Washington Monthly - September/October 2020 - 31

Many of these calamities can and should be mitigated
in the short run by a sufficiently large federal rescue package. But even that will leave the system significantly worse
than it was pre-pandemic: diminished, sclerotic, and vulnerable to the next unforeseen disaster. A fundamentally different policy architecture is needed for American higher education, and the best time to build it is now. This essay describes
how that plan would work.
The plan would change how the federal government supports colleges and universities, staving off immediate disaster,
boosting resources for historically underfunded schools, and
fundamentally realigning the financial incentives that drive
many colleges to put money and status ahead of students. At
the same time, the plan would usher in a new era of intercollegiate cooperation, transforming an archipelago of endangered,
isolated institutions into a network of technology-enabled
learning communities.
Not all colleges would choose to participate in such a
network, preserving the American tradition of diversity and
independence in higher learning. But those outside the system would mostly be rich colleges that mostly serve rich students, and we would tax them in a way that helps pay for everyone else.
The result would be a new higher education ecosystem
that works for everyone, not just the chosen few.

F

or a long time, the federal government did very little to
fund higher learning. Until the mid-20th century, states
paid the overwhelming majority of the costs for public
colleges, students paid for private ones, and nobody paid that
much. But after World War II, higher learning opened up to
the masses as matriculation became a path to upward mobility for the burgeoning middle class, women entered the labor
market, and the economy shifted toward white-collar work. The
GI Bill set the precedent for the federal government's marketoriented, voucher-based method for supporting higher education institutions: Give or lend students money, and let them decide where to spend it.
This system, which persists to this day, has had its virtues.
Collegiate learning and scholarship are complicated, sometimes
esoteric, and not especially amenable to the kind of direct government regulation that often follows direct government subsidies. The market approach helped make American higher education uniquely large and diverse, encompassing thousands
of institutions with different missions, philosophies, and student bodies. Nearly every existing college found a place in the
new order. Elite research universities expanded spectacularly,
attracting money and talent from around the world.
But the system rested on the strength of a few key assumptions that have steadily weakened over time. It presupposed that state governments would continue to sustain and expand public colleges and universities, as they had
while building out regional public universities and community colleges in the 1950s, '60s, and '70s. That turned out to
be deeply mistaken. Some states, like California, New York,

and North Carolina, invested in their public universities and
kept tuition low. But others, like Pennsylvania, Colorado,
and New Hampshire, were stingy, letting students and parents foot the bill. And in every economic downturn since the
1980s, states have disproportionately cut college and university budgets.
The logic was always the same-unlike K-12 schools, prisons, and health care for the poor, higher education could raise
prices to make up for lost revenue. So tuition increased during
recessions to fill the budget gaps, backed by a federal loan program with bottomless reserves and no credit standards for borrowers. The process worked like a ratchet: When funding was
restored during boom times, tuition never went back down.
Adjusted for inflation, tuition prices at public four-year universities have almost tripled over the past 30 years. The post2008 period has been especially harsh. Some states, mostly
governed by Republicans, never restored lost funding. If Great

COVID will bankrupt many
colleges. But the need for
higher education won't go
away, particularly with
widespread unemployment.
Absent major reform, forprofit colleges backed by
private equity will surge into
the gap, using aggressive and
deceptive marketing tactics.
Recession-era funding cuts are repeated over the next few
years, 23 states will end up with systems that receive two dollars in tuition for every one dollar in state funding, a threshold
beyond which the whole idea of being a "public university" is seriously in question.
The system also assumed that an unregulated, consumerdriven free market for higher education would successfully
match students with the institutions best prepared to serve
them while imposing market discipline on quality and prices.
But the higher education market does not work like the simple
models freshmen are taught in Econ 101. Choosing an institution with which to have an intense multiyear relationship involving hundreds of people and countless unforeseeable future
decisions is a lot more complicated than shopping for toothpaste at CVS. Undergraduates are inexperienced consumers by
definition-few people return to college for another bachelor's
degree. Students and parents are highly susceptible to marketing and pressure tactics, rumor and innuendo, peer pressure,
Washington Monthly  31
Washington Monthly - September/October 2020

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