There Is No Constituency That Really Wants To Lower College Prices

Back in January, one of our guests on the Future U. podcast was Bill Troutt, who was chairman of the National Commission on the Cost of Higher Education in the late 1990s. The commission was an attempt by Congress to figure out how to curtail the rising price tag of a college degree.

One of the reasons that the commission is so forgettable, Troutt told us, is that its congressional sponsors really wanted the panel to “simply say it’s time for price controls.” It didn’t say that, and so the commission went down in history with a report collecting dust on a shelf somewhere in a Washington office building.

That 1990s-era congressional commission was one of many federal attempts over the years aimed at controlling the spiraling price of college. It’s reminiscent of the national debate over soaring health care costs. I was reminded during a visit last week to the Carter Presidential Library in Atlanta (highly recommend) that he had endorsed the idea of comprehensive national health insurance during his 1976 campaign. Health care and higher ed: we have complained about their costs for decades but can’t seem to do anything about either one.

The Biden administration is the latest to try on the college cost front with two policies that have dominated the higher ed news cycle over the last week. The first is something that really won’t do anything to bend the cost curve, but it’s good politics: student-loan forgiveness. The other attempt seems to be going after the wrong villain.

Let’s start with the administration’s effort to forgive some $400 million in student debt for tens of millions of borrowers—an idea that faced a skeptical conservative majority in the Supreme Court last Tuesday.

After listening to the oral arguments, it’s hard to imagine that the court won’t rule in June that any widespread loan forgiveness must have the backing of Congress (which it won’t get anytime soon). What then will be interesting is if the administration extends the pause on loan payments that has been in place since the beginning of the pandemic. The Education Department has said that payments will resume by the end of August, or 60 days after the litigation is resolved. Let’s see if the administration tries to do an end-run around the Supreme Court’s decision by continuing to extend the pause as long as they can (before there’s more lawsuits).

The other administration policy that hasn’t received as much attention in the mainstream press is new guidance from the Education Department to colleges that work with third-party providers on a range of services from enrollment to academic advising. In the last two decades, colleges and universities have outsourced so many of their services in an effort to save money (or drive new revenue).

But some of these services cost a lot of money to provide—money many institutions don’t have to invest—especially if they’re looking for new revenue streams. To solve that problem, a few savvy outside providers developed a great model: revenue-sharing agreements where they get a portion of the tuition dollars from new students in exchange for providing the needed infrastructure up front. In 2011, the Obama administration said these agreements didn’t violate a 1992 law that bans incentive compensation—basically colleges giving staff members (or in this case, outside vendors) more money when they enroll more students.

In its newest guidance, which the Education Department released in mid-February, it greatly expanded the definition of what it means to be a third party to, as Doug Lederman in Inside Higher Ed put it, “companies and other organizations that help colleges recruit, educate or retain students, and on the institutions themselves.”

The Education Department had wanted colleges to start to publicly reporting these relationships on May 1—a deadline they have since extended to September amid pushback. The big reveal the department really wants from this effort is what colleges are doing with so-called online program managers—or OPMs—which colleges contract with to recruit students and manage their online programs. (🎧 to this Future U. “Higher Ed 101” episode where ed tech analyst Phil Hill explains OPMs.)

OPMs have helped many colleges and universities get online over the last decade and expand their offerings of graduate degrees, in particular.

But OPMs have also come under fire by government officials and progressive think tanks for their aggressive marketing of students to get more money from ever higher tuition prices (like a $115,000 two-year master’s degree in social work from the University of Southern California).

What’s often lost in this debate, however, is that the more a degree costs, the more difficult it is to recruit and retain students. It’s not in the OPM's interest to have the most expensive degree. They want a reasonably priced one that makes it easier to recruit on volume. But many colleges and universities have long seen their part-time and professional graduate programs as cash cows. When colleges went online in the last decade they were no longer constrained to a specific geographic area, so they could charge more, to more people.

That was especially true among brand-name colleges that heavily restrict enrollment of in-person undergraduates to boost their prestige, but then open the floodgates to graduate students who end up subsidizing so much of the rest of the university. I saw this first-hand when I enrolled in an online graduate program at a top 25 university a few years ago where faculty members bragged in class that it was their ranking that enabled them to even offer this program at the price point they were charging us.

What college really costs a consumer is a black box that only colleges and the consultants they hire to help them with pricing can see inside. Forgiving loans for students who were burdened with debt for rising prices last decade or cracking down on third-party providers to colleges won’t change the fundamental problem in higher ed: price transparency.

We’ll probably never know why two students at the same college, with the same major, and without financial need get charged different amounts. Ron Lieber, a personal finance columnist at The New York Times, has been on a campaign for colleges to publish more data on how they award merit-based aid. As I point out in Who Gets In and Why, some colleges are “buyers” and others “sellers” in the admissions process. If college consumers are armed with more information about the black-box of financial aid, they’ll hopefully make better decisions (or at least they'll know what they're paying earlier in the admissions process).

Ever since President Lyndon Johnson signed the Higher Education Act in 1965 to have the federal government play a bigger role in paying for higher ed, we have debated the rising prices of colleges and the reason for them. And it’s certainly not going to end here in 2023, with a Supreme Court decision in June or Department of Education guidance to rein in outside service providers.

After all, there is no constituency that really wants to lower costs: parents and students want more services, the government demands more regulations, and trustees want better results. All of it costs money.