[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
COLLEGE ACCESS: IS GOVERNMENT PART OF THE SOLUTION, OR PART OF THE
PROBLEM?
=======================================================================
HEARING
before the
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
April 19, 2005
__________
Serial No. 109-8
__________
Printed for the use of the Committee on Education and the Workforce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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COMMITTEE ON EDUCATION AND THE WORKFORCE
JOHN A. BOEHNER, Ohio, Chairman
Thomas E. Petri, Wisconsin, Vice George Miller, California
Chairman Dale E. Kildee, Michigan
Howard P. ``Buck'' McKeon, Major R. Owens, New York
California Donald M. Payne, New Jersey
Michael N. Castle, Delaware Robert E. Andrews, New Jersey
Sam Johnson, Texas Robert C. Scott, Virginia
Mark E. Souder, Indiana Lynn C. Woolsey, California
Charlie Norwood, Georgia Ruben Hinojosa, Texas
Vernon J. Ehlers, Michigan Carolyn McCarthy, New York
Judy Biggert, Illinois John F. Tierney, Massachusetts
Todd Russell Platts, Pennsylvania Ron Kind, Wisconsin
Patrick J. Tiberi, Ohio Dennis J. Kucinich, Ohio
Ric Keller, Florida David Wu, Oregon
Tom Osborne, Nebraska Rush D. Holt, New Jersey
Joe Wilson, South Carolina Susan A. Davis, California
Jon C. Porter, Nevada Betty McCollum, Minnesota
John Kline, Minnesota Danny K. Davis, Illinois
Marilyn N. Musgrave, Colorado Raul M. Grijalva, Arizona
Bob Inglis, South Carolina Chris Van Hollen, Maryland
Cathy McMorris, Washington Tim Ryan, Ohio
Kenny Marchant, Texas Timothy H. Bishop, New York
Tom Price, Georgia John Barrow, Georgia
Luis G. Fortuno, Puerto Rico
Bobby Jindal, Louisiana
Charles W. Boustany, Jr., Louisiana
Virginia Foxx, North Carolina
Thelma D. Drake, Virginia
John R. ``Randy'' Kuhl, Jr., New
York
Paula Nowakowski, Staff Director
John Lawrence, Minority Staff Director
------
C O N T E N T S
----------
Page
Hearing held on April 19, 2005................................... 1
Statement of Members:
Boehner, Hon. Jon A., Chairman, Committee on Education and
the Workforce.............................................. 1
Prepared statement of.................................... 4
Miller, Hon. George, Ranking Member, Committee on Education
and the Workforce, prepared statement of................... 6
Scott, Hon. Robert C., a Representative in Congress from the
State of Virginia.......................................... 5
Statement of Witnesses:
Heller, Dr. Donald E., Associate Professor and Senior
Research Associate, The Center for the Study of Higher
Education, The Pennsylvania State University, University
Park, PA................................................... 17
Prepared statement of.................................... 21
Vedder, Dr. Richard K., Distinguished Professor of Economics,
Ohio University, Athens, OH................................ 7
Prepared statement of.................................... 10
COLLEGE ACCESS: IS GOVERNMENT PART OF THE SOLUTION, OR PART OF THE
PROBLEM?
----------
Tuesday, April 19, 2005
U.S. House of Representatives
Committee on Education and the Workforce
Washington, DC
----------
The Committee met, pursuant to notice, at 2:05 p.m., in
room 2175, Rayburn House Office Building, Hon. John Boehner
(Chairman of the Committee) presiding.
Present: Representatives Boehner, McKeon, Castle, Kline,
Price, Fortuno, Boustany, Drake, Kildee, Scott, Tierney,
Kucinich, Holt, Davis of California, McCollum, and Bishop.
Staff present: Kevin Frank, Professional Staff Member;
Alison Griffin, Professional Staff Member; Sally Lovejoy,
Director of Education and Human Resources Policy; Alexa
Marrero, Press Secretary; Krisann Pearce, Deputy Director of
Education and Human Resources Policy; Amy Raaf, Professional
Staff Member; Deborah L. Samantar, Committee Clerk/Intern
Coordinator; Brad Thomas, Legislative Assistant; Ellynne
Bannon, Minority Legislative Associate/Education; Alex Nock,
Minority Legislative Associate/Education; Joe Novotny, Minority
Legislative Assistant/Education; and Mark Zuckerman, Minority
General Counsel.
Chairman Boehner. The Committee on Education and the
Workforce will come to order. A quorum being present, the
Committee comes together today to hear testimony on ``College
Access: Is Government Part of the Solution, or Part of the
Problem?'' And under the Committee rules, opening statements
are limited to the Chairman and Ranking Member. So if other
members have statements, they'll be included in the hearing
record. And with that, I ask unanimous consent for the hearing
record to remain open for 14 days to allow member statements
and other extraneous material referenced during the hearing to
be submitted for the official record.
Without objection, so ordered.
STATEMENT OF HON. JOHN A. BOEHNER, CHAIRMAN, COMMITTEE ON
EDUCATION AND THE WORKFORCE
I want to welcome all of you here to today's hearing. First
let me say that this is probably going to be one of our more
provocative hearings. We're surrounded by evidence that the
Higher Education Act is not getting the job done for today's
students and parents.
Last year, some of our members of this Committee created
quite a stir when we warned of a growing disconnect between the
priorities of the college lobbying community and those of
parents and students. We warned parents and students, the
consumers of higher education, are growing weary over ever-
soaring college costs, and we warned about the significant
graduation gap that exists between disadvantaged students and
their peers at traditional colleges and universities.
We warned that traditional colleges and universities are
not meeting the needs of nontraditional students, and we warned
that the ongoing unchecked hyperinflation in college costs is
the mark of a system headed for a breakdown.
The process that follows this hearing cannot be a routine
reauthorization of the Higher Education Act. It won't be an
easy process or a comfortable one. Assumptions will be
challenged, myths will be confronted, and china will probably
have to be broken along the way, but that's the job that we
were all sent here to do.
With this in mind, we're starting today with a candid and
open discussion about the role that the Federal Government is
currently playing in college access.
In the past year, a number of prominent schools have
voluntarily taken steps to curb tuition growth. Responding to
consumer demand, growing competition from proprietary colleges,
and possibly pressure from lawmakers, some schools have ruled
out major tuition increases in the coming years. Instead,
they're looking for alternatives. Some are studying ways to
become more efficient and less dependent upon government, and
we applaud these institutions for their leadership.
We remained concerned, however, about the general state of
American higher education as we prepare this year to
reauthorize the Higher Education Act, we have an obligation to
step back and take an honest look at the big picture. We need
to examine the role that the Federal Government is playing when
it comes to college access in America.
A newly published article in the U.S. News & World Report
offers this assessment, and I quote: ``These days, it doesn't
matter what your assets look like. It's increasingly difficult
for almost everyone to afford college, as tuitions climb and
Federal aid remains more or less stable.'' End quote.
And this statement I think accurately describes the
challenge that parents and students face today. Unfortunately,
the implied assumption is that increased Federal spending on
higher education would ease the burden that these families
face.
Now I'm not criticizing U.S. News & World report, but to
me, it seems like a dangerous assumption to make. College
tuition rates have been spiraling upwards for decades at
hyperinflationary levels, and the Federal Government has
consistently responded by increasing spending. But college
access for far too many families remains an elusive goal.
As many of you have heard me say before, it seems that the
more we spend in higher education, the further we continue to
fall behind. In fact, some believe government spending may be a
hidden culprit in the ongoing inflation of college costs. They
point to what seems to be a vicious cycle: Colleges increase
tuition. Government responds by increasing spending, and
colleges respond by increasing tuition again.
As we get set to reauthorize the Higher Education Act, I
think we have to take a hard look at whether such a cycle
exists. Now this is going to require some thinking outside the
box, if you will, something that I've found doesn't exactly
come natural here in Washington.
Going back to the U.S. News article again, I was struck in
particular by a comment attributed to a top higher education
lobbyist who seems alarmed by the growing climate of fiscal
responsibility and belt-tightening in Washington. Quote: ``The
Federal budget deficit is an 800-pound gorilla,'' the
individual is quoted as saying. ``We're not making decisions
based on a rational assessment of public policy needs in higher
education; we're making decisions based on what we can
afford.''
Now I happen to know the individual who made this remark. I
know him well, and I certainly wouldn't want to single him out,
but when did balancing the Federal budget become irrational
public policy? We should not automatically assume students or
parents are better off with more government spending in higher
education. Deficits do matter, and they matter to all
Americans, including students, parents and the employees of
American colleges and universities.
I'm by no means suggesting Congress should not make
targeted increases in certain higher education programs such as
the Pell Grant program, which the President clearly strongly
supports, and we've even proposed expanding it. But there are
some in Washington who have responded to the latest round of
tuition hikes by calling literally for tens of billions of
dollars in increased higher education spending in one program
after another.
And I'm concerned that such huge increases would actually
hurt the very students and parents that they are intended to
help. At a minimum, they would add to the budget deficit or
force deep cuts in other programs such as No Child Left Behind
or special ed. And some believe they'd put the double whammy on
students and parents by paving the way for another round of
tuition hikes.
