President Obama’s Address to the Nation
Last night, President Obama delivered an address to the nation. He focused on the state of the economy and his administration’s plans for the economic future of our country focusing on energy, healthcare, and education. I thought I would examine his plans for education as it relates to higher education and compare them to the public policy initiatives and thought pieces that have previously been published.
President Obama’s speech led off with a discussion of the global economy and the fact that “the most valuable skill you can sell is your knowledge.” One of the first persons to stimulate a national discussion on this topic was author Thomas Friedman with the publication of his book, The World is Flat, in 2005. Friedman cogently makes the point that technology has opened up the ability for companies to effectively employ engineers from India and China while conducting their business from the U.S. Friedman also discusses the higher rates of education in countries with former third world status where it is recognized that the ticket to financial success is a good education.
After the publication of Friedman’s book, the National Conference of State Legislatures’ Blue Ribbon Commission on Higher Education issued a publication entitled Transforming Higher Education: National Imperative – State Responsibility (2006). President Obama stated that “we have one of the highest dropout rates of any industrialized nation and half the students who begin college never finish.” Reading through the NCSL report, you will find several chilling statistics, one of which is that “for every 100 ninth graders who enter high school, only 18 finish college within six years.” President Obama stated that “three-quarters of the fastest-growing occupations require more than a high school diploma, and yet just over half of our citizens have that level of education.” It doesn’t take a degree in mathematics to figure out that with an 18 percent college graduation rate (calculated from the base of ninth graders) our percentage of college-educated citizens going forward is on a much more rapid descent rate when compared to the ascent in other countries.
Part of the problem in lower college participation and graduation rates is that the fastest growing populations in America (Latinos, African Americans, and immigrants) are the lowest participating populations in higher education. There are many research studies that document some of the reasons why our minority populations are participating in college at a lower rate. One of them is affordability. The NCSL report expresses a concern that America is in danger of creating a permanent underclass in that “the poorest individuals have only an 8 percent chance of obtaining a college degree compared to a 70 percent chance for the wealthiest individuals.” Last night, President Obama said, “We’ve made college affordable for nearly 7 million more students, 7 million.” That comment is misleading. The stimulus package increases the amount of the Pell Grant awarded to recipients of federal financial aid from $4,731 to $5,350. That is a notable increase and it would currently benefit the 5.4 million students who received Pell Grants last year and the estimated 6.7 million students who are projected to be using Pell Grants. But increasing the Pell Grant does not make college affordable for nearly 7 million more students. Our federal financial aid system has been designed to focus on loans, not grants. The design of the Higher Education Act (HEA) of 1965 was to distinguish between mandatory entitlement programs and discretionary entitlement programs. Student loans are considered mandatory entitlements and all other programs, including Pell Grants, are considered discretionary. Thus, as the numbers of students eligible for federally subsidized loans have increased and the tuitions that colleges charge have increased, the government has been required to fund those increasing loan amounts (over $60 billion in 2008). Pell Grants remained flat at $4,050 per year for the first five years of the Bush administration as tuitions made their meteoric rise and only recently, has Congress increased that amount. At the same time, in some years, Pell Grant funding had to be legislated in arrears after it was determined that the number of students eligible for Pell Grants exceeded the original Department of Education projections.
There are many who say that the current financial aid system is broken. The Spellings Commission suggested simplifying it and others have suggested that it does not achieve the educational goals that we need to attain as a country. The formula for financial aid calculates the estimated family contribution for each student based on income and assets and the costs of attending the institution. The higher the tuition and fees, the higher the loan while the Pell Grant amount stays relatively fixed. In an article in yesterday’s Chronicle of Higher Education entitled “Don’t Fix the Student-Aid System. Kill It.”, Robert Ronstadt, a former vice president at Boston University and author of Surviving the Tuition Travesty: How to Take the Financial Sting Out of Paying for College, says that colleges need to focus on lower tuition strategies and reduce the amount students must borrow, which has inched its way up to $21,000 per graduating undergraduate in 2007. Ronstadt cites the disparity between tuition increases and family income increases that were reported in Measuring Up 2008 whereby the lowest income quintile of Americans perceives that they cannot afford college regardless of the tuition charged.
President Obama and his Secretary of Education, Arne Duncan, would be well-advised to establish a Commission to examine a financial aid system that incentivizes its participants (institutions) to charge more since the financial aid system will fund a loan that a student will eventually have to repay. The President stated that “if you are willing to volunteer in your neighborhood or give back to your community or serve your country, we will make sure that you can afford a higher education.” Maybe he has a plan to revamp financial aid and we have not seen it yet. Ronstadt believes that lower tuitions and consequently lower loan balances can only benefit the student and the economy since students will have more disposable income with lower loan balances to pay after graduating. The Spellings Commission cited affordability and access as two of its four key issues that higher education needs to address. I believe that increased affordability is the primary way that we can increase the number of college graduates and that it will expand access. Serving adult learners through a financial aid system that recognizes that not everyone attends college immediately after graduating from high school will expand access and affordability. Ronstadt says that colleges need to become more competitive and revise their operating model. Some of the for-profit institutions and non-profit institutions that are tuition dependent already operate with efficient models and generally, affordable tuition rates. The Presidents cited in the Iron Triangle Report (see my recent blog article about this report) state that they can increase access and affordability only if someone gives them more money. My guess is that they haven’t studied economic models in a free-market economy or chose not to go through the heavy lifting required to solve the affordability problem. Either way, it is disappointing that the attitude is more entitlement-oriented than geared toward designing a product that will benefit America’s students.
Lastly, President Obama ended his thoughts on a motivational note. “So, tonight, I ask every American to commit to at least one year or more of higher education or career training. This can be a community college or a four-year school, vocational training or an apprenticeship. But whatever the training may be, every American will need to get more than a high school diploma. And dropping out of high school is no longer an option. It’s not just quitting on yourself; it’s quitting on your country. And this country needs and values the talents of every American. That’s why — that’s why we will support — we will provide the support necessary for all young Americans to complete college and meet a new goal: by 2020, America will once again have the highest proportion of college graduates in the world. That is a goal we can meet.” This is motivational and ambitious. I hope that President Obama’s goal is attained as was President Kennedy’s goal to place a man on the moon by the end of the decade (1960’s). I think that there will be a lot of heavy lifting required by higher education policy makers at the state and federal level, state legislators, governors and Congress, higher education leaders and others in order to accomplish this goal. If our dialogue can be as direct and as blunt as the budget that the Obama administration promises to deliver, progress may occur.