $50,000 of debt for those making less than $100,000, and Sanders’ would pay off practically all of America’s $1.6 trillion in student debt, make state college “free,” and attempt to pay for it by taxing stock and bond trades.

This would be a stunningly bad idea, primarily because it would be a handout to relatively wealthy Americans. But Warren and Sanders would also continue a system that doesn’t align students and their degrees with the labor market, and would turn an ideological indoctrination factory largely paid for by taxpayers into one entirely paid for by taxpayers.

Yet when Democrats — who are proposing fundamental reforms to a system that Americans instinctively know should be fundamentally reformed — are juxtaposed to Alexander’s plan, which would only tinker around the edges, the country is in serious trouble. Republicans, led by President Trump, need a plan to fight back. And it needs to be a plan they can sell to the American people. Here’s a broad outline.

A Revolutionary Higher Ed Plan

Require every college that receives subsidized student loans to disclose the average income earned by graduates in each major, at least three years after graduating, and the percentage of graduates in that major who work in a field related to that major. The “personal responsibility” crowd says if you took out substantial student loans, its your own fault. But 18-year-olds shouldn’t be trusted with much, let alone picking a school and a major, while understanding the real cost of the loans they are taking out and their employment prospects after — when everyone is telling them to go to college.

Higher ed lobbyists have long resisted efforts to make colleges report their students’ earnings. For example, the Obama administration had a meager plan to provide transparency, then shelved it after facing higher ed industrial complex pressure. Pushing for absolute major-by-major transparency should be a priority of the Trump administration. Set up a website to house the data: HigherEdReturn.gov.

Congress should pass a tax exemption for employer contributions, up to $2,000 per year, into a 401(k)-type investment vehicle that allows for money eventually to be withdrawn at the long-term capital gains rate, in order to pay down student loan principal balances. Investment options should be limited to a well-diversified portfolio, and companies should bid to provide the lowest management fees. The proposal would be politically popular, and it would probably save the federal government money in the long run, if more people pay more of their student loans.

Congress should make student loans dischargeable in bankruptcy proceedings. Currently, student loans are just about the only type of debt that is extremely hard to discharge in bankruptcy. Congress changed the law to favor lenders in a sop to the higher ed industrial complex, and it should reverse that change. Going forward, this change would force lenders of student loans, private and government, to be more careful about who they lend to, and saddle fewer Americans in endless debt.

Require colleges to take an equity stake in their students. Automatic wage garnishment by the government to pay for its irresponsible student debt lending is a bad idea. But requiring colleges to have skin in the game is a great idea. Here, Florida Republican Sen. Marco Rubio has some good ideas, as does current Purdue University President and former Indiana Gov. Mitch Daniels.

For example, colleges could be required to receive 10-20 percent of tuition as a future payment of a small percentage of their students’ income for 10 years after graduation. If their students’ majors and education helped them make a lot of money, the colleges would get paid. If the students made little money, colleges wouldn’t get paid. The result would be an incentive for colleges to align their degrees with the labor market, and a marked decline in worthless “social justice” degrees.

Focus more on technical schools and apprenticeships, and focus less on the four-year college degree. There are no easy answers here, and history shows it is a bad idea simply to throw money at something without thinking it through. Germany’s apprenticeships are world-beating, but Britain tried to replicate that with little luck. But, generally, America needs more kids in technical school and apprenticeships, and fewer kids in four-year colleges.

Cut federal funding for schools that don’t protect the free-speech rights of students, faculty, and visitors.

Higher ed in America is a debt bomb that has enslaved the young. But on the other side of the transaction, it is the peak of cronyism and excess for the thousands of bureaucrats and professors who benefit off this system.

The system is rotten to its core — economically, ideologically, and spiritually. Trump and every Republican after him should run on metaphorically blowing it up, and the listed proposals are the least a great disruptor would pursue.

Willis L. Krumholz is a fellow at Defense Priorities. He holds a JD and MBA degree from the University of St. Thomas, and works in the financial services industry. The views expressed are those of the author only. You can follow Willis on Twitter @WillKrumholz.

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