But before Congress proceeds with this reauthorization, I
think we're obligated to take a look at the role the Federal
Government may be playing in the hyperinflation of college
costs. And I also believe we need to look for ways in which the
Federal Government can give college consumers more information
and more choices, restore fairness for low- and middle-income
students, and encourage greater competition and innovation in
the higher education marketplace.
To help shed light on some of these matters, we've invited
two prominent witnesses to discuss the role the Federal
Government plays in higher education. I want to thank both of
them for being here, and we look forward to their testimony.
And with that, I'd like to yield to my colleague from the
great state of Virginia, Mr. Scott.
[The prepared statement of Chairman Boehner follows:]
Statement of Hon. John A. Boehner, Chairman, Committee Education and
the Workforce
Welcome to all of you.
First let me say this is probably going to be one of our more
provocative hearings. We are surrounded by evidence that the Higher
Education Act is not getting the job done for today's students and
parents.
Last year, some of the members of this Committee created a stir
when we warned of a growing disconnect between the priorities of the
college lobbying community and those of parents and students. We warned
that parents and students, the consumers of higher education, are
growing weary with ever-soaring college costs. We warned about the
significant graduation gap that exists between disadvantaged students
and their peers at traditional colleges and universities. We warned
that traditional colleges and universities are not meeting the needs of
non-traditional students. We warned that the ongoing, unchecked
hyperinflation in college costs is the mark of a system headed for a
breakdown.
The process that follows this hearing cannot be a routine
reauthorization of the Higher Education Act. It won't be an easy
process, or a comfortable one. Assumptions will be challenged. Myths
will be confronted. And china may have to be broken along the way. But
that's the job we were sent here to do.
With this in mind, we're starting today with a candid and open
discussion about the role the federal government is currently playing
in college access.
In the past year, a number of prominent schools have voluntarily
taken steps to curb tuition growth. Responding to consumer demand,
growing competition from proprietary colleges--and, possibly, pressure
from lawmakers--some schools have ruled out major tuition increases in
the coming years. Instead they're looking for alternatives. Some are
studying ways to become more efficient and less dependent on
government. We applaud these institutions for their leadership.
We remain concerned, however, about the general state of American
higher education. As we prepare this year to reauthorize the Higher
Education Act, we have an obligation to step back and take an honest
look at the big picture. We need to examine the role the federal
government is playing when it comes to college access in America.
A newly published article in U.S. News & World Report offers this
assessment:
``These days, it doesn't matter what your assets look like: It's
increasingly difficult for almost everyone to afford college, as
tuitions climb and federal aid remains more or less stable.'' (Butler,
``Will the Aid Be There?'', Paying for College special edition, April
18, 2005)
This statement accurately describes the challenge parents and
students face today. Unfortunately, the implied assumption is that
increased federal spending on higher education would ease the burden
these families face.
I'm not criticizing U.S. News & World Report. But to me, this seems
like a dangerous assumption to make. College tuition rates have been
spiraling upward for decades at hyperinflationary levels. The federal
government has consistently responded by increasing spending. But
college access for far too many families remains an elusive goal.
As many of you have heard me say before, it sometimes seems the
more we spend in higher education, the further we fall behind. In fact,
some believe government spending may be a hidden culprit in the ongoing
inflation of college costs. They point to what seems to be a vicious
cycle: colleges increase tuition; government responds by increasing
spending; and colleges respond by increasing tuition again.
As we get set to reauthorize the Higher Education Act, I think we
have to take a hard look at whether such a cycle exists. This is going
to require some ``thinking outside the box,'' if you will--something
that I've found doesn't exactly come naturally in Washington.
Going back to the U.S. News article again--I was struck in
particular by a comment attributed to a top higher education lobbyist
who seems alarmed by the growing climate of fiscal responsibility and
belt-tightening in Washington.
``The federal budget deficit is an 800-pound gorilla,'' the
individual is quoted as saying. ``We're not making decisions based on
rational assessment of public policy needs in higher ed--we're making
decisions based on what we can afford.''
Now, I know the individual who made this remark; I know him well,
and I am by no means singling him out. But when did balancing the
budget become irrational public policy? We should not automatically
assume students or parents are better off with more government spending
in higher education. Deficits do matter, and they matter to all
Americans, including students, parents, and the employees of American
colleges and universities.
I'm by no means suggesting Congress should not make targeted
increases in certain higher education programs, such as the Pell Grant
program, which President Bush strongly supports and we have even
proposed expanding. But there are some in Washington who have responded
to the latest round of tuition hikes by calling, literally, for tens of
billions of dollars in increased higher education spending, in program
after program.
I'm concerned such huge increases would actually hurt the very
students and parents they are intended to help. At a minimum, they
would add to the budget deficit or force deep cuts in other programs,
such as the No Child Left Behind Act or special education. And some
believe they would put the ``double whammy'' on students and parents by
paving the way for another round of tuition hikes.
Before Congress proceeds with this reauthorization, I think we're
obligated to take a look at the role the federal government may be
playing in the hyperinflation of college costs. I also believe we need
to look for ways in which the federal government can give college
consumers more information and more choices, restore fairness for low
and middle-income students, and encourage greater competition and
innovation in the higher education marketplace.
To help shed some light on these matters, we've invited two
prominent witnesses here today to discuss the role the federal
government plays in higher education. We thank them for being here. We
look forward to their testimony, and to what we hope will be a spirited
discussion.
With that, I would turn to the senior Democratic member of our
committee, Mr. Miller, for any opening statement he would like to make.
______
STATEMENT OF HON. ROBERT C. SCOTT, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF VIRGINIA
Mr. Scott. Thank you, Mr. Chairman. And, Mr. Chairman, I'm
delighted to see that there's all of a sudden some concern
about the deficit. Last year's budget was projected when this
administration came in to have a $400 billion surplus, but it
ended up with a $400 billion deficit, a swing of $800 billion,
which since we are right around April 15th, people would be
delighted to know was the entire take from the individual
income tax, approximately $800 billion.
And before we start coming up with excuses, the war and the
economy can take credit for about $150 billion of that $800
billion swing.
But, Mr. Chairman, we're here to talk about higher
education, and there's a direct correlation between education
and an individual's future. The more education they have, the
better future they'll have. And it's important to make sure
that in a democratic society we do not deny access to higher
education to people just because of the station in which they
were born.
The Pell Grants, which traditionally have been the key to
low income students getting into college, are covering less and
less each year. You used to be able to get a Pell Grant, a 15-
hour-a-week job, and a summer job, and maybe a little bit of
student loan, and you can go to about any college, certainly
any state college, in the country. Now the Pell Grant plus a
lot of loans, you're still far away.
We need to make sure the Pell Grant keeps up with not only
inflation but the inflation that you mentioned, Mr. Chairman,
of college tuition. Student loans have to be available at
reasonable interest rates.
Education is also important to the community. Those
communities that have that have high incidence of well educated
community have lower costs in welfare, lower costs in crime. We
also need to make sure that we have the best educated workers
so that we can attract jobs. Right now we're falling way behind
in a lot of different areas--engineers, nursing, teachers, a
number of other areas where we're not doing the job.
So, Mr. Chairman, I'm delighted to see that we are talking
about access to higher education and look forward to the
testimony of the witnesses, and I'd ask unanimous consent that
the statement from the Ranking Member, Mr. Miller, be entered
into the record.
[The prepared statement of Mr. Miller follows:]
Statement of Hon. George Miller, Ranking Member, Committee on Education
and Workforce
Thank you Mr. Chairman.
I am pleased to join you at today's hearing. And I've got an answer
to the question it poses. The federal investment in higher education is
absolutely part of the solution.
Since the passage of the Higher Education Act in 1965, Federal
grants, loans and work-study have helped to send millions of students
to college, many of whom would not have gone without the help.
This investment has been critical in making the U.S. the world
economic leader it is today. Our system of higher education is the envy
of the world.
But we all know that the world is quickly becoming a much more
cutthroat place when it comes to the economy.
Whether the U.S. retains its preeminence in this fiercely
competitive global environment will depend more and more on having a
highly skilled workforce.
And higher education is the critical tool for building that
workforce.
Thanks in part to the improved federal investment in higher
education since 1965, college participation rates have grown
dramatically:
In 1965, 38 percent of African-American high school
graduates attended college. Today, more than 60 percent attend;
In 1965, about half of white high school graduates
attended college. Today, more than two-thirds attend;
Thirty years ago, under half of all Hispanic high school
graduates attended college. Today, nearly 60 percent attend; and
Over the last three decades, the number of women
attending college has grown by a quarter.
Continuing this progress--and closing the college participation gap
between white and minority students--would add $250 billion to our
nation's economy and an additional $80 billion to tax revenues each
year.
Yet we cannot take this progress for granted.
Already, we know that there are too many college-qualified students
who are getting priced out of a higher education.
We cannot continue to ignore rising tuition prices.
In the last Congress, I cosponsored legislation with
Representatives Tierney and McCollum that would make tuition more
affordable and stop big tuition hikes.
It's time for this committee to act on legislation to make college
tuition affordable.
Congress must also do a better job of maintaining and improving its
commitments to college students, and it should start by increasing the
Pell grant scholarship.
