published Monday, October 29th, 2012

The higher ed customer

By Robin Smith
  • photo
    Robin Smith, former Chairman of the Tennessee Republican Party and congressional candidate.
    File Photo/Chattanooga Times Free Press

What if a customer purchased a product or service that would make the claim to increase in value over time and with more use? There is a caveat, however. The product's cost increases an average of 5.2 percent annually. Worse, the cost projections outpace inflation and the growth in personal income for the unforeseeable future.

What is this valuable product that is saddled with such outrageous cost increases? Higher education.

In a recent Politifact article, John Morgan, the chancellor of Tennessee's Board of Regents noted that "students now pay 67 percent of the costs of their educations at the state's universities and 60 percent at community colleges."

I'm curious, Mr. Morgan, shouldn't students pay all of those costs?

In truth, taxpayers fund a huge portion of higher education.

Chancellor Morgan observed that while 33 percent is now a subsidy of the state, a few decades ago, higher education received "state appropriations that comprised up to 70 percent ... and students and their parents picked up the rest."

The cost of tuition and "fees" for higher education have "more than doubled since 2000, outstripping the inflation rate across all goods as well as the growth rates of energy, housing and healthcare costs," according to the July 2011 issue of Moody's Analytics.

Remember that government-subsidized goods and services increase in cost and artificially alters the market. We all recall the recent housing market fiasco caused by easy subprime loans that sent the real estate market spiraling with reduced home equities.

The doubling cost of tuition since 2000 coincidentally mirrors the explosion in college loans with student loan debt now at $1 trillion.

And who guarantees those student loans offered at low interest rates? Yep -- the taxpayer again.

The federal government insures these student loans and, as of July 2010, is the sole lender of guaranteed student loans President Obama turned the Department of Education into a bank with the profits to be used for ... wait for it ... Obamacare.

Moody's Analytics observed that "federal grant aid nearly doubled from $26 billion to $52 billion between the years reviewed of 2008-2009 and 2010-2011."

In the Oct 24 publication of Syracuse University's student paper, "The Daily Orange," a student submitted an opinion with this observation: "Government aid, by purpose and effect, enables people to pay more for some good or service ... federal student aid empowers students to pay more than they otherwise could for college, federal college aid empowers colleges to raise prices."

Chancellor John Morgan concluded in Politifact, "I believe we are at a point where we can't raise tuition much beyond general-inflation increases without impacting enrollment. We may already be seeing that effect this year: enrollment is down on average across our system although historically enrollments rise during recessions and flatten out or decline somewhat during recoveries ..."

A recent educational report by Demos, a national public policy organization, worried that states have been forced to prioritize spending and balance budgets which reduced tax-dollars for colleges and universities. The result has been "an irreversible slide of the United States' higher education's becoming a collectively-funded good to that of an individually purchased private good."

Education is a national necessity. It has both value and cost. When it is collectively-funded, it has proven to be non-competitive and unresponsive to its customer: the student. It's time for reform with the customer's needs being driven into the market of higher education.

Robin Smith, a consultant at Rivers Edge Alliance, is a wife and mother living in Hixson. She served as chairman of the Tennessee Republican Party from 2007 to 2009.

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nucanuck said...

My granddaughter recently expressed an interest in UCal Berkeley. Learning that the out-of-state cost outlay would be nearly $50,000 per year and that is just not an option for most unless they have a big scholarship. Is a good education going to be reserved for the 1%?

Yes, our education system is in disarray, but we still must find a way to deliver a solid foundation to all. We have fallen from 1st to the middle of the pack. Without educational success the US will not compete well in any catagory with the rest of the world.

October 29, 2012 at 1:58 a.m.
Leaf said...

Ms. Smith, You say education should not be subsidized by the taxpayer. Should we then close all public schools? I don't think our Democracy would be well-served by such an extreme position.

October 29, 2012 at 12:06 p.m.
tipper said...

