Wednesday, April 21, 2010

The Obama Administration's War on College Students

By Richard Vedder

The Obama Administration is letting its ideology get in the way of intelligent governance, making life miserable for many current and prospective college students. The president, I believe, genuinely dislikes private enterprise and is a socialist who believes government generally can do things better and more efficiently than the private sector. The President's ideology is wildly out of step with the feelings of a majority of the American people, but he is doing an awful lot of damage nonetheless, as Congress is on a politically suicidal spree to enact much of the Obama vision despite near certain massive reputation by the people this fall.

With respect to colleges, the first major anti-student act was the elimination of the program of federally subsidized private loans and substituting it with an expanded directed student loan program. A monopoly government lender almost certainly will provide counseling and other services to students at the the quality of services provided by other monopolists --the Bureau of Motor Vehicles, the Post Office, etc. (even the Post Office faces increased competition though, and has become somewhat more consumer friendly as a consequence).Proponents of this move say that vast amounts will be saved by having a monopoly provider, the government, and those savings will fund more Pell Grants. I believe the savings in some ultimate sense are illusionary, no matter what the government bookkeepers say. Costs are being moved away from the federal government onto the backs of students and possibly universities.

The second abomination has been discussed recently in this space by both Daniel Bennett and myself. Proposed Department of Education rules will require on-line providers to get state licensing approval in every single state they operate. Dick Bishirjian of Yorktown U. estimates the cost of this could well reach $15 million, which, of course, would be passed onto students in the form of higher tuition. This is a triple outrage.

First, it is an outrage to trammel on the spirit of our Constitution by imposing interstate barriers to trade. Our nation's strength was developed in part because of constitutional provisions barring state government constraint of trade --Supreme Court decisions beginning with at least Gibbons v. Ogden nearly two centuries ago strengthened this right of individuals to trade and barter and serve customers in multiple jurisdictions without state governmental interference.

Second, huge barriers to entry are being created that will make it nearly impossible for small, innovative for profit providers to compete in the on-line market. It gives large providers like the U. of Phoenix an unfair advantage over smaller providers. Why? Cannot a single accrediting agency give approval that would hold all over the nation, or at least in every state covered by the regional accrediting agency?

Third, the action will hurt in particular the poor and minorities that cannot afford to attend expensive residential universities. It is anti-American Dream, anti-equal opportunity.

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