This year, the Pell will make it possible for more than five
million low- and moderate-income students to attend college. But the
buying power of the Pell is worth $800 less, in real terms, than it was
in 1975-76.
President Bush has yet to make good on his promise to raise the
maximum Pell grant scholarship to $5,100, but that shouldn't stop the
Congress from acting to help students.
In addition to Pell scholarships, this year more 14 million student
and parent loans will be made to help students pay for college.
Unfortunately, my Republican colleagues on this committee have
introduced legislation that would require student borrowers to pay an
additional $5,500, on average, in interest costs over the life of their
loan.
This year more than one million low-income, first generation, and
minority students will benefit from college outreach programs.
Despite the success of these programs, President Bush eliminated
their funding in his education budget this year.
Our nation's continued economic success demands that we take the
federal investment in higher education seriously.
We have a responsibility to help make college more affordable for
students, and to do it in a way that uses taxpayers' dollars
efficiently--for example, by eliminating wasteful subsidies to banks
and student lenders.
It doesn't make sense for the Congress to allocate limited
resources to boosting the profit margins of banks.
We have to return to the original premise of the Higher Education
Act of 1965: that no college-qualified student should be denied a
college education because he or she lacks the financial resources.
I look forward to working with my colleagues on both sides of the
aisle to accomplish this goal.
______
Chairman Boehner. Without objection, so ordered. I want to
thank you, Mr. Scott.
Mr. Scott. Well, Mr. Chairman, I'd yield to either of my
colleagues if I've got any time left. If not, Mr. Chairman, I
yield back.
Chairman Boehner. Well, we've got two excellent witnesses
with us today, and we've granted each of the witnesses 10
minutes of testimony since we only have two. I thought we'd
give them more time to give us their point of view.
Our first witness today is Dr. Richard Vedder. Dr. Vedder
is Distinguished Professor of Economics at Ohio University,
with degrees in economics from Northwestern University and the
University of Illinois. He's been a visiting professor at
numerous colleges and universities, most recently serving as
the John M. Olin Professor of Labor Economics and Public Policy
at Washington University in St. Louis.
Over the course of his academic career, Dr. Vedder has
authored several books and more than 200 published papers and
several studies for the Joint Economic Committee here in the
Congress. His latest book was titled ``Going Broke By Degree:
Why College Costs Too Much.''
Our second witness is Dr. Donald Heller. Dr. Heller is an
Associate Professor and Senior Research Associate with the
Center for the Study of Higher Education at the Pennsylvania
State University.
He has also taught at the University of Michigan, the
University of Massachusetts, and Harvard University. He's
authored numerous books and articles on college access issues
and served as a consultant for institutions and state agencies
in many states.
I think we've explained to you the lighting system, how it
works. I don't think we're going to have any problems with that
today.
So with that, Dr. Vedder, you may begin. You might want to
turn your microphone on, though, first.
STATEMENT OF DR. RICHARD K. VEDDER, DISTINGUISHED PROFESSOR OF
ECONOMICS, OHIO UNIVERSITY, ATHENS, OH
Dr. Vedder. I am Richard Vedder. I teach economics at Ohio
University. I'm an Adjunct Scholar at the American Enterprise
Institute.
As you mentioned, I recently wrote this book on college
costs. How do colleges cut costs? How do you cut the costs? You
follow the money. Costs are rising to a considerable extent
because you're dropping dollars over campuses and student
homes, and they're ending up in the hands of relatively
unaccountable administrators and faculty, who are spending the
money in part to promote good lives for themselves.
The solution is to stop the growth in this money flow. Now
let me document this by summarizing some of the major
conclusions in my book before discussing some of the policy
implications. Let's begin with some facts. The cost of higher
education is rising both to society and to consumers. From 2002
to 2004, 4-year state university tuition fees increased an
average of 26 percent. For every year since 1982, college
tuition fees have risen faster than the overall rate of
inflation.
Let me briefly mention six reasons why this may be in part
so. First, when the Federal Government increases subsidized
student loans or Pell Grants or tuition tax credits, it
increases the number of students wishing to attend college at
any given tuition fee. In short, Federal policies increase the
demand for education, which pushes up prices and tuition fees.
Financial assistance on higher education not only has been
increasing, but it has been rising at an accelerating rate. In
the 5 years between 1998 and '99 school year and the 2003-'04
school year, per student assistance rose at an annual rate of
11.66 percent a year compounded.
Second, in the private, for-profit sector, when the prices
for products rise with increased demand, profit margins widen,
and this unleashes a torrent of entrepreneurial activity as
firms scramble to get a share of the highly profitable market.
The rise in demand induces an increase in supply, ultimately
leading to prices and profits falling to a more normal level.
This has not happened to the same extent in higher
education. Universities do not vigorously compete on price as
they lack the profit incentives to do so. There's no bottom
line in higher education. Did Xavier University, your alma
mater, Mr. Chair, have a good year or a bad year in 2004? Who
knows? With private, for-profit firms, we have real time
changes in stock prices, earnings reports to indicate the
financial success of the firm.
In private firms, poor profits lead managers to being
fired, employees to being laid off, and bonuses to be reduced.
In traditional higher education, who knows whether the
university is doing good or bad? And there are few incentives
to improve. Poor performance sometimes goes unpunished, good
performance sometimes goes unrewarded.
Third, in the public's eye, the primary purpose of higher
education is teaching our youth. Yet Federal data reveal a
significant shift in resources over time from instructional
purposes to other things.
Some of the things of course include grant funded research,
which is largely self-supporting and certainly in keeping with
the educational mission, but some funding has gone for other
things. In 1929, American University spent eight cents of each
dollar on administration. Today they spend fourteen cents.
The big personnel explosion has not been in new faculty but
in nonteaching professional staff, and I could document this.
Fourth, universities have become more aggressive in
discounting fees for some but not all students. Increasingly,
universities are doing what airlines have done for years.
They're charging those who are relatively insensitive to price
more than those for whom price is a major consideration in
selecting schools. There's been a bit of a soak-the-rich
attitude more than heretofore.
Fifth, productivity in higher education has probably
fallen, difficult to measure, but it's probably falling.
Staffing certainly is rising relative to enrollments.
Sixth, much incremental funding has gone to improve lives
for staff. Salaries of full professors have risen at least 50
percent in real terms since 1980, and workloads have declined
for many as well. Some incremental funds from higher third-
party payments have gone to improve the quality of life of
personnel.
Now what does this all have to do with the Higher Education
Act reauthorization? You should aim to improve competition in
higher education, promote alternatives to not-for-profit
schools. You should rein in or reduce the artificially induced
growth in demand that is pushing up tuition fees. Above all,
you should put some brake on the cost to the Federal Government
of helping to finance higher education, particularly given the
large deficits you mentioned accompanied the congressional
spending spree of the last few years.
Now there's many ways we could curb Federal programs
somewhat. One approach of course would be to reduce those
eligible for loans, restrict tuition tax credits by greater use
of income-tested eligibility. A variant of this approach would
simply let tuition tax credits expire after this year. Another
approach would be similar to what we did with welfare reform in
the mid-'90's. Put on time limits. Limit a student's loan or
grant eligibility more rigorously than at present. Put a
lifetime limit on years of loan or grant eligibility, for
example.
Another approach would be to put performance dimensions to
loans and Pell Grants, have at least part of the grants vary
with the student's performance.
A fourth approach would be to set an aggregate ceiling on
Federal financial assistance, and if legal requests for that
aid exceed the ceiling, to prorate the grants or loans to fit
the ceiling.
Now aside from restricting Federal student assistance, you
need to ensure that newly emerging competitors to traditional
universities can flourish. I've been worried about two
potential problems. The first are the regional accreditation
associations might use their power to reduce competition from
the for-profit schools, and perhaps even the junior colleges.
Our current accreditation system is inefficient, has often
raised costs needlessly, and is in large part based on input-
based assessment. I'm concerned that the not-for-profit schools
that largely control the accreditation bodies will start
putting obstacles in the way of the for-profits.
A second concern is that the for-profit 4-year institutions
might increasingly start to deny transfer credits to the for-
profits and public community colleges, not on the basis of the
nature of the coursework offered, but simply on the grounds
that these schools are stealing students from them.
Legislation should minimally include a nondiscrimination
clause that states that the profit status of an institution may
not be taken into account in evaluating credit transfer
requests for any school which has Federal student assistance.
Finally, the Federal Government appears to be either
indifferent or hostile to good behavior at either the level of
the institution or the individual student. With regards to
students, I would at least give slightly smaller Pell Grants to
poorly performing students than good ones. I would cut off
students with poor grades or bad disciplinary records; for
example, arrests for rioting or other bad forms of behavior. I
think we can strengthen up--strengthen what we do in this area.
The same can be done with respect to loans and even tuition
tax credits to parents of students. A parent who saw that they
were going to lose a tuition tax credit because their kid got
arrested and put in jail might have something to say to their
kid.
How do you improve institutional behavior? One approach
would be to bribe them. You can reduce the cost to the Federal
Government--say you reduce the cost by $5 billion a year
through restricting loans and grants. Devote a part of that,
say $3 billion, to tax relief to taxpayers or deficit reduction
or a non--to other things, but use the remaining $2 billion to
establish a fund to reward schools holding down their costs.
