Tuesday, December 10, 2013
Yesterday in a meeting, a colleague referred to fractions as “fractures,” without realizing she had done it. I liked the mistake, since it captured the experience that some students have with fractions. Now I need a similar term for percentages.
Apparently, the two youngest members of the United States Senate, Chris Murphy (40, D-CT) and Brian Schatz (41, D-HI), have decided to tackle college costs through price controls. They”re co-sponsoring legislation to reduce or eliminate federal funding to colleges that increase their tuition by too high a percentage. The article quotes Senator Murphy:
“If a school is raising tuition at 8 percent a year and 50 percent of their students are defaulting on their loans, they probably shouldn’t continue to get Stafford loans and Pell grants,” Murphy said.
Where to start?
It probably wouldn’t be sporting to point out that colleges lose eligibility for federal student loans now at a much lower threshold than that. (It gets a little complicated, but the maximum before losing eligibility now is 25 percent for three years under the old “two years out” rules, or 30 percent for three years under the new “three years out” rules, or 40 percent for one year.) In other words, the hypothetical case he’s trying to solve is already solved under existing rules. But let’s write this one off to hyperbole and let it slide for now.
One could also argue that reducing Pell grants will invariably drive up reliance on private loans, which are far more expensive than Stafford loans. If one is truly concerned about student debt, the last thing to do would be to cut off the “best” aid and drive students to the worst aid.
Or, one could point out that in the public sector, one of the primary drivers of tuition increases has been state disinvestment. Punishing a college for trying to offset some of what its state legislature has done to it is quite literally adding insult to injury. Without a robust “maintenance of effort” requirement -- actually, a robust “step up your efforts” requirement -- a focus on “list price” increases merely compounds the error.
But never mind that. That’s just basic.
Take, instead, the use of a percentage. “If a school is raising tuition at 8 percent a year…”
8 percent of what?
A name-brand college that charges $50,000 per year raises its sticker price by four percent. A community college that charges $5,000 per year raises its sticker price by eight percent. Which is worse?
The name-brand college, by a long shot. A four percent increase off a base of 50k is $2,000. An eight percent increase off a base of $5000 is $400. If you look at percentages, you would praise the name-brand college. But if you actually do the math, the name-brand college increased costs by five times more than the community college. Without some sort of intervention, setting percentage-based ceilings across the board will simply increase the gaps between the well-funded and the rest. In this example, in one year the gap went from $45,000 per student to $46,600. And that’s assuming that the community college was aggressive!
If you set a maximum percentage -- in the case of a “freeze,” it would be zero -- then you are assuming that the existing base rates are correct. I know of no reason to assume that. Those who overcharge now can keep overcharging. Those who have made a point of keeping costs down will be consigned to penury for having failed to get while the getting was good. That’s not just counterproductive; it’s perverse. “No good deed goes unpunished” should not be a guiding principle for public policy.
Community colleges fly so far below the radar of national discussion that policies like these get dropped on us because somebody is angry at what Yale charges. I would hope that Senators Murphy and Schatz figure that out before they do real and lasting damage. Fractions may hurt, but percentages can be poisonous.