Non-Profit Higher Ed Schools Get Alot Of Government Aid And Results Are Not Always Great

See The Aid’s the Thing by Neal McCluskey of Cato.

"The following is cross-posted from the National Journal’s Education Experts blog. This week’s topic: Whether new ”gainful employment” regulations for higher education are too little, too much, or just right:

I agree largely with Steve Peha — our policies and mindsets have made “college” synonymous with “job training,” and that has led to huge inefficiencies. But there is an even deeper problem: government aid, both to students and schools.

The most aggressive opponents of for-profit schooling to have posted thus far appear to agree that taxpayer-funded student aid is what for-profit institutions are after. No doubt the critics are, for the most part, right. But there is another side to this equation: The aid also enables students to choose proprietary schools, choices many aid recipients likely would not have made had they been using only their own money, or money they borrowed from people who willing lent it to them. So aid helps enrich proprietary schools, but it also hugely degrades the incentives of students to economize or fully scrutinize the choices before them.

College is a two-way street, and student aid has fueled out-of-control traffic going in both directions

But it gets worse. What has been perpetually ignored by far too many people who’ve been involved in the assault of for-profit institutions is that all sectors of higher education get massive subsidies, and all are performing very poorly.

Public colleges get huge subsidies directly from state and local governments, yet still saddle students — and aid-supplying taxpayers — with big bills. And how do they perform? Only about 55 percent of students at four-year public colleges finish their degrees within six years, while only about 21 percent — one-fifth! — of community college students complete their programs within 150 percent of expected time. And yes, there is a lot that these figures do not capture, but there is no way to look at these outcomes of public schools as anything other than atrocious.

And nonprofit private institutions? They get big tax benefits by virtue of being putatively nonprofit, and often accumulate major wealth as a result. But their six-year grad rates? Only 64 percent.

Once again, the root problem is that massive government subsidies induce students to spend far more — and think about their priorities far less — than they would were they using their own dough, or money someone voluntarily gave them. Moreover, all of our higher ed subsidies enable colleges to raise prices with near impunity, and expend cash on all sorts of things that make them hugely inefficient.

In light of all this, “gainful employment” is clearly no solution to our higher ed troubles. It is, at best, an over-hyped distraction."