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What Elizabeth Warren Gets Wrong (and Right!) About the Costs of Higher Education

By Robbie Rosamelia | May 3, 2019

Senator and 2020 presidential hopeful Elizabeth Warren (D-MA) generated a slew of headlines last week by unveiling a policy proposal aimed at eliminating student loan debt and making all public colleges in the United States tuition-free. Sen. Warren went on to chastise state governments and the federal government for the rising cost of higher education, stating they would “rather cut taxes for billionaires and giant corporations and offload the cost of higher education onto students and their families.”

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Considering the fact that a Forbes analysis of student debt found the price of college is increasing eightfold compared to wages and makes up the largest portion of non-housing debt per U.S. household, any proposal devoted to combating such a crisis deserves a hearing. I have previously written in praise of a common-sense proposal Sen. Warren offered with Florida Sen. Marco Rubio (R-FL) to protect professional licenses from missed student loan payments, and it is clearly an issue she cares about addressing.

But would her latest proposal do more to help student borrowers struggling under loan debt?

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Sen. Warren’s two big promises — forgiving student debt and making all public colleges tuition-free — sound like a saving grace to the countless graduates (and, more likely, non-graduates) struggling to pay their student loans. She even takes on the misleading belief that a four-year college education is right for everyone by equally addressing the issues facing borrowers at two and four-year public colleges.

Where the proposal starts to come up short has first to do with who the intended beneficiaries would be. Sen. Warren hopes for her proposal to open a door to lower-income Americans aspiring to college educations that, though not superior to vocational or trade schools, are proving to lead to higher wages than not graduating college. In her rollout, Sen. Warren stated “the way we build a future where everyone’s got a chance is we start out by investing in their education,” and she has promised to pay for her plan’s estimated cost of $1.25 trillion over 10 years through her wealth tax proposal. It seems like an egalitarian way of ensuring the least-advantaged have access to America’s higher education system, but the actual makeup of higher ed tells a different story.

Two facts get in the way of the proposal helping its intended recipients. According to New York Times columnist David Leonhardt, college graduates primarily come from higher-income families who cannot pay the costs of college in full, and this issue leads Leonhardt to conclude that “universal student debt cancellation would be a giant welfare program for the bourgeoisie.” Economist Michael Strain backs this up. Returning to the point that college graduates tend to earn more than non-graduates, Strain writes that the plan is “a giveaway to relatively higher-income people — a giveaway they don’t need, as the labor market’s rewards for a four-year diploma are much more significant than the debt students incur to earn one.”

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The plan also does little to incentivize colleges to control their costs. Writing in the Washington Post, Professor Steven Pearlstein observes that “the biggest increase in cost per student at large research universities was not in instruction but in administration: student services, institutional support, research and academic support.” These costs range from everything to hiring staff to navigate through the jungle of government regulations on higher education finances to the perks of university presidents.

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In a higher education regime where funding comes from the government, colleges would face no incentive to streamline these costs. On the contrary, one could reasonably guess that administration costs would continue to take the front seat compared to investing in education quality at an institution. All of this said, the problem remains: if Sen. Warren’s plan does not reform higher education in a way that is beneficial for both students and the institution, what will?

A more refined scope would be a good start. Student loan debt is a major problem, but tackling the issue of students who take out loans and then drop out before receiving a degree is the first major step to relieving the weight of crushing debt on the people it hurts most. American Enterprise Institute Resident Fellow Jason Delisle proposes using “government’s unique resources to collect and disclose more information about prices and student outcomes at colleges,” clarifying further that “the government should not link subsidies or aid eligibility to these data except to establish a floor that guards against diploma mills, widely recognized fraud, or severe administrative negligence.” By providing more transparency about costs and outcomes about the broad merits or demerits of a prospective student’s desired school, more information about the school is able to inform the decision to make such a substantial financial commitment before a loan is even taken.

To the question of ballooning higher education costs, Professor Pearlstein also comes prepared with a suggested fix. He suggests capping administrative pay at universities to combat “the growth in the number and pay of non-teaching professionals in areas such as academic and psychological counseling, security, information technology, fundraising, accreditation and government compliance.” Though it is useful to keep in mind the inherent preference a professor would have for funding research and teaching over necessary administrative upkeep, Professor Pearlstein rightly concludes that the priority for a university should be enhancing the availability and quality of education to its students.

As he alludes to in his diagnosis, the costs of administrative growth are out of control. By working to address this expansion, the toxic relationship between tuition costs, ever-increasing administrative budgets, and the amount students have to borrow as a result of the two former factors can be addressed in a way that makes college more affordable. Just as important, it will mean more university dollars going toward improving academic work.

Education is a fundamental building block for a society that wishes to expand opportunity and personal fulfillment. Sen. Warren is right to be concerned about the costs associated with education, and it is noble for her to strive for greater access to higher education among those who can least afford it. She channels another famous Massachusetts politician, President John Adams, who once wrote that we should “tenderly and kindly cherish […] the means of knowledge. Let us dare to read, think, speak, and write.” It is, then, just as important to take her plan seriously and consider its effect on the issues she highlights.

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The crisis of student loans and what it represents in the larger debate over improving higher education will not be fixed by sweeping debt cancellation plans or wealth taxes. With as large a sector as the U.S. higher education, a more targeted approach is needed. Though the above solutions do not promise to fix every problem facing students in one sweeping piece of legislation, they offer concrete steps toward reforming higher education for the better.

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