Sunday, September 23, 2012


Feds and States

Last week I had a lightbulb moment.  Why are so many financial aid rules at odds with so many academic policies and goals?

Because financial aid is mostly federal, but public colleges are mostly run by states.  And the two levels of government have different goals.

Some of that is because the feds are allowed to run deficits and the states generally aren’t.  (I’m not counting unfunded pensions as deficits; they’re more like long-term debts.  I’m using deficits to refer to annual operational shortfalls.)  So in a recession, the feds can increase spending, but the states have to cut theirs.  That showed up over the last few years in a pretty dramatic way.  Federal spending on Pell grants increased dramatically, but state spending on operating money for higher education dropped hard.  As a result, colleges shifted more of the expense of operations to students.  Consequently, the increase in federal financial aid didn’t really increase funding for higher ed; it simply made up for part of the state cuts.  With the federal foot on the accelerator and the state foot on the brake, it was hard to make real progress in any given direction.

Annoyingly, that kind of unappreciated conflict leads to easy demagoguery, as folks who aren’t big fans of higher ed in the first place are able to say things like “we increased aid dramatically, and nothing happened!”  Which is true, as long as you only look at one piece of the picture in isolation.

The conflict shows up even with something as mundane as how semesters are scheduled.  When a college decides to run “part of term” courses alongside its traditional, semester-based classes, it has to run a separate calendar for financial aid purposes.  I’m told that’s a pretty labor-intensive operation.  Most of the standard back-office systems have trouble handling it, so every student aid package that includes a non-traditional schedule has to be handled manually.  That means adding more financial aid staffers for every new permutation of the schedule.

That’s no big deal for the Harvards of the world, who stick to semesters, or for the Phoenixes, who amortize the cost of innovations over hundreds of thousands of students.  But for the smaller colleges that are trying to improve student success with accelerated or compressed courses, the cost of essentially reversing automation is a deal-breaker.  And it isn’t covered by the increased Title IV money, either; it has to come out of the shrinking state pot.  As far as the feds are concerned, they gave at the office; as far as the states are concerned, there’s no more money to be had.  So colleges have to either increase tuition even faster to cover the back-office costs, or simply choose not to innovate.

The same issue shows up in the differences in broader goals.  At the federal level, there’s a focus on increasing the number of college graduates.  The idea is to keep the country innovative, and to keep the cost of skilled labor low enough that companies won’t abandon the U.S. for India.  But at the state level, there’s much less interest in helping students who might cross the country.  That means that, at the state level, there’s much more interest in short-term training, and much less in transferable liberal arts.  At the national level, we want the best and brightest to go anywhere in the country that opportunity beckons.  At the state level, we aren’t especially keen on exporting our best and brightest to other states.  

There’s a classic article out there about the folly of hoping for A while paying for B.  In the case of public higher ed, we have a set of national goals that doesn’t align terribly well with the goals of the people actually paying the operating bills of the colleges.  

I’m not necessarily calling for nationalizing public higher ed; my experience last week with TSA screening was a painful reminder of how “federal time” stretches out infinitely.  But as the folks in the trenches, I think we’d be well-advised to start crafting, and then advocating for, a set of federal policies that would consciously push states in desired directions.  “Maintenance of effort” requirements are far too weak; we need something pretty dramatic.  As long as the feds push the accelerator and the states jam the brakes, we won’t get where we need to go.

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