ON-Lion Letter

The cost of college places a stifling burden on America's middle class.  Tuition at four-year public universities has almost quadrupled since the early 1980s, and 70% of current students need loans to pay for school.

How did higher education become so expensive, and what can be done to bring costs back down?  In a new book on higher education that is part of the Room to Grow series, Andrew P. Kelly provides insightful answers to both questions.  Kelly is a resident scholar at the American Enterprise Institute in Washington, D.C., and directs its Center on Higher Education Reform.

In the book, he notes three reasons for higher costs.  First, the breadth of federally-funded student loans mitigates incentives for colleges to keep tuition rates low.  Second, data that would help students and parents make more-informed choices about colleges, like employment information for a college's graduates, are often unavailable.  This lack of information makes it more difficult for parents and teachers to determine whether the investment in a particular college and program of study are worth the tuition expense and loans.  Finally, the current accreditation process serves as a barrier to entry for new schools and alternative education options.

To fix the problem, he proposes reforming the financing system for higher education, encouraging the development of more options, and holding colleges accountable for graduates left with unreasonable amounts of debt.  Private income-share agreements (ISAs), where financiers pay for a student's college education in return for a small stake of the student's postgraduate income, can complement or even supplant the most-expansive federal student loans.  The federal government can promote alternative models of education by making accreditation processes hospitable to new competitors.  Finally, colleges should be forced to pay a percentage of the defaulted debt of their graduates, thereby creating an incentive for schools to keep costs low and produce self-sufficient students.

The Lynde and Harry Bradley Foundation in Milwaukee substantially supports the Room to Grow series.  Bradley also supports AEI.

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