If you know Ms. Smith's political bent--tea party supporter, No Tax champion--you realize that the question of having a public school system and allowing only the most wealthy to be able to attend higher education, then you understand her positions on education. Like often has been the case, conservatives such as Smith have an agenda to privatize education, a program that has has as mixed results as some of our public schools. Public school teachers have become the straw people for conservative attacks and misinformation. No doubt higher education has become ever more costly for many Americans, however, eliminating government loans for qualified students to continue their education in such fields as math, science, and nologies as stated by Smith promotes an education gap by wealth. And one thing many of us know is that wealth does not necessarily translate to quality leaders. I have often said, and I believe it even more now, education and healthcare are two institutions in this country that cannot be privatized and still be expected to provide quality for all people. These areas are where government can and must play a role in order to maintain democracy and the "American Dream" for everyone.

October 29, 2012 at 1:02 p.m.
Rickaroo said...

"I have often said, and I believe it even more now, education and healthcare are two institutions in this country that cannot be privatized and still be expected to provide quality for all people. These areas are where government can and must play a role in order to maintain democracy and the "American Dream" for everyone" - tipper

Agreed. Completely. Privatizing education would be a disaster, and to the extent we have privatized much of it already, it has been a horrible drain on the public system. To think that privatizing will increase quality based on the notion of competition is baseless. The primary motive in any private enterprise is profit, and to inrease profits, the quality of the product may or may not be the first consideration. Look at the proliferation of for-profit online schools in the past decade. Some are adequate at best in providing a purely vocational type of education but many are over-priced rip-offs whose sole intent is to sell their product (increase their profits) without regard for the success rate of the students.

Furthermore we don't have the luxury of waiting for the free market, acting discordantly and selectively, to establish a system whereby all students, regardless of economic level, can obtain a solid education. We don't need to reinvent the wheel here. We have a system in place now that has worked well in the past and it can continue to serve our needs well, with tweaking and more subsidizing. Throwing money at the problem is not necessarily the answer, but there is no doubt that more funds are needed, and if directed in the appropriate ways, the additional funds will be a godsend. We just need to stop scattering our resources in opposite directions and stop pretending that the free market is the magic solution to all of our problems or needs. Certainly private schools have their place for those who choose and can afford to send their kids to them, but we need a system whereby ALL kids can get a basic, solid education, and we need to focus our time, energy, and money into putting it into place ASAP.

Ditto for health care. Medicare has worked for decades and worked well. Our health care has no business being in the hands of private, for-profit insurance companies. Medicare for all is the way to go.

October 29, 2012 at 3:09 p.m.
Facts said...

It's lots of fun to see the socialists emerge and strain to get the point. Tuition has increased as subsidies have increased. If the true education market were operating with no government influence, the costs would not be as extravagant. Instead, it's the socialists words to close public schools. C- on comprehension and A+ on creating the strawman.

October 30, 2012 at 8:59 a.m.
JustOneWoman said...

Facts said... ...."If the true education market were operating with no government influence......"

"true education market"? My child's eduation should never be up on the market. Tied to someone's bottom line on how to educate cheaply so others can line their pockets? No thank you!

F on humanity, facts....

Isn't humanity why we are here, or do you just bow to the money god?

October 30, 2012 at 9:57 a.m.
nucanuck said...

Fact, you may well be correct on the cost influences of subsidized education, but you fail to address HOW to educate the ENTIRE population with privately funded education. Or do you think that does not matter...some collateral damage is necessary to improve cost efficiency.

What's good for you may not be beneficial for society as a whole.

October 30, 2012 at 12:18 p.m.
Facts said...

There is nothing in this article that references elementary, middle or high school. Again, "collateral damage", "educate the ENTIRE population" is all about extremes. So EVERYONE SHOULD GO TO COLLEGE FREE according to you. Most of us disagree. And "F" humanity are again your words. I have a degree, worked as I went to school in the last 6 years. The interesting thing is to see how valuable some view a college degree but you want someone else to pay for it.

October 30, 2012 at 5:42 p.m.
hixsondave said...

The rate that tuition increased the last 20 years or so has nearly eliminated the student that can work there way through school. Looks like it would take someone 12-15 years to graduate without debt, that is if they already have a pretty good job, or live with parents...etc. I graduated after 7 years in school while working full time without debt. Three years later in 1982 while still working entered grad school with a tuition cost of $11,500.00 per year, same program is now at $60,000.00 per. It's time to wonder how the long term will treat some of today's students. Will they be able to afford a home of there own or ever buy a new car, with student loans hanging over there heads?

October 31, 2012 at 9:55 a.m.
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