Give them incentive payments to keep the sum of tuition fee
and state government subsidy growth per student to the level of
inflation or less. Those universities that seriously trim their
bureaucracies, make their faculty teach more, use personnel and
facilities year round or use technology to lower costs, would
be rewarded. Perhaps mandate that a portion of their reward
payments be returned to the top administrators and the staffs
as efficiency bonus payments. Provide incentives for workers in
higher ed to want to cut costs.
Another variant on the proposal would be to provide
financial incentives to state governments that increase the
proportion of state assistance that goes directly to the
students as vouchers or scholarships rather than institutional
subsidy payments, or to states that keep the overall growth of
total higher education expenditures to the rate of inflation
plus growth in the 18 to 24 population.
Concluding, Federal higher education policy exemplifies in
my judgment the law of unintended consequences. Legislation
that was adopted in good faith to help kids has contributed in
a significant way to the cost explosion that needs to be
addressed. And perhaps it is time for tough love for American
higher education.
I wish you luck in your endeavors.
[The prepared statement of Dr. Vedder follows:]
Statement of Dr. Richard K. Vedder, Distinguished Professor of
Economics, Ohio University, Athens, OH
Chairman Boehner and members of the committee, my name is Richard
Vedder, and I am Distinguished Professor of Economics at Ohio
University, and an adjunct scholar at the American Enterprise
Institute. I have recently written a book entitled Going Broke By
Degree: Why College Costs Too Much (Washington, D.C.: AEI Press, 2004),
a copy of which is being provided to each of you. My testimony is
largely derived from my research for this book, aided by 47 years of
experience in American higher education, including service as a
professor at a wide variety of institutions.
Public support of higher education is usually justified on two
major grounds: first, universities allegedly have positive spillover
effects, so that colleges benefit not just those attending them but
society as a whole. Second, in keeping with equalitarian ideals dating
back to the founding, we believe that access to higher education
furthers the American Dream, specifically that persons can succeed in
our society regardless of their family position, race, religion,
gender, ethnicity, or other group attribute. My research suggests that
while still the best in the world, American universities have lost
their way in terms of meeting these fundamental objectives. Of
particular relevance to this hearing, access to college is not growing
much despite--or maybe even because of--the well intended efforts of
the federal and state governments. Also, there is some evidence that
universities have significant and important negative spillover effects,
that government support for them actually has negative economic
effects. All told, federal higher education policy is a perfect example
of the Law of Unintended Consequences.
I will first summarize in rather abbreviated form the major
conclusions of my book. I will then discuss some policy implications,
including some possible directions for federal higher education
participation as you ponder the reauthorization of the Higher Education
Act.
Let us begin with some facts. First, and most obvious, the cost of
higher education is rising to society in general and to consumers in
particular. The College Board tells us that in the two years from 2002
to 2004, four year state universities tuition fees increased an average
of 26 percent. The Bureau of Labor Statistics tells us that for every
year since 1982, college tuition fees have risen faster than the
overall rate of inflation. Over the past generation, tuition fees have
been rising faster than family incomes, a phenomenon that is not
sustainable on a long-term basis. There is some evidence that the rate
of tuition increase has exceeded the inflation rate for at least a
century, although I would argue that the rate of real increase has
accelerated in recent times, in part because of public policy.
In the course of my testimony, I will mention at least six factors
related to the tuition fee explosion: the presence of huge third party
payments, the lack of strong market discipline, the use of university
resources to cross-subsidize non-academic activities, price
discrimination against some students, a decline in productivity, and,
finally, rent-seeking behavior.
Third Party Payments
There are two sectors of the economy where the federal government
involves itself heavily in financing private transactions, namely
health care and higher education. It is not a coincidence that these
are the two sectors with the greatest amount of price inflation in
modern times. When the federal government increases subsidized student
loans, gives a Pell Grant, or grants a tuition tax credit, it increases
the number of students wishing to attend college at any given tuition
fee. Indeed, that is the idea--the federal government wants to provide
access to persons who might not otherwise go to college for financial
reasons. In short, federal policies increase the demand for education
relative to the supply, which pushes prices or tuition fees up. For
those who have copies of my book, I refer you to page 16 for a
graphical presentation of this phenomenon. When the federal government
began tuition tax credits a few years ago, I jokingly called it the
Faculty Salary Enhancement Act, reasoning that the tax credits would
lead to larger tuition increases, and some of the incremental money
that colleges received would go to the faculty in larger raises than
would otherwise have been provided. I believe I was right.
It is a fact that federal financial assistance in higher education
has not only increased, but it has risen at an accelerating rate. In
the 1983-84 school year, American college students received $28.4
billion in financial assistance from all sources. Twenty years later,
that aid had grown more than four-fold to $122 billion, two-thirds of
which was provided by the federal government. In the five years between
the 1998-9 and 2003-4 school years, per student assistance rose at an
annual rate of 11.66 per cent a year, a truly extraordinary rate of
growth. By contrast, 15 years earlier, the annual growth rate over a
five year period was less than half of that, 5.08 percent. This rapid
and accelerating increase in aid has served to move the demand curve
for higher education services to the right, and with that there has
been a sharp increase in tuition fees.
Lack of Market Discipline
In the private for-profit sector, when the prices for products rise
with increased demand, profit margins widen and this unleashes a
torrent of entrepreneurial activity, as firms scramble to get a share
of the highly profitable market. The rise in demand induces an increase
in supply, which ultimately leads to prices and profits falling to a
more normal level. This has not happened in higher education. While it
is true that institutions are competitive with one another, they do not
vigorously compete on price, as they do not have the profit incentives
to induce them to alter their behavior in response to changing market
conditions. Do you see colleges advertising that they are 10 percent
cheaper than their peer schools? Or that they are leaving their tuition
fees constant while their rivals are raising them? It is rare indeed.
In the private sector, such behavior is commonplace. The for-profit
University of Phoenix sometimes tells students ``enroll now and your
books for the first course will be free.'' That never happens with not-
for-profit schools. A successful for-profit business is one that cuts
costs and/or increases revenues by offering an improved product. Price
increases are minimized in order to win business and maximize profits.
Profits mean greater income for managers, stockholders, and employees.
The profit incentive is lacking in all but a small portion of the
higher education market.
The big problem is that there is no bottom line in higher
education. Did Xavier University, Chairman Boehner's alma mater, have a
good or bad year in 2004? How would one know? With private for-profit
firms, we have real time changes in valuations based on stock prices,
and frequent earnings reports to give a sense of the financial success
of the firm. There is a very specific and precisely measured bottom
line. In private firms, poor profits often lead to managers being
fired, employees being laid off, bonuses being reduced. In traditional
higher education, it is difficult even to say whether the university is
doing good or bad, and there are few incentives to improve.
Accountability is limited. Poor performance goes unpunished, and good
performance goes unrewarded. State universities have a large degree of
independence from the political process, and in both public and private
universities the boards of trustees tend to be volunteers who do not
take the time to seriously challenge the decisions of the
administration. Thus universities are far less accountable to anyone
than most institutions in our society.
Cross-Subsidization of Activities
In the public's eye, the primary purpose of higher education is
teaching our youth. Certainly state creation of institutions of higher
education was largely predicated on the proposition that the presence
of cheap colleges further the American Dream of equal opportunity for
all, and education has spillover effects that positively impact the
rest of society. Yet data provided by colleges and universities to the
federal government reveal that there has been a significant shift in
resources over the years from instructional purposes to other things.
Some of the other things include grant-funded research, which at least
is largely self-supporting and in keeping with a traditional education
mission, but some funding has gone for other things. In 1929, American
universities spent about 8 cents of each dollar on administration,
whereas today they spend 14 cents and it has been rising. The big
personnel explosion in universities has not been in new faculty, but in
non-teaching professionals, many of whom are bureaucrats who do little
to improve learning but who must be paid--by tuition fees if not third
party payments. In 1976, American universities had three non-teaching
professionals for every 100 students; 25 years later, they had six. In
some schools, luxurious new facilities are adding to costs, as are
subsidies for intercollegiate athletics. It is also true that as
federal and state dollars have rained down on college campuses,
universities have been generous in compensating themselves. The true
real compensation of full professors at four year schools, for example,
has risen over 50 percent over the past two decades.
Price Discrimination
Another reason that the stated tuition fees have grown so much is
that universities have been more aggressive in discounting those fees
for some but not all students. Increasingly, universities are doing
what airlines have done for decades--they are charging those who are
relatively insensitive to price more than those for whom price is a
major consideration in selecting schools. More bluntly, there has been
more of a soak the rich attitude than previously.
An interesting and some would view worrisome trend has been
occurring lately with respect to price discrimination. Historically,
scholarships have largely been based on need, with tuition discounts
going predominantly to students from lower income families. The whole
federal financial assistance program depends on prying the most
intimate of financial information from students and their parents, and
then using that to determine the price of services. Incidentally, I
would note that if a car or real estate dealer tried to do that they
would be probably put in jail. Recently, however, it appears that
colleges are increasingly giving merit based scholarships in an attempt
to improve the average quality of the student body in order to improve
rankings done by such organizations as US News and World Report. At a
recent meeting I had with a group of private college presidents, they
complained bitterly to me that the state universities have lost sight
of their basic mission, giving scholarship aid not to the poor who need
it in order to attend college, but to bright kids they want to attract
to improve their national rankings. There is even some evidence that
suggests that the median family income of those attending four year
state universities is as high as that of those attending private
schools, perhaps suggesting that the state universities on the whole do
not take terribly seriously the notion that they have a special
obligation serve the disadvantaged.
