Good Intentions with Inimical Results – Part 1: The Obama Administration and Tuition

The Obama administration has strongly supported the need for growth in college degrees. The administration’s 2020 goal of the USA’s having the highest college completion rate is emblematic of that support. However, the Obama administration has taken actions that have had the unintended impact of restricting growth in college graduates, actions that are inimical to the very goals of the administration and this blog. Among those actions have been the continued attack on for-profit universities with the expected result of reducing student access – as was noted in this blog.

On Sunday, NPR highlighted the administration’s intentions with regard to traditional nonprofit colleges and universities. Those intentions, it observed, are to restrict increases in tuition, a seemingly laudable goal. Indeed, rising tuition has been the focus of this blog for the same reason that the President has addressed it; its rise without commensurate need-based aid restricts access to college by many working class families and working adults who cannot afford the rising tuition rates. What NPR highlighted was President Obama’s apparent plans to restrict growth in tuition in his related comments of a few weeks ago at the University of Michigan.

Just as the administration’s attacks on for-profit colleges had the unintended impact of limiting access to a college degree, so will plans to restrict tuition prices for traditional colleges and universities also restrict access. The reasons are numerous, but they begin with what we know of markets and price controls.

Price controls negatively impact market efficiency and may have the impact of restricting the availability of a targeted product or service, e.g., a college education. They also famously fail to actually restrict growth in prices as a result of human creativity in circumventing them through black markets. While the President has not stated that he will impose price controls, NPR has described the implications of his comments as a threat that there will be penalties on colleges and universities that raise prices beyond some unspecified limit.

The economic issues associated with price restrictions make them wrong-headed, and we already know how colleges behave when their revenue is restricted. Community colleges in California reduced available classes to students and cut services in the face of losses of revenue. What is needed is a means to increase access by working class families and non-traditional students such as working adults, a huge proportion of those seeking a college education.

Some Americans can afford to pay for college, but many others cannot. Increased tuition is not harmful to all in quite the same way. Pell grants are a good example of what works in making a college educational affordable for those with need. But the federal government is not the only solution. Colleges that do raise tuition have an opportunity as well to address the issue if access; they can make substantial amounts of that new revenue available in scholarships, thereby off-setting the price increases for those in need. Sadly, past evidence shows this has not occurred in traditional colleges and universities.

It is in this area of need-based access that we should see action – from the federal government, states and boards of trustees. Restricting price, however, is unfortunately almost always a bad idea.

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