By Richard Vedder
Today's INSIDE HIGHER ED has good and bad news. It sort of reminds me of the economy --the "real" economy is humming, with good output and employment growth, but the "financial" economy is nervous and complaining of hard times (largely through mistakes of their own). A classic good news, bad news scenario. The same is true of colleges.
THE GOOD NEWS, MAYBE
Elite colleges are increasingly getting out of the student loan business. In principle, I think borrowing for college is a legitimate idea, and indeed colleges should loan, not give, money to students from moderately affluent families. However, the loan programs have been abused somewhat, and endowments are being underutilized in some cases. Harvard could lower tuition for everyone to zero without breaking a sweat. So, I was not unhappy when Williams College joined other elite schools (e.g., Princeton, Davidson, Amherst) in saying they are only going to give grants, not loans. The trend in this direction is building partly because colleges are now scrambling to deal with the inconvenient truth that they have become more elitist and less available to low and even low-middle income students. Others (e.g., Wesleyan, Bowdoin) are rumored to be ready to follow this lead.
THE BAD NEWS, MAYBE
Congress reminds me of over-sexed teen-aged boys --they have trouble doing things in moderation. The Aristolean golden mean is foreign to their thinking. Earlier, the President signed a bill, very much to my chagrin, that, among other things, increased the maximum Pell Grant by around 19 percent for the coming year. Congress now is saying that is not enough, and they want to raise the maximum by another $150 --for a total increase for the year of around 24 percent.
CCAP likes giving money to kids, not institutions, so we generally like the Pell Grant program (although in principle we are not overly wild about any third party payments to higher education), but we also think the financial aid offices of colleges should have absolutely nothing to do with it. As a Spellings Commission member, I went along with Jim Hunt's plea to raise the Pell maximum. However, huge increases in Pell Grants all at once are an open invitation for universities to raise their tuition charges. Tuition inflation is up, not down, this year, as the colleges talk a good game but continue to tell the public to go to hell on the issue most concerning them. No big attempt is being made to rein in costs, which, admittedly, is nearly impossible to do when Congress continues to allow universities to avoid fiscal responsibility and accountability by increasingly subsidizing either them or their customers.
The prediction is that the President will veto the bill. Of course he should (it includes the budget of the Department of Education). What he should do and what he will do, however, often do not coincide when it comes to fiscal responsibility and adherence to sound principles.