Washington Monthly - September/October 2020 - 32

and vaguely defined reputation. The fact that colleges disclose
little hard data about the quality of their courses doesn't help.
Colleges also do their best to make prices hard to understand. Car dealers are a cultural stereotype of caveat emptor sleaziness. Yet when you shop for a car, at least dealers are required
to list various key features along with the price in a standard

Can you imagine if you had
to disgorge every detail of
your finances before haggling
with a seller who was legally
allowed to lie to you about
how much their product
actually costs? If you've
ever sent kids to college, you
don't have to imagine.
window sticker that is the same at every dealer. Colleges are
subject to no such regulation. Instead, each adopts a different
financial aid "award letter" format that is often a nightmare of
deliberate obfuscation. A New America study of more than 500
award letters found that a third of colleges don't even disclose
how much they actually cost. Seventy percent combine grants
and loans into a single measure of college "aid." Many then tell
students that their "net price"-tuition minus "aid"-is $0,
even when it's financed by tens of thousands of dollars in loans.
All of this translates into congenital market failure, measured
by the millions of Americans who drop out of college and default on their student loans.
This system has obviously disadvantaged customers. Yet
for decades, it worked just fine for schools. The economy continued to shift away from blue-collar labor toward jobs that require college degrees, stoking demand and expanding the pool
of students to include more diverse consumers. Beginning in
the late 1990s, the gigantic Millennial generation ensured that
there were enough customers for everyone, and colleges were
able to keep labor costs down by creating a constant oversupply
of newly minted PhDs and then using the resulting power imbalance in the labor market to hire them as adjunct professors
for wages low enough to qualify for food stamps. As a result,
many colleges prospered. If you're old enough to revisit a familiar college campus after a decade or two away, you will almost
certainly be struck by how much bigger and nicer everything
has become-even if the school isn't famously wealthy.
But in the long run, consumerization and privatization
were a trap for most colleges. Like countless other dimensions of
American society, the higher education sector became increasingly financialized and winner-takes-all. While upper-upper32  September/October 2020

tier institutions accumulated almost unimaginable amounts of
new financial wealth and global brand prestige, many schools
were swept into a race for status and students. After the Millennials finished school and the overall size of the college-going
population declined, that race became less-than-zero sum.
To make the numbers add up every year, some colleges,
especially in the private nonprofit sector, spent millions on "enrollment management" consultants whose marketing tactics
generated thousands of applications that were fed into the kind
of sophisticated mathematical models that airlines use to generate ticket prices, with the goal of maximizing tuition revenue
from each seat in the lecture hall. Can you imagine if you had
to disgorge every detail of your earnings and assets before haggling with a seller who was legally allowed to lie to you about
how much their product actually costs? If you've ever sent kids
to college, you don't have to imagine.
This complex price discrimination helped sustain creaky
college finances for a while. But like all systems that rely on statistical analysis of the past, it was vulnerable to a future black
swan event like a once-a-century pandemic. As the virus tanked
the economy, it blew up state budgets and turned every classroom and frat house into a potential public health disaster.
It also prompted our anti-immigrant president to move even
more aggressively to keep out international students, who often prop up university budgets by paying full tuition. With less
money from states, fewer Americans who are willing to attend
school for fear of getting sick, and a smaller pool of international applicants, many colleges stand on the precipice.

M

any people already believe that the time has come to
upend the old system. Outrage over the $1.6 trillion
mountain of outstanding student debt helped fuel the
Bernie Sanders "free college" movement that upended American electoral politics. The Sanders plan, and a similar proposal
from Elizabeth Warren, would give states enough money to
reduce undergraduate tuition at public colleges and universities to $0. The cost would be split between new federal grants
and state matching funds. As part of the post-primary rapprochement between rival campaigns, Joe Biden has broadly
endorsed the program.
"Free college" is a well-motivated but poorly designed idea.
Understanding why shows what to do instead. By giving each
state enough money to bring public university tuition down to
$0, "free college" would unjustly reward states that previously
cut college funding and let tuition rise, while perversely penalizing states that did the right thing by spending more to keep
tuition low. The stingy states, especially over the last decade,
have largely been governed by Republicans. "Free college" is essentially a bailout for tax-cutting, government-hating rightwingers. And by requiring states to opt in and spend additional
matching funds if they want to make college free, it would all
but guarantee that some states opt out, as they did with the
Medicaid expansion under Obamacare.
"Free college" would give far more money per student
to wealthy elite public research universities that charge high-
Washington Monthly - September/October 2020

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