Productivity Decline
Rising demand for colleges have led to increase tuition fees,
which, along with greater government and private gifts and grants,
means the universities have been awash with funds. They have used a
good deal of the incremental monies to hire additional staff. The
evidence is very clear that staffing has risen relative to enrollments.
For those with copies of my book, I refer you to page 47. Recent data
updates do not change the picture. Whereas in the mid-1970s it took 18
or 19 employees to educate 100 students, now it takes 21. In my book, I
have an extended discussion of the implications of this staffing
explosion on productivity, concluding that under almost any reasonable
assumption, productivity has fallen or, at best, remained constant in
an absolute sense. Relative to the rest of the economy, there is
absolutely no question that there has been a significant decline in
labor productivity in higher education.
Rent-Seeking
The field of public choice economics has the insight that people
almost always seek to improve their lot in life, even persons working
for non-profit institutions such as governments and universities. We
say that individuals are ``rent-seekers'', trying to increase the
payments made to them beyond those necessary to get them to do any
given amount of work. University personnel are no different, and the
relative low level of accountability that they face has allowed them to
allocate resources in ways that improve their lives, even when that
improvement comes at the cost of performing their professed mission at
greater than the lowest possible cost adjusting for quality.
Specifically, much of the fund reallocation discussed above was
done because administrators and faculty members could get away with it,
not because it was necessarily desirable on some educational ground. I
have already pointed out that salaries of professors have risen
handsomely in the past couple of decades or so, almost precisely the
period in which federal loan and grant programs have been
quantitatively important. Faculty have also quietly but effectively
lowered their teaching loads, ostensibly to increase time for research.
It is simply more pleasant to do research, or in some cases, play golf,
then to teach more classes and grade more papers. Administrators have
hired more assistants to relieve themselves of some of their work load.
Much of the personnel explosion has simply served to reduce the work
pressures on staff.
There are many other issues that I will only cursorily mention in
the interests of time. Intercollegiate athletic programs are filled
with scandal and are increasingly expensive. Grade inflation is
reducing standards. More and more students spend two, three and even
more nights a week partying rather than studying. The high rate of
attrition of students means enormous resources are wasted. Some claim
that universities are forcing ideological conformity at the same time
they widely proclaim racial and other forms of diversity. While these
are all interesting topics, they are the subject of another day and
another hearing.
Reforming the Academy--Non-Federally Initiated Changes
Before turning to steps that the federal government should take as
it ponders the reauthorization of the Higher Education Act, I would
note that some changes of importance are already happening. These
trends can be expected to continue under almost any policy regime you
decide to adopt.
Non-Traditional Competition
When something becomes expensive, people search for cheaper
alternatives. This is happening to an increasing extent in higher
education. We see several alternatives emerging. One, of course, is on-
line education, provided in part by traditional providers such as not-
for-profit universities, but also by for-profit firms. More generally,
the for profit higher education industry is growing exponentially, is
highly profitable, and is viewed by Wall Street as having a very bright
future based on the high price-earnings ratios prevailing on common
stock of publicly traded companies. The best known, of course is the
University of Phoenix owned by Apollo Group, but there are a number of
other firms growing just as fast and often nearly equally profitable.
To this point, the for-profits have concentrated on offering
limited vocationally oriented training to adults studying on a part-
time basis. As that market approaches saturation, the for profits are
starting to expand into the 18 to 22 year old market, competing more
directly with traditional not-for-profit providers. The for-profits
have taken advantage of the soaring tuition fees of the traditional
providers to be able to offer education at a cost that compares
favorably with the private not-for-profits. The for-profit universities
are for those looking at education as an investment, rather than those
undergraduates at a typical residential university who look at higher
education both as a service to be consumed and enjoyed, as well as an
investment.
In addition to the for-profits and on-line providers, there has
been a growth in non-university forms of certification of skills. I
believe that university graduates earn a substantial earnings premium
over high school graduates not mainly for what they learn in college,
although some college programs are vocational training in nature.
Rather, a college diploma usually means the individual is reasonably
literate, fairly dependable, probably at least fairly intelligent and
mature, and is at least minimally conscientious. These are qualities
desired in an employee, and are very often missing in high school
graduates, so employers will pay a premium for these kinds of workers.
A diploma certifies that there is a very high probability of some
minimal level of competency. Such certification, however, can come
without a formal college education. Firms like Microsoft, Oracle and
Novell give certificates to persons who have demonstrated proficiency
in their software. We certify people as being qualified as accountants,
lawyers, doctors and investment counselors through various forms of
certification and licensing exams, and it is possible that we could
expand this approach to occupations where a college degree is clearly
not in and of itself necessary to demonstrate competency.
America has been a mecca for students around the world seeking a
higher education. But that is a two-way street, and as the costs of
attending U.S. universities rise, more students may seek degrees
elsewhere, particularly in other English speaking countries such as
Canada or the United Kingdom.
Finally, I am already seeing a rise in interest in students
spending two years in a junior college and then transferring to more
expensive four year universities to complete their degree. The issue of
articulation between different institutions thus is becoming a more
important issue.
State Legislative Efforts
State governments are reducing their direct subsidies to colleges
and universities as a share of their budget, and often reducing them in
absolute terms as well. As Medicaid eats up a larger share of state
budgets, and as K-12 lobbies push for ever more expensive education at
that level, legislators have to either reduce higher education
subsidies or raise taxes. The reduced state support of higher education
is leading some states to be approaching piecemeal privatization of
universities. The graduate law and business schools at the University
of Virginia, for example, no longer receive any subsidies from the
state and are, for all practical purposes, privatized. Several major
universities reach only about 10 or 15 percent of their budgets from
state appropriations, and the privatization option is becoming
increasingly realistic.
Another move at the state level that I think has much to commend
for it is the growing emphasis on funding students, not institutions.
Colorado is beginning offering vouchers to students this summer,
Georgia offers huge grants under its HOPE scholarships to good
students, and Missouri may adopt a bill that could direct all future
spending increases for higher education to the students in the form of
vouchers usable at either public or private institutions. Some of these
moves would probably increase price competition and the sensitivity of
colleges to the needs of students. A twist on vouchers would be to make
them both progressive, as suggested once by Robert Reich, and
performance based. More would be given to lower income students than
higher income ones, and more would be given to good students than bad,
and perhaps all aid would be cut off after the fourth year of study.
This would help deal with problems of poor college access and high
attrition.
Some states are trying to legislate or regulate university
behavior. Examples include tuition price controls, mandated minimum
teaching loads, elimination of low enrollment doctoral programs, and
prohibitions on some forms of conspicuous spending, such as substantial
foreign travel by administrators. Personally, my own observation is
that these piecemeal regulatory or legislative attempts seldom work,
and sometimes they hinder universities in utilizing policies that would
fit their unique situations well.
Internal Reform
Universities are not inclined to cut costs and break from old
habits easily, but in some cases budget exigencies are forcing change.
Modifying tenure arrangements, increasing teaching loads, eliminating
some programs, and reducing administrative staff are four things that
one or more universities have done in the past few years in order to
remain fiscally sound. As the traditional universities continue to lost
market share in an era when the 18 to 24 year cohort is growing slowly
and soon will begin to decline, we can expect to see some acceleration
of internal efforts to restrain costs.
Changes in Federal Higher Education Policy
What does all of this have to do with the Higher Education Act
reauthorization? You should aim to improve competition in higher
education, promoting non-traditional alternatives to not-for-profit
schools. You should take steps to rein in the artificially induced
growth in demand that has pushed up tuition fees. Above all, you should
put a brake on the costs to the federal government of helping finance
higher education, given the large deficits that have accompanied the
Congressional spending spree of the last few years.
Before I start giving more specific suggestions, allow me to
actually commend federal policy in one regards. Putting aside research
grants from organizations like the National Institutes of Health and
the National Science Foundation, the bulk of federal assistance has
gone to students rather than institutions. This is as it should be, and
I would prefer to see the states move in that direction as well.
Second, you have not discriminated against students who prefer to
attend private schools, unlike most state aid that is directed to only
certain state institutions. Given the rent-seeking and inefficiencies
associated with institutional grants, I believe governments should get
out of the business of providing general assistance to education
institutions. Competition is improved when money goes to students, as
then their enrollment decisions have greater consequence on
institutional finances, and that, in turn, makes institutions more
responsive to student needs and concerns.
