Colleges learn that federal subsidies come with a price

Whitehouse.gov

In his weekly address, President Obama notes that while college education has never been more important, it has also never been more expensive, August 24, 2013.

Article Highlights

  • The federal government is a crack dealer who gives you your first hit for free but demands premium prices once you're hooked.

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  • The university lobby doesn't like Washington deciding who's doing a good job, and how — for good reason.

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  • Contemporary lobbying filings show colleges and their trade associations lobbying for federal student aid.

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The federal government is a crack dealer who gives you your first hit for free but demands premium prices once you're hooked.

American colleges are the latest to learn this.

President Obama on August 22 and 23 announced his plan for improving the value of higher education: Link tuition subsidies to a federal ratings system of colleges. Colleges that please Washington most get higher subsidies.

"It's a very hard job to decide on how to rate colleges," Harvard's former president Derek Bok told Bloomberg News. "I have to be somewhat apprehensive when any force as powerful as the federal government undertakes the task."
 
The university lobby doesn't like Washington deciding who's doing a good job, and how — for good reason.

"Those sorts of discussions tend to become very political," Terry Hartle, the top lobbyist at the American Council on Education, told Bloomberg.

Would anyone be surprised to see Ohio State and University of Florida get gold stars and outsize federal subsidies in presidential years?

Measuring "quality education" is something best left to the students and their parents. How will politicians handle this task? When Republicans are in charge, will they follow the lead of Sen. Tom Coburn, R-Okla., and declare social science to be pseudoscience? Will Oberlin, Wesleyan and other conspiciously leftward-leaning colleges see their federal money dry up under President Marco Rubio?

And conservative Christian colleges will have to fear a liberal administration. Will Hillary Clinton's Department of Education punish Christendom College for spending too much time on Thomas Aquinas? Or whack Thomas Aquinas College for having too few minority and women authors on the reading list?

As a result, colleges these days sound like Tea Partiers: Washington should leave us alone.

This is a bit rich, though, coming from an industry that has spent decades lobbying for more federal subsidies. When Ronald Reagan came to power in 1981, and his budget chief David Stockman hinted he might try to close the deficit by curbing federal student aid, the college lobby organized a counterattack. The American Council on Education, National Association of Student Financial Aid Administrators, National Association of State Universities and Land-Grant Colleges, National Association of Independent Colleges and Universities, and the American Association of State Colleges and Universities stood together in the Capitol to rally for continued subsidies.

Contemporary lobbying filings show colleges and their trade associations lobbying for federal student aid.

In this context Obama has a reasonable argument: The federal government has been subsidizing college for decades, and the result hasn't been more affordable education. Many colleges have become four-year resorts, pouring federal subsidies into luxurious dorms, state-of-the-art athletic centers, and burgeoning bureaucracies. While Obama won't admit it, federal student-loan subsidies have driven up tuitions and helped create a near-crisis of recent graduates drowning in debt, after getting educations that don't justify the expense.

Here's the analogy to the crack dealer: If you lobby for and receive federal subsidies, the money comes at first with no strings, or few strings attached. But over time, politicians and bureaucrats will recognize that you're hooked on the taxpayer dole, and they'll start imposing conditions on you. And they'll be justified: He who pays the piper calls the tune.

Colleges shouldn't be surprised by this turn of events, because this is exactly what happened to student lenders. Banks and Sallie Mae spent decades lobbying for — and receiving — more federal subsidies for student loans, until 2009. That's when Democrats pointed out that taxpayers were bearing risks and footing the costs of student loans, so why were the private banks taking the profits? Obamacare's authors, seeking some revenue, nationalized the student-loan industry.

States had a similar experience when it came to highway money. For years, Washington funnelled taxpayer dollars to states to fund highways — no strings attached. Then Transportation Secretary Elizabeth Dole called in the government's chit: She required states to hike their drinking ages up to 21 if they wanted the federal money they were now hooked on.

Manufacturers, energy companies, drug companies, and all businesses currently seeking federal handounts should take to heart the lesson that student lenders learned in 2009 and colleges are learning today: if you enter into a deal with the devil, you're the junior partner.

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Timothy P.
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