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In the Nation's Interest

The New College Compact: More Harm than Good

I have a keen interest in higher education and have experienced it from multiple perspectives as I served as a Penn State Trustee for 33 years, after having been on the faculty for almost 20 years.

I was instrumental in helping lead Penn State into the online digital learning world with the world campus in the 1990s and have been a leading proponent for accelerating the development of digital media both online and in the classroom for more than 20 years.  Penn State is considered to be one of the leading universities, if not the leading university in online learning.

I have several concerns with the proposed New College Compact.  First, I believe the rapid increase in tuition over the last 30 years has been partially fueled by two components.  One, is that, there has been a continuous decline in state funding as a percentage of the higher education institution's budgets.  This unfortunate decline has been going on at Penn State for nearly 50 years.  The other component is that federal programs including subsidized loan programs, have reduced universities' incentives for cost discipline, which otherwise might have played more of a role in restricting tuition increases.

I am concerned that the proposed Compact would require states to agree not to reduce state spending on higher education and to increase their spending over time.  The Compact does not say by how much and, of course, there is no way to control state adherence to such a compact nor to predict future tuition inflation, including that caused by depreciation of the dollar or deflation. The proposal would require the states to commit to funding levels that will increase by an unknown factor over time, which I do not believe is a reasonable requirement.

I believe the emphasis of any policy should be placed on competency and students’ progress, measured as objectively as possible no matter how they learn.

The Compact also urges a cut in interest rates on federal loans so that the federal government does not profit on these rates relative to government cost of borrowing.  Of course the default rate and the projected default rate need to be considered. For example, if the federal government can borrow money at 2%, but there is a loan default rate of 4%, then to break even the interest rate needs to be approximately 6%.

The Compact proposes to penalize colleges with low graduation rates where students leave with high loan balances.  Of course the graduation rate is only part of the measure of an educational institution's effectiveness and these numbers can change significantly over time. 

All components of the plan will have unintended consequences, as CED has blogged about in a previous 2-part series.  One is that it might further spark grade inflation and even increase the possibility of outright grade fraud, such as has been seen in some schools that are rated by standardized tests. Although this may lead to higher graduation rates, students may actually learn less as a possible unintended consequence.  The free enterprise system should, over time, influence parents and students to pick universities that are best suited for them in a variety of ways and also to shy away from universities that do not turn out successful students.  In fact, it is the easy availability of government funds that distorts the free market, enabling underperforming colleges and coursework to continue.

The Compact urges the attempt to weed out bad actors among for-profit post-secondary institutions.  What about non-profits? And again, it is all in the metrics.  How do you pick the correct measures to do so without creating unintended consequences?

The Compact also suggests allowing more experimentation by allowing students taking online courses to draw federal aid. I agree with this in principle, but it needs to be done in a manner that provides benefits without unintended consequences.

I believe the emphasis of any policy should be placed on competency and students’ progress, measured as objectively as possible no matter how they learn. 

The proposed Compact talks about a $350 billion federal spending program, which I oppose.  Let us be realistic - all federal spending programs seemed like a good idea at the time they were implemented, but they invariably grow to a multiple of their original size, and they often fail to achieve their goals and in some cases cause the opposite effect.  There is no financial model that accompanies this spending proposal, and so it is likely flawed.

The Compact suggests that households will spend less on higher education while federal and state government spend more.  I believe this would hurt the quality of higher education by steadily reducing accountability.  Money could be appropriated based on political influence, and this seems to be a socialistic plan that gives government increasingly more and more control over picking winners and losers, rather than letting the decision makers (i.e. the students and their parents) do that. 

If the cost of going to college becomes too high, and I think it is beginning to approach those limits, fewer students will go to college because the tuition, if left unchecked, will outstrip the benefits.  Why should the taxpayers then pick up the tab, thereby causing that trend to occur even more rapidly, rather than letting the natural process of creative destruction bring about the new paradigm of more efficient learning driven by technology and the digital revolution?

Throughout this Compact there is no discussion of goals and how real progress would be measured in the rate of students' learning and the acquisition of skills, which is the key to all of it.

My belief is that despite some recent progress, there are still massive inefficiencies in higher education; learning is perhaps the most inefficient thing that humans do, and this is part of the reason why the cost of education has been rising far faster than inflation and faster than the benefits being derived. 

The only policy that I believe makes sense is to accelerate creative destruction which will bring about individualized, personalized learning that maximizes the use of digital content, context, and tools.  And, believe me, this is coming anyway and it will probably come from the private sector - probably in connection with some institutions that are flexible and innovative. 

My experience in developing AccuWeather and growing it into the world's largest source of weather forecasts and warnings, and in being on the Penn State Board, is that because of the innate sluggish movement of even the best institutions of higher education, it is going to be tough for universities to lead this revolution.  Penn State, in my perhaps biased opinion, is one of the leaders in this area because of its relative flexibility, good judgement and initiative.  But even Penn State needs to accelerate its commitment to online courses and applications of digital media in the classroom.

In summary, I believe this New College Compact would do more harm than good.  It appears to rely on numbers picked out of the air for spending without any metrics of what the benefits will be and without sufficient planning and understanding of the future economic and educational situation will be.

Further, universities, especially public universities, have been strongly supported by the boom, or possibly the bubble, in China.  Foreign students pay the full out of state tuition, without financial support from federal or state governments.  They typically pay public universities $10,000-$15,000 or more per year beyond what in-state students are paying so they represent a significant "profit" for universities.  If, or when, this flow of wealthy foreign students slows or stops, there will be few alternatives to substantial cost cuts for colleges to deal with this income shortfall.

When that time comes, because of their relatively inflexible structure, a major crisis could develop in higher education and a restructuring, reinventing, and retooling will be needed.  Again, I believe much of this will be driven by creativity from the private sector or more likely by partnerships between ingenious private sector companies and nimble institutions.  This Compact, if adopted, might actually accelerate the threats to quality universities, which are one of the great strengths of this country.

Dr. Joel Myers is a CED Member and the President and Founder of AccuWeather. Member blogs are the views of the individual Member and do not necessarily reflect the official policy of CED.