Having said that, I believe a very strong case can be made for all
governments to largely withdraw from the funding of higher education
given the empirical evidence regarding higher education behavior. There
are still enormous income related gaps in terms of higher education
participation, and many institutions are more obsessed with their US
News and World Report ranking than serving these needs. A smaller
proportion of 18 to 24 year old Hispanics are in college today, for
example, than in the mid-1970s. The proportion of the American
population attending college actually fell slightly from 1990 to 2000,
the first decennial decline in modern American history. There is only
the weakest of statistical correlations between state government
assistance for colleges and universities and the proportion of kids
actually attending or graduating from college. Moreover, there is
evidence that greater spending at the state and local level on colleges
and universities is associated with negative, not positive, economic
growth. The alleged positive spillover effects of higher education are
more rhetorical and theoretical than real, in my judgment. The more
states spend on colleges, the less non-college-attending citizens of
states earn. Putting economic issues aside, on equity grounds, why
should you be subsidizing upper middle class kids to go a fifth or
sixth year to institutions which have country club like facilities?
The cold turkey elimination of federal support to colleges or
students is not going to happen, nor probably should it occur. At the
same time, however, the double digit increase in student financial
assistance has contributed mightily to the tuition price explosion, and
the solution is to reduce the money that is flowing to institutions and
members of their academic communities.
There are many ways curbs could be put on various federal programs.
One approach would be to reduce those eligible for loans, and to
restrict tuition tax credits by greater use of income tested
eligibility. Why should persons making more than $100,000 a year be
allowed tuition tax credits, for example? A variant on this approach
would be to simply let tuition tax credits expire after this year, as I
understand will happen under current law. Another approach would be
similar to what we did with welfare reform in the mid 1990s--put on
time limits. Limit a student's loan or grant eligibility more
rigorously than at present. Put a lifetime limit on years of loan or
grant eligibility, for example. A third approach is to put a
performance dimension to loans and certainly to Pell Grants. Have at
least part of the grant vary with student performance. To avoid even
more outrageous grade inflation than currently exists, tie performance
to class rank as certified by the college. Any college that refuses to
certify class rank would find its students ineligible for loans or
grants. A fourth approach would be to set an aggregate ceiling on
various or all forms of federal financial assistance, and if legitimate
requests for the aid exceeds the ceiling, pro rate the grants or loans
to fit the ceiling.
There are arguments for or against each approach, but what is
critical that some approach be adopted that puts brakes on the growth
in student loan expenditures. At the present, universities set their
tuition fees each year at ever higher levels and you, the federal
government, respond by increasing assistance. You enable the tuition
explosion to persist. If you stop providing assistance, in the short
run there will be a rise in financial pain to college students, but in
the long run you will help break the vicious circle of rising fees
followed by rising loans, grants and now tuition tax credits.
Universities raise their tuition a lot because they can get away with
it. Make it difficult for them to do that.
A highly controversial idea that in my mind would dramatically
reduce tuition increases would be to phase out the FAFSA form and
prohibit the solicitation of financial information from prospective
students and their parents. Denied that information, universities would
find it much hard to soak the rich, and would reduce the sticker price
relative to the net tuition revenues received. Given the rather dubious
record of colleges of providing access to low income groups in society,
even after controlling for academic ability, perhaps the time has come
to do this, although it would render it difficult to administrator
federal programs designed to promote student access to higher
education.
Aside from restricting loan, grant and tax credit aid from growing,
you need to assure that the newly emerging competitors to the
traditional universities are allowed to flourish. I have been
particularly worried about two potentially severe problems. The first
is that the regional accreditation associations might use their power
to reduce competition from the for-profits. Our current accreditation
system is highly inefficient, has raised costs in some cases
needlessly, and is largely based on input-based assessment, to name a
few problems. I am concerned that the not-for-profit schools that
largely control the accreditation bodies will start putting obstacles
in the way of the for-profits. One way would be to impose dubious
accreditation requirements, such as requiring a certain sized library,
or that a certain percent of faculty be full-time professors with
doctorate degrees. As the for-profits grow in relative importance, I
suspect pressures along these lines will mount. Some review of the role
of accrediting bodies in determining institutional eligibility for
student loans is desirable. A good case can be made to base
institutional loan eligibility on student performance on national
examinations both in the area of general education and on specific
subject. For example, perhaps deny student loans to any school that
does not have 50 percent or more students score a specified score on
the National Assessment of Educational Progress examinations
administered to high school seniors. While this approach has its
deficiencies as well, at least it is outcomes based.
A second concern is that for year institutions might increasingly
start to deny transfer credits to the for-profits, or even to public
community colleges, not on the basis of the nature of the coursework
offered, but simply on the grounds that the schools have for-profit
status or are stealing students from them.. At the minimum, legislation
should include a non-discrimination clause that states that the profit
status of an institution may not be taken into account in evaluating
credit transfer requests for any school which has federal student
assistance.
Finally, I would observe that currently the federal government
appears to be either indifferent or hostile to good behavior at either
the level of the institution or the individual student. Federal
assistance should be directly related to the degree that students and
institutions behave in a socially commendable fashion. At the student
level, as indicated above, I would give at least slightly smaller Pell
grants to poorly performing students than good ones, and I would cut
off students with poor grades or whose bad disciplinary records, for
example arrests for rioting or other bad forms of behavior. The same
can be done with respect to loans and even tuition tax credits to
parents of students.
How do you improve institutional behavior? One approach would be to
bribe them to be more responsible. Let me give you a specific example
for illustration. Say that you reduce the cost to the federal
government by, say, $5 billion a year initially, of governmental higher
education programs through tightening eligibility for assistance as
discussed above. Perhaps you eliminate or greatly restrict tuition tax
credits, for example. Devote a large portion of that, say $3 billion,
to further tax relief to the taxpayers or to deficit reduction. Use the
remaining $2 billion to establish a fund to reward schools that hold
down costs. Give them incentive payments for keeping tuition increases
to the level of price inflation, or better yet, to keep the sum of
tuition fees and state government subsidies per student to the level of
inflation or less. Those universities who get serious about trimming
their massive bureaucracies, making their faculty teach more, using
personnel and facilities year-round, or using technology to lower costs
will be rewarded, while those who do business as usual will not be.
Perhaps mandate that a portion of the institutional reward payments be
returned to the top administrators and the staff in the form of
efficiency bonus payments. Provide incentives for workers to want to
cut costs.
Another variant on the proposal above would be to provide financial
incentives to state governments that increase the portion of total
state assistance that goes directly to students in the form of vouchers
or scholarships, rather than to institutional subsidy payments, or to
states that keep the overall growth of total higher education
expenditures to the rate of inflation plus the growth in the 18 to 24
year old population.
Conclusion
How do you cut the costs of college? Follow the money. Costs are
rising because you are dropping dollars over college campuses and
student homes and they are recycling those dollars to the campus
community, where relatively unaccountable administrators and faculty
are spending the money largely to promote the good life for themselves.
The solution is to rein in the growth in this money flow. I wish you
luck in your endeavors.
______
Chairman Boehner. Thank you, Dr. Vedder.
Dr. Vedder. Other than that, I have no opinion.
Chairman Boehner. I could tell.
[Laughter.]
Chairman Boehner. I love it when we have a wide array of
thought brought to our Committee. Dr. Heller, it's your turn.
STATEMENT OF DR. DONALD E. HELLER, ASSOCIATE PROFESSOR AND
SENIOR RESEARCH ASSOCIATE, THE CENTER FOR THE STUDY OF HIGHER
EDUCATION, THE PENNSYLVANIA STATE UNIVERSITY, UNIVERSITY PARK,
PA
Dr. Heller. Chairman Boehner, Congressman Scott, and
members of the Committee, thank you for the invitation to
address you on this important issue being discussed at today's
hearing.
This year, as you know, marks the 40th anniversary of the
Higher Education Act of 1965, and this law and its subsequent
reauthorizations have had an unprecedented impact on
postsecondary education in the United States. This year the
Federal Government will award $15 billion in grants to about 5
million students. Twelve million students will receive a total
of over $55 billion in Federal loans. Approximately 1 million
high school and college students, most of whom are from low
income and first generation college-going families, receive
vital assistance in preparing for college and being successful
once there through the TRIO programs.
In response to the provocative title, to use the word you
used, Chairman Boehner, of today's hearing, I would answer the
question by stating emphatically that both the Federal
Government and states are vital parts of the solution to
ensuring access for today's college students.
While there are some problems with the way our college
access programs are structured, and Professor Vedder has ably
described some of these problems in his book, I differ with his
conclusion that the solution is to eliminate government funding
for higher education. I will return to the problem shortly, but
I want to start by emphasizing the importance of Federal and
state funding for our nation's colleges, universities and
students.
A wide body of research over three decades has confirmed
two important points about the financial aspects of college
access. First, lower income students are the most sensitive to
rising tuition prices, and they are the first to be priced out
of college as tuition goes up or to drop out if already
enrolled. The price sensitivity decreases as you go up the
income ladder, so that the highest income students have very
little price sensitivity.
Second, financial aid is particularly important in ensuring
college access for lower- and middle-income students. Much of
the discussion about the rising cost of college ignores the
fact that two-thirds of all undergraduates and over three-
quarters of full-time undergraduates receive some form of
financial aid.
In his book, Professor Vedder calls for the elimination of
the subsidies that states provide public colleges and
universities, and for Congress to abolish the Title IV grant
programs. He justifies this radical proposal by presuming that
government support for higher education has little impact other
than to enable colleges and universities to increase their
prices. Remove the public subsidy, as he just argued, and these
institutions would have little capacity to raise prices.
