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Obama’s College Promises

05/10/2012

National Review Online, May 10, 2012

By Katrina Trinko

The Obama campaign has a message for young-adult voters: When it comes to higher education, the president will dole out taxpayer dollars and “free stuff” at the rate Joe Biden makes gaffes.

When Mitt Romney was campaigning in Ohio on Monday, he offered a different approach.

Romney explained the president’s strategy thus: “In an effort to try to get them engaged, he’s going to promise to give a lot of free stuff to them. And say, ‘I’ll pay for your education,’ or ‘I’ll get rid of the loans.’”

“I’m only guessing, but my expectation is that he’s going to find — as politicians do — promises of free stuff are a way to get people to vote for him,” Romney added.

Tuesday morning, the Obama campaign fired back. “[Romney] equated the president’s support for keeping the interest rate on student loan rates low with giving away ‘free stuff’ — an assertion that millions of hard-working students would likely contest,” said Obama spokeswoman Lis Smith in a statement. “These out-of-touch comments come after Romney told students struggling with the cost of tuition that their only answers were to ‘shop around’ for lower prices and ask their parents to lend them money . . . and endorsed the Ryan budget, which would cut Pell Grants and let the student-loan interest rate double.”

Smith’s assertion is inaccurate; according to reports of the event, Romney didn’t directly mention Obama’s current push to prevent interest rates from doubling. Furthermore, Romney has previously stated that he supports keeping the rates at 3.4 percent for another year, rather than letting them rise to 6.8 percent as scheduled.

But it’s true that when it comes to subsidizing students’ college educations, Romney and Obama sharply diverge. Obama is making college affordability — via increased government subsidies — a cornerstone of his campaign.

Obama proposes to do that by continuing to increase the number of students eligible for Pell Grants, which give students up to $5,550 for college costs per year. (The number of students eligible for Pell Grants has increased from 6 million in 2008 to 9 million today.) He created the American Opportunity Tax Credit, which gives families making up to $80,000 a year a tax credit of up to $2,500 a year for college expenses. On the student-loan front, he signed a law allowing graduates to pay no more than 10 percent of their income toward federal student loans at a given time, regardless of how much they owe. And if they haven’t paid back the full amount after 20 years of working? The remainder is forgiven.

To use the language popularized during the Obamacare debate, none of these policies shows any promise for bending the college cost curve, that is, reducing runaway tuition inflation. Instead, they further insulate consumers from the true costs. For instance, tuition and fees at public four-year colleges rose by $1,800 between 2007 and 2012. But the College Board calculates that “the average net tuition and fees in-state students pay after taking grant aid from all sources and federal education tax credits and deductions into consideration increased by about $170 in 2011 dollars.” In other words, almost 90 percent of the increase during those years wasn’t paid directly by consumers, but was covered by grants and government funds.

Even Obama’s plan to pressure colleges into curbing tuition rates involves more government spending and support. “Under the [president’s] plan . . . the amount available for Perkins loans would grow to $8 billion, from the current $1 billion,” the New York Times reported in January. “The president also wants to create a $1 billion grant competition, along the lines of Race for the Top . . . to reward states that take action to keep college costs down, and a separate $55 million competition for individual colleges to increase their value and efficiency.”

Obama’s policies are designed to dole out money to college students, not promote better outcomes, which would make them poor policy even if there were no budget crisis. For instance, the plan makes no effort to incentivize academic effort or excellence: “A” students and “D” students are equally eligible for Pell Grants, federal student loans, and the American Opportunity tax credit. Further, the abundance of subsidies and student loans available may be encouraging students who aren’t prepared for college to attend anyway. Only 57 percent of students who started college in 2002 had graduated six years later, according to the National Center of Education Statistics. Students who drop out face the prospect of paying back student loans without a degree that brings them a better salary.

Romney’s approach is different. He supports the Ryan plan, which would put the Pell Grant program on a sustainable path, something Obama has not done, by curtailing eligibility. And he has talked frankly about the idea — first put forward in the 1980s by then–education secretary William Bennett — that government subsidies may be driving up college tuition rates, which have grown by 559 percent since 1985.

“If you look at inflation in America, there are two places where the rate of inflation has been massively higher than the overall rate: higher education and health care,” Romney told the Reno Gazette-Journal editorial board in February. “When the government subsidizes to a great degree a particular effort, people take advantage of the money coming in from the government and just keep on raising the tuition. And so if the federal government tomorrow were to say we will give $50,000 a year to every student in higher education my guess is that the tuition would go up $50,000.”

Instead, Romney prefers to apply market forces to tuition rates, noting that for-profit colleges like the University of Phoenix could help provide competition. “Students are going to say, you know what, it’s not worth tens of thousands to go to this college when I could go to that college for half the price and get a very good education,” Romney remarked.

This approach has not won Romney too many fans on the left. In March, when Romney encouraged a high-school student to “go to [a college] that has a little lower price where you can get a good education . . . and don’t expect the government to forgive the debt that you take on,” New York Times editorial writer David Firestone characterized his response as “pretty brutal.” The Nation’s Ben Adler also derided Romney’s college policies, writing that “Romney, the fantastically wealthy son of an auto executive, has evinced a ‘let them eat cake’ attitude towards college affordability.” In other words, just as in the health-care debate, liberals are eager to label those who oppose additional government subsidies as heartless or cruel.

Ultimately, this debate isn’t about college affordability. It’s about whether students and their parents or taxpayers should be primarily responsible for paying for college. And it’s about whether higher education will respond to market forces or become, like health care, increasingly subsidized, with its costs rising at a faster and faster rate. But since this places a bigger and bigger financial burden on the government, students and parents who choose the “free stuff” approach today will spend their future working for Uncle Sam, not themselves.