By Richard Vedder
Henry Butler invited my sidekick Andy and me to a Searle Center seminar at the Northwestern Law School on Burt Weisbrod et al's fine new book, Mission and Money. More about the book and the seminar later. I found one semi-revolutionary idea was pleasing to both conservatives and liberals in attendance --a progressive federal voucher in lieu of ALL current federal forms of financial aid.
The idea is this. Pool all the federal student aid funds including loan subsidies together, and you have tens of billions in outlays. I would include tax credits in the calculation. Let us say the sum is $50 billion, about one-third of which is current Pell Grant outlays. Make the Pell Grant an explicit scholarship (the word voucher is verboten on political grounds, I guess) payable to the student, with the amount totally independent of the school chosen by the student (obviously, the money is usable only at an accredited school).
Give more of these awards than currently receive Pell Grants, maybe 8-10 million, with a peak award of, say, $5,000 or even more. Give no awards, however, to upper income students, who should be paying for their own education. Scale the remainder of the awards by adjusted gross income, maybe with some allowance for family size and number of kids in college --period. Awards could run between say $1000 and $6000. End the FAFSA form --use an income tax form checkoff allowing the administrator of the student awards access to IRS and, possibly, Social Security records. Give no money to richer kids. Put some performance standards in --the awards are good only for four years, for example. A bonus is given for being in the top one-fourth of your class (don't use a grade point average --that encourages grade inflation).
Sitting next to me at this seminar was Jim Rosenbaum, a Northwestern sociologist who, almost by definition, must be liberal politically. He loved the idea --it fits in well with liberal egalitarian concerns --target help for the poor, more than at present. Conservatives like it too --it is a voucher, supporting students and free choice more than institutions. It encourages competition and making higher education more of a market environment. It gets rid of massive administrative costs associated with the scandal ridden student loan programs. It awards excellence and punishes schools that allow students to linger around for many years. It is an idea Barack McCain or John Obama could support.
Why won't it happen soon? The private loan providers will be up in arms. The private colleges won't like kids getting as much in financial aid at public schools as at their own. In short, higher education and the financial industry will fight it. A good president will play hardball, and threaten withholding federal research funds, earmarks and other dollars if true financial aid reform does not happen. It is time to fight for the student and against the special interests.
Now, lest you think I am softening, I am outlining what I believe to be a political doable strategy that is better than what we are doing. If I had my way, we would encourage more kids to go to vocational/trade schools --and use their scholarship there --instead of conventional four year universities. I would allow vouchers to be used for intensive study courses such as Kaplan and Princeton Review offer to prepare for tests for law or business school, but in this case to prepare for examinations to earn a certificate to be, say, a master auto mechanic or computer programming specialist. And, perhaps we should rethink what the optimal length of postsecondary training is --why four years (now increasingly five or six)? Why not three? Or 3.4 years for Johnny the Brain, 4.6 for Susie the Social Butterfly, and 0.6 for Tom the Truck Driver wannabe?