Friday, February 08, 2008

The House Higher Ed Bill: Mostly Bad

By Richard Vedder

The House has voted overwhelmingly to renew the Higher Education Act (under a jazzier name). There are lots of provisions the higher ed establishment did not like, and the fact that the bill passed with strong bipartisan support should give them pause. They should be asking: “Why are we losing so much clout on Capitol Hill?” (Short answer --we are elitist, condescending, always complaining and relatively oblivious to both our customers and our benefactors.)

There are tons of things in the bill, and this is not the final answer --the Senate will weigh in, maybe even the White House (which says it is against the House bill), and there will be a conference committee negotiation almost for sure. But here are a few noteworthy things.

Start with the bad:

1) I agree with Secretary Spellings that denuding the Department of Education's authority in the area of accreditation is disastrous in the extreme. I usually do not like government regulations, but this is an area about where we are defining the environment of standards. This move suggests we are turning regulation of the colleges over to the colleges themselves and the accreditation organizations which they dominate. This is terrible. I love Judith Eaton (Mother Superior of the Accreditation Establishment) and CHEA (her organization) is doing some good things these days. But accreditation has been more a barrier to entry than a preserver of quality and that must change.

2) The rule for measuring student loan defaults was set in the bill so as to understate true default rates (although it is a better rule than the current one), which is irresponsible, and will lead to greater uncertainty amongst private lenders --and a decline in lending over what would happen if accurate default rates were allowed. This was a sellout to lobbyists for for-profit schools, with whom I usually am in agreement. Moreover, the bill delays implementation of even this weak provision for several years --shame.

3) This bill sets, in effect, minimum spending levels for STATE governments. This is a gross violation of the basic federalist principles governing our nation, is of dubious constitutional validity, and is just plain dumb. Who is Congress to tell states what the optimal allocation of their state budgetary resources is? Indeed, this provision is designed to keep states dropping more dollars out of airplanes over campuses --exactly the wrong thing to do if we want to bring efficiency and cost control to this industry long term.

Some other provisions --on regulating private lenders by the Ed Department for example -- may be bad as well, but I have not had a chance to read the precise language in the bill.

Some of the reporting requirements, designed to increase transparency and consumer knowledge about university operations --are on balance probably pretty good.

On the whole, this does nothing to change fundamentally the way colleges operate, and probably is worse than nothing. Shame.

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