You’ve seen the headlines before: Americans are burdened with a record $1.2 trillion in student loans—with default rates above 10 percent. The overall balances are eye-popping and speak volumes about the cost of education, which continues to rise. College costs are an issue across higher education, but the student debt crisis is focused squarely on two groups of students: those who do not complete college, and those who complete degrees or earn credentials that have little to no value in the labor market. The highest default rates on student loans are actually those who owe the least—less than $5,000. Although there are always exceptions, borrowers with high-debt balances also tend to be very high earners who racked up big balances paying for law school, business school, or medical school. High-cost programs that lead to high-debt balances aren’t tremendously problematic as long as they have a significant return on investment. The big problem is when high tuition doesn’t lead to high earnings—or when programs don’t retain students through to graduation. Refocusing colleges on completion and high-value degrees would pay huge and immediate dividends to students, their families, and our society.
The current hot solution to college affordability: make it free. My colleagues at the Christensen Institute have written fairly extensively on our views on “free college” proposals. Our diagnosis is that the key issue facing higher education is a problematic business model. Subsidizing access to a broken system doesn’t fix the system. Who should pay for education is an important policy question, but it can’t be used to cover up or avoid dealing with the issues of why college is so expensive in the first place. There are real problems in U.S. higher education, and “free college” is an easy sound bite that allows politicians to attract voters without explaining or solving those problems. This critique applies to promises made on the campaign trail, as well as to President Obama’s push to expand the College Promise programs. Promise programs are being established elsewhere at individual colleges, through the support of cities and private donors. Efforts to pass additional statewide Promise programs, despite a strong push by the administration, have little chance of passing in the current political climate—of the 16 state legislatures in which Promise legislation has been introduced, only a handful have passed it. One of those, Kentucky, recently announced that it will delay implementation.
College Promise is modeled on an innovative program in Tennessee, designed to attack low college completion rates. It combined intensive mentorship with requirements to maintain a satisfactory academic record and complete community service, in exchange for free tuition at community colleges and state institutions. Tennessee’s higher education policy has also included a significant shift toward outcomes-based funding, designed to focus institutions on completion rather than enrollment. These innovations have the potential to shift the business model of higher education in Tennessee and focus institutions on outcomes rather than inputs. Tennessee didn’t just change who was paying—it took substantive steps to change the nature of what was being paid for. It’s frustrating that these high-potential innovations aren’t being more widely copied, but that the headline of “free college” continues to catch fire.
Last month, the White House announced a new initiative in higher education, which we think is on the right track, despite the “free college” tagline. In fact, this $100 million grant competition is a good deal more substantive and takes aim at closing the gap between college and the labor force by creating partnerships between community colleges and employers. The competitive nature of the initiative should spur institutions across the country to start thinking creatively about who they could partner with and how to develop programs that meet labor force needs—regardless of whether they ultimately win a grant. The programs are expected to be tuition-free, but much more importantly, they are expected to create productive credentials that create pathways to employment for students. Individual community colleges have long partnered with employers, but the new grant competition could help spur the creation of these kinds of programs.
The private sector is already experimenting with sustainable solutions to close the gap between workforce training programs and the actual workforce. Capella, a for-profit provider of both degrees and credentials, is piloting a new program called RightSkill. In a partnership with CareerBuilder, Capella is seeking to identify jobs employers are struggling to hire for and then to build programs that train potential employees for those jobs. The first program is in front-end web-development, where Capella estimates there are currently more than 50,000 open positions. RightSkill charges students less than $500, but if students complete the program and don’t find a job, their tuition is refunded.
We are delighted to see the Obama administration spurring further innovation around these crucial issues. “Free college” may score votes, but it doesn’t solve problems. Closing the gap between higher education and high-quality employment opportunities does.