By Richard Vedder
I had a pleasant chat yesterday with two friends from Spellings Commissions days, Sara Martinez Tucker, the Under Secretary of Education, and Charles Miller, former chair of the Spellings Commission. Sara told me and showed me some things, however, that infuriated me. Let me list a few factoids that Sara presented to Charles and me that got me mad. Some of them were not new, but Sara renewed my indignation.
1. If a student applies to Duke and to North Carolina State, it is entirely possible that she will be eligible for a Pell Grant if she goes to Duke, but not if she goes to NC State. The more expensive a school a student applies to, other things equal, the more money the school receives. Federal aid empowers elitist schools to charge more. Why do we give more money for kids to go to Harvard than Montgomery Community College? (One might ask, “Why do we give federal grants at all?” I will save that one for another day.)
2) Pell Grant money actually goes into an escrow account with almost no accountability --certainly none to the Department of Education. If Susie is accepted at Duke, Duke says "Susie is coming and is Pell eligible, so give us the money. The Department of Education does --but if Susie does not go to Duke, there is no refunding of the money. While the escrow monies must be used for Pell Grants, the schools have wide discretion as to when the money is spent, how it is invested, etc.
3). Because colleges know exactly what the Feds and others are giving Susie (indeed, the school gives it to her on behalf of these other donors), the school tailors its own institutional aid to fit the school's, not Susie's, needs. For example, suppose Susie gets a Pell of $3000 but the school doesn't much want Susie to attend. They give her no institutional aid. Maybe they would have given her $3000 if they did not know about and administer the Pell Grant. The school negates the Pell Grant award with its own decisions, contrary to the intent of the law. The notion that increases in Pell Grants go to students is questionable in some regards --Pell money goes up, either institutional aid goes down --or tuition goes up. The school captures the money, not the student.
4). Although most schools have some sort of calculators that allow applicants to have some idea about financial aid, they rarely have an exact idea what the school will cost --until the student is accepted, months after applying. It is like a car dealer telling a customer, "we will not tell you the price until you tell us whether you are going to buy it or not."
5) Funds given to students to help pay for college have tripled in the last 15 years, roughly. Yet enrollment and college attainment growth have slowed down dramatically from the historic growth observed in past decades. We are falling between other nations rapidly in this regards.
6) Aid plus estimated parental contribution is more likely NOT to cover tuition costs today for low income students than in the early 1990's. It took 33 percent of family income to cover cost of attendance for a low income family in 1993, 36 percent in 2004. The real burden of college is rising. Yet there is not evidence that quality is improving, because the colleges resist finding out what they add to the value of a student's human and ethical capital during the college years.
The root cause of the problem is the soaring cost of attendance at colleges, but that is aided and abetted by money going to the schools instead of to the students. The turning money over to the students to choose their own school makes a lot of sense, and in this high tech world the administration of such a system is a piece of cake.
Where does DuPont Circle come in? The Mandarins of the Higher Education Establishment work there, and they fight tooth and nail any attempt to reform or rationalize the system. As a consequence, adults (college employees) are getting richer in the name of "helping college students." It is economic pick-pocketing, or, to be more colorful, molestation. My guess is that an Andrew Cuomo type investigation of school escrow accounts might reveal some interesting abuses --power and money corrupt, and absolute power and money corrupt absolutely.