A Conservative Agenda: Education (Part One)

All right, let’s talk about the agenda I outlined in my book. As I noted, the idea is to create an agenda that appeals to the public at large, who are not ideologues. The purpose is to spot the things that matter to average Americans and address them in ways that fit with conservative principles so they will see a reason to vote for us. Let’s start with the issue of the cost of college.

Education is one of the top priorities for most Americans, and any successful agenda must deal with this issue and must address both K-12 and college. Today we start with college. College is vitally important to people’s success and to the success of the country as a whole. As I pointed out a couple weeks ago, people with college degrees will do much, much better than the “I never needs no skooling” crowd by as much as $5.3 million over the course of their careers, depending on the degrees they choose. They are also better off in recessions and they recover quicker. Anyone who tells you we shouldn’t be encouraging people to go to college is a fool.

But there is a problem with college: cost. I first outlined this for you back in 2009. Under the current system, students are being weighed down with the equivalent of a mortgage in student loan debt just to get through college. In 1981, the average yearly cost of attending a four-year college program was $3,499 (that’s in 2011 dollars). Today, it’s up to $22,092! That means college is 6.3 times more expensive in real terms today than it was in 1980. Consequently, today’s students will pay around $89,000 for an undergraduate degree and most of that will be debt. Government figures say that students currently owe more than one trillion dollars in student loan debt.

What this means is that these students, the best and brightest among us, are saddled with a debt that will take 10-15 years to pay off. So rather than starting families, buying homes, starting retirement plans, investing, building businesses, etc., they will spend their most productive years paying off debt. That is a huge disservice to them and to our economy. It’s bad for the interior of the country too (red states) because it means the smarter kids need to stay on the coasts where they earn more to pay back their loans.

More importantly, this is an issue that resonates with the public. Parents worry that their kids can’t afford college or will be weighed down forever by this... or they dread becoming co-signers. College kids despise the debt they are being saddled with. And young professionals struggle to pay off their debts for years. Each of those groups are groups the GOP lost in a big way. Why did the GOP lose them? Well, for one thing, because the GOP response to this issue has been offensive and stupid: basically, conservatives have groused that people shouldn’t go to college. Talk about a response that’s guaranteed to lose the public!

So what should conservatives offer? Three things come to mind, each of which is designed to make college more affordable and more accessible:

(1) Free State College for the Top 15%. Conservatives should advocate letting the Top 15% of high school graduates go to any state college anywhere in the United States for free, provided they maintain a 3.2 GPA or higher.

The purpose here is to make sure that the brightest kids can always afford to go to college. It also frees these kids up from student loan debt when they get out so they can act freely within the economy. It also provides an incentive for high school kids and their parents to make sure they do their best to get into that Top 15%. And it will help state colleges attract the kids they normally lose to places like Harvard.

But what about cost? You might be surprised. In 2012, 3.4 million students graduated from high school, so 510,000 students would be eligible for this program. The average in-state tuition at the moment is around $8,000 a year. Thus, the cost of this program would be $4.08 billion if they all participate – which they won’t. This is less than 10% of the Federal Government’s current $41 billion financial aid budget, which we can probably slash in half with our next idea.

(2) Maximum Pricing Provisions. The primary reason college costs have shot up is because student loans act like a pricing mechanism which lets colleges coordinate their rates. The result is that as loan availability has gone up, so have prices because schools know students can afford it. To counter this, we would ideally drop the student loan program entirely and watch colleges dramatically slash their prices to attract the students. But that’s politically impossible and suggesting it would only hurt us. So, instead, we should advocate the government using its market power to set maximum prices. Specifically, we should propose that any institution that wants its students to be eligible to receive federal loans cannot charge those students more than the average in-state tuition charged by state schools nationwide. Further, if the students are required to live on campus, then room and board must be provided at cost to those students. This will slash the cost of college dramatically and immediately.

But wait, how can a conservative argue for a price control? Because this isn’t a price control. An actual price control is an attempt to control a free market. This is not that. This is simply a condition on the receipt of a subsidy, and if a particular school believes this is unfair, then they are free to forgo the subsidy and charge market prices instead. Moreover, keep in mind that this is hardly a novel idea. The government already does this when it issues fixed-fee contracts to contractors, when it imposes “most-favored customer” clauses or unilaterally sets prices under Medicare, and conservatives are more than happy to argue that things like welfare should come with strings attached. It’s disingenuous to say we can dictate terms to poor people but not to rich schools.

And make no mistake, these schools are stinking rich. Harvard’s endowment is more than $34 billion dollars. Sixty-nine colleges have endowments larger than one billion dollars each. All told, colleges hold $410 billion in investments. These schools do not need taxpayer dollars to survive. If they don’t like this change, then they can hope students will keep paying their outrageous prices or they can dig into those endowments to make schools cheaper for students... they can finally face the free market.

(3) Fed Discount Rate Interest Rates. Finally, we need a solution for the people who are already saddled with these debts. The Democrats talk about forgiving student loan debt, but there’s too much to forgive at a trillion dollars. A better plan would be to convert all debts to a repayment schedule of 20 years and charge students the Federal Funds Discount Rate which the federal government charges to the nation’s biggest banks (about 0.75%). Seriously, if it’s good enough for banks, it should be good enough for taxpayers as well.

Think about what this agenda does. First, it promises the people most concerned about education that their kids can get a good college education for free (or very cheaply). It slashes the subsidy that has been ensconced in the law to support ultra-rich schools. It cuts the cost of college probably by a factor of 3 or 4, which will help current and future students. By all but eliminating interest rates, it helps the young professionals who are struggling with college debt. And its costs can be absorbed within the present system. Offering this will go a long way toward winning over the college students, the young families, and the minority families we have lost in record numbers.

Thoughts?