Professor Vedder's assumption, I am afraid, is not
supported by the available research. In 1998, Congress required
the Department of Education to conduct a study of the reasons
behind the rising cost of college. That study, which has been
widely recognized as the most complete and authoritative on the
topic, was issued by former Secretary of Education Paige in
2001. It examined whether Federal or state financial aid led
directly to tuition price increases. This study conducted by
the Department concluded that there was no relationship between
either Federal or state aid and tuition price increases.
This finding confirmed the bulk of the research on this
topic that had previously been conducted, including that of the
National Commission on the Cost of Higher Education in its 1998
report to Congress.
The study found that the primary driver of tuition price
increases in public colleges and universities was the level of
appropriations received from the states. In those states where
appropriations grew more slowly, or as happened most recently
were actually cut, prices in the public sector grew the
fastest.
More evidence to refute Professor Vedder's hypothesis can
be found in the last 4 years. Since 2001, the average and
maximum Pell Grant has risen just about 8 percent. State grants
have stagnated, with many states offering no increases or even
cuts in their grants because of the state of their economies.
There has also been no increase in borrowing limits in the
Federal loan programs in the last 4 years. During this same
period, however, tuition price increases have averaged 16
percent at private colleges and universities, 36 percent at
public 4-year colleges, and 29 percent at community colleges.
Clearly, there have to be other factors driving these price
increases than the availability of state or Federal aid, as the
amount of aid available to individual students has not changed
appreciably. What has happened is that the states have
decreased the funds appropriated for higher education by 1
percent in current dollars since 2001. The impact is seen quite
clearly in the rapid rise in tuition prices.
Now in the face of these cuts, many universities have
worked to make themselves more efficient. Let me use my own
institution, Penn State, as an example. Starting in fiscal year
2002, Penn State endured cuts in its appropriation from the
commonwealth for 3 years in a row. Our current appropriation of
$317 million is almost exactly the same amount we received 5
years ago from the state.
In response, President Graham Spanier formed a university-
wide taskforce to identify ways to cut costs and make Penn
State more efficient. We implemented $15 million in budget cuts
and income enhancements other than tuition increases throughout
the university, representing more than half of the funds that
we lost from the commonwealth.
These changes were made without decreasing the quality of
the education provided to our over 80,000 students. Similar
efforts can be found at many other colleges around the country
who have reacted to cuts in their appropriations by looking to
find ways to make themselves more efficient.
While these efforts at making universities more efficient
are important, they cannot by themselves compensate for the
elimination of Federal and state support for higher education.
So contrary to Professor Vedder's assumption that cutting
Federal and state aid to higher education will lead to more
moderated prices, the evidence demonstrates that eliminating
governmental support will result in even more rapidly
escalating prices, as we have experienced in the last 4 years.
His proposal is akin to suggesting that abolishing Medicaid
and Medicare would by itself alleviate the skyrocketing growth
of health care costs. More likely, this would leave millions of
poor families and senior citizens without access to adequate
health care.
Even with the financial aid available from the Federal
Government and other sources, many of these students are
already being priced out of college. A report from the Federal
Advisory Committee on Student Financial Assistance shows that
over 400,000 high school graduates who are academically
qualified to attend a 4-year college are unable to do so
because of cost barriers. Over 160,000 of these students are
unable to afford even a community college, our lowest price
option.
Eliminating government funding for higher education would
result in even more lower- and middle-income students being
priced out of college.
Professor Vedder's proposal of moving to a voucher system
is also fraught with danger. He points to Colorado's decision
to replace its general subsidy with vouchers for students, but
this experiment is so new that we do not yet have the evidence
to determine its impact on college students and higher
education more broadly.
Professor Vedder also recommends adding a merit component
to these vouchers, as well as to Pell Grants. This, too, would
funnel money away from financially needy students, as the
research that I and others have done has demonstrated that
merit aid is awarded disproportionally to students from higher
income families, many of whom do not need that assistance to be
able to go to college.
I believe that Professor Vedder's assertions regarding the
productivity of colleges and universities and their faculty
members are also mistaken. He claims that the typical professor
at a major university works only 1,200 hours per year, with
little evidence to back that up. Yet data from the Department
of Education show that university professors work an average of
58 hours per week, or a total of 2,100 hours during a 9-month
academic year. That's quite different from the 1,200 hours he
calculated.
His claim that the lack of productivity among faculty is a
major reason for rising tuition prices is not substantiated by
the Department's own figures.
Professor Vedder also provides some basic calculations he
claims demonstrate that the public investment in higher
education actually works against the interests of states. But
his work uses a very narrow measure of the impact this
investment has on the economy, and it suffers from measuring
the impact over a single time period.
More rigorous studies have found that the public investment
in higher education earns a positive social return, as measured
by higher rates of national economic growth and productivity,
increased tax revenue received by states and the Federal
Government, and a decreased reliance on government assistance
programs such as food stamps, TANF, Medicaid, and housing
assistance.
As I stated earlier, I believe there are some problems with
the way public support for higher education is currently
structured. When I testified before the Subcommittee on 21st
Century Competitiveness in 2003, I encouraged it to examine
ways to simplify the process of applying for and receiving
Federal student aid. And the advisory committee this January
issued a report on this topic and has a number of excellent
recommendations for improving the processes of applying for and
delivering Title IV funds, and eight of the ten recommendations
would require no increase in program costs.
Pell Grants are the foundation of student aid for many
lower and middle income students. Pell Grants are also the most
well-targeted student aid available to college students in this
country. Data from the Department of Education indicate that 94
percent of Pell dollars that go to traditional age college
students are awarded to those from families with incomes at or
below the national median of about $45,000 per year. In
contrast, only 35 percent of institutional grants are awarded
to students from below that median income, 33 percent of
private scholarships, and 60 percent of state aid.
Strengthening Pell and making it easier to apply for Title
IV funds is an important task for this Congress.
In closing, I will borrow from the words of President
Lyndon Johnson when he signed the Higher Education Act into law
on November 8th, 1965 in San Marcos, Texas: ``The President's
signature upon this legislation passed by this Congress will
swing open a new door for the young people of America. For them
and for this entire land of ours, it is the most important door
that will ever open--the door to education.
``So when we leave here this morning, I want you to go back
and say to your children and to your grandchildren, and those
who come after you and follow you, tell them that we have made
a promise to them.''
I hope that this Congress in its reauthorization of the
Higher Education Act will ensure that this 40-year-old promise
is kept.
I want to thank the Committee again for the opportunity to
address these important issues, and I will be happy to take any
questions you may have.
[The prepared statement of Dr. Heller follows:]
Statement of Dr. Donald E. Heller, Associate Professor and Senior
Research Associate, The Center for the Study of Higher Education, The
Pennsylvania State University, University Park, PA
Chairman Boehner, Congressman Miller, and members of the Committee:
Thank you for the invitation to address you on this important issue
being discussed at today's hearing. As I am sure you are aware, this
year marks the 40th anniversary of the Higher Education Act of 1965.
This law, and its subsequent reauthorizations, has had an unprecedented
impact on postsecondary education in the United States. This year, the
student aid programs authorized by this act will award $15 billion in
federal grants to over five million students. Many of these students,
and millions more, will receive a total of over $55 billion in federal
loans. Approximately one million high school and college students--most
of whom are from low-income, first generation families--receive vital
assistance in preparing for college and being successful once there
through the TRIO programs.\1\ In addition, hundreds of institutions
receive direct assistance through Title III and Title V of the Act.
---------------------------------------------------------------------------
\1\ An additional one million students receive similar assistance
through Gear-Up, while not part of the Higher Education Act, is another
important federal postsecondary initiative.
---------------------------------------------------------------------------
To best understand the role that the Higher Education Act has
played in America, I will borrow from the words of President Lyndon
Johnson when he signed the legislation into law on November 8, 1965, in
San Marcos, Texas:
The President's signature upon this legislation passed by this
Congress will swing open a new door for the young people of
America. For them, and for this entire land of ours, it is the
most important door that will ever open--the door to education.
And this legislation is the key which unlocks it.
So, when we leave here this morning, I want you to go back and
say to your children and to your grandchildren, and those who
come after you and follow you--tell them that we have made a
promise to them. Tell them that the truth is here for them to
seek. And tell them that we have opened the road and we have
pulled the gates down and the way is open, and we expect them
to travel it.
As this Committee is painfully aware, the cost of college today is
much greater, in relative terms, than it was at the time President
Johnson signed the legislation that November afternoon 40 years ago.
The grandchildren of many of those first students who benefited from
the Higher Education Act are today approaching college age. Today's
students both need--and deserve--support from the federal government to
be able to attend college.
In response to the provocative title of today's hearing, I would
answer the question by stating emphatically that both the federal
government and the states are a vital part of the solution to ensuring
college access for financially needy students. While there are some
problems with the way our college access programs are structured, and
Professor Vedder has ably described some of these problems in his book,
I differ with his conclusion that the solution is to remove government
funding for higher education. I will return to the problems shortly,
but I first want to start by emphasizing the importance of federal and
state funding for our nation's colleges, universities, and students.
A vast body of research over the last three decades has confirmed
two important points about the financial aspects of college access.
First, lower-income students are the most sensitive to rising tuition
prices, and they are the first to be priced out of college as tuition
goes up, or to drop out if already enrolled. The price sensitivity
decreases as you go up the income ladder. Second, financial aid--
grants, loans, and work study assistance--are particularly important in
ensuring the college access needs of lower- and middle-income students.
Much of the discussion about the rising cost of college, both in the
media as well as among policymakers, is focused on the sticker price of
college, and ignores the fact that almost two-thirds of all
undergraduate students today, and over three-quarters of full-time
students, receive some form of financial aid.
In his book, Professor Vedder calls for the elimination of the
subsidies that states provide for public colleges and universities, and
for Congress to abolish the Title IV grant programs as well. He
justifies this radical proposal by presuming that state and federal
support for higher education has little impact other than to enable
colleges and universities to increase their prices. Remove the public
subsidy, he argues, and these institutions would have little capacity
to continue to raise prices.
Professor Vedder's assumption, I am afraid, is not supported by the
available evidence. In the last reauthorization of the Higher Education
Act, in 1998, Congress required the Department of Education to conduct
a study to determine the reasons behind the rising cost of college.
That study, which has been widely recognized as the most thorough and
complete research on the issue, was issued by former Secretary of
Education Rod Paige in December of 2001.\2\ The study specifically
looked at the question of whether federal or state financial aid led
directly to tuition price increases.
---------------------------------------------------------------------------
\2\ Cunningham, A. F., Wellman, J. V., Clinedinst, M. E., &
Merisotis, J. P. (2001). Study of college costs and prices, 1988-89 to
1997-98, Volume 1 (NCES 2002-157). Washington, DC: U.S. Department of
Education, National Center for Education Statistics.
---------------------------------------------------------------------------
The study concluded that there was no relationship between either
federal or state financial aid and tuition price increases. This
finding confirmed the bulk of the research on this topic that had
previously been conducted, including that of the National Commission on
the Cost of Higher Education in its 1998 report to Congress. In fact,
the only link between aid and rising prices in the Department of
Education study was found among both public and private comprehensive
institutions, those universities that award master's but not doctoral
degrees. The study found that for these institutions, as they increased
the proportion of students receiving institutional grants, prices
tended to rise somewhat faster. But let me emphasize again that this
study found no relationship between federal and state aid and rising
prices.
The study found that the primary driver of tuition price increases
in public colleges and universities was the level of appropriations
received from the states. In those states where appropriations grew
more slowly, or as happened most recently, were actually cut, prices in
the public sector grew the fastest. In simpler terms, as state support
drops, public institutions have few options other than to increase
tuition prices.
More evidence to refute Professor Vedder's hypothesis and resulting
policy recommendation can be found in the experience of the last four
years. Since 2001, the maximum Pell Grant has risen $300, or just 8
percent. State grant aid has stagnated during this period, with many
states offering no increases, or even cuts, in their grants because of
the revenue constraints they faced. There also has been no increase in
borrowing limits in the federal loan programs.
During this same period, however, tuition prices have increased 16
percent at private colleges and universities, 36 percent at public 4-
year institutions, and 29 percent at community colleges. Clearly there
have to be other factors driving these price increases than just the
availability of state or federal aid, as the amount of aid available to
individual students has not changed appreciably during this period.
While overall spending on aid programs has increased, that growth is
almost entirely a factor of the increased eligibility of students and
the number of students availing themselves of the aid, rather than
increases in the maximum amounts that students can receive.
What has happened since 2001 is that the states have decreased the
amount of funds appropriated for higher education by 1 percent,
including two consecutive years of cuts in fiscal years 2003 and 2004,
the first time in recent history that state appropriations were cut two
years in a row. The impact is seen quite clearly in the rapid rise in
tuition prices I just described. While private institutions generally
do not receive state appropriations, they have been hurt by the drop in
the stock market and other investments, which has led to a decrease in
their endowment earnings and slower growth in private gifts, both of
which are used to subsidize tuition prices.
I also want to make clear that public institutions have not simply
passed the cuts in appropriations on to students in the form of higher
tuition prices. Let me use my own institution, Penn State, as an
example. The Commonwealth of Pennsylvania was hit particularly hard by
the slowdown in the economy in the beginning of this decade. Starting
in fiscal year 2002, Penn State endured cuts in its appropriation--not
slower growth, but actual cuts in the appropriation--for three years
running. Our current appropriation this year of $317 million is almost
exactly the same amount we received from the Commonwealth five years
ago, in fiscal year 2000.
While we have increased our tuition during this period, President
Graham Spanier also formed a university-wide task force to identify
ways to cut costs and make Penn State more efficient. This task force,
which brought together senior administrators, faculty, and staff,
identified and implemented $15 million in budget cuts and income
enhancements throughout the university. This amount represented more
than half of the funds lost from the state appropriation. And these
changes were made without decreasing the quality of the education
provided to our 80,000 students. Similar efforts can be found at many
other higher education institutions around the country.
While these efforts at making universities more efficient are
important and can help, they cannot by themselves compensate for drops
in governmental support, or worse yet, a phased-in elimination of
federal and state support for higher education. Colleges and
universities would have no choice but to increase tuition prices at
rates even faster than have occurred in recent years. So contrary to
Professor Vedder's assumption that cutting federal and state aid to
higher education will lead to more moderated prices, the research
evidence demonstrates that eliminating governmental support will result
in even more rapidly escalating prices. His proposal is akin to
suggesting that eliminating the Medicaid and Medicare programs would by
itself alleviate the skyrocketing growth of health care costs. More
likely, this would leave millions of poor families and senior citizens
without access to adequate health care. Similarly, the impact of
eliminating government funding for higher education would be felt most
greatly by this nation's lower- and middle-income students, those most
dependent on the subsidy provided by state appropriations and federal
student aid, which Professor Vedder recommends eliminating.
Even with the financial aid available from the federal government
and other sources, these students are already finding themselves priced
out of attending college. The Advisory Committee on Student Financial
Assistance, in its report titled Empty Promises, used data from the
Department of Education to examine financial barriers faced by
potential college students.\3\ This report found that over 400,000 high
school graduates who were qualified to attend a four-year institution
were unable to do so each year because of cost barriers. Over 160,000
students were unable to attend any form of postsecondary education, not
even a community college.
---------------------------------------------------------------------------
\3\ Advisory Committee on Student Financial Assistance. (2002).
Empty promises: The myth of college access in America. Washington, DC:
U.S. Department of Education.
---------------------------------------------------------------------------
Professor Vedder's proposal of moving to a voucher system is also
fraught with danger. He points to the state of Colorado's decision to
replace its general subsidy with vouchers for students, but this
experiment is so new that we do not yet have the evidence to determine
its impact on higher education. A major argument against vouchers at
the state level is that they are unlikely to keep pace with tuition
price increases, so that over time the value of the voucher will be
eroded, making it harder and harder for lower- and middle-income
students to afford to attend college. This is exactly what has happened
with Pell Grants at the federal level. Professor Vedder also recommends
adding a merit component to the vouchers. This too would funnel money
away from financially needy students, as the research that I and others
have done has demonstrated that merit aid is awarded disproportionately
to students from higher income families.\4\
---------------------------------------------------------------------------
\4\ Heller, D. E., & Marin, P. (Eds.). (2004). State merit
scholarship programs and racial inequality. Cambridge, MA: The Civil
Rights Project at Harvard University.
---------------------------------------------------------------------------
I believe that Professor Vedder's assertions regarding the
productivity of colleges and universities, and their faculty members,
are also mistaken. Based on his own estimates, the source of which he
does not provide, he claims that the typical professor at a major
university works only 1,200 hours per year over the course of a 9-month
work year. Yet data from a national study conducted by the Department
of Education show that professors at these universities work an average
of 58 hours per week, or a total of 2,100 hours during those nine
months. So his claim that the lack of productivity among faculty is a
major reason for rising tuition prices simply is not substantiated by
the Department's own figures.
Professor Vedder also rightly notes that from 1976 to 1999, the
proportion of college and university expenditures going to instruction
has declined by approximately five percentage points. He uses this to
claim that higher education institutions have a ``credibility'' (p. 44)
problem when they ask for more money. But Professor Vedder's own
figures show that this decline was more than offset by spending in two
categories: research and institutional financial aid. It is hard to
argue against spending in these areas, as research leads to growth in
the economy and benefits society in other ways, and institutional
financial aid helps to reduce the net cost of college faced by
students.
Professor Vedder also provides some basic calculations he claims
demonstrate that the public investment in higher education actually
works against the interests of the state. But his work uses a very
narrow measure of the impact this investment can have on states and the
nation as a whole, and it suffers from measuring economic growth rates
over a single time period. More rigorous studies have found that the
public investment in higher education earns a positive social return,
as measured by higher rates of economic growth for the nation,
increased tax revenue received by states and the federal government due
to the increased earnings of individuals who attend college, and a
decreased reliance on government assistance programs, such as Food
Stamps, TANF, Medicaid, and housing assistance.\5\
---------------------------------------------------------------------------
\5\ L. L., & Brinkman, P. T. (1988). The economic value of higher
education. New York: American Council on Education/Macmillan
Publishing.
---------------------------------------------------------------------------
The method used by Professor Vedder also ignores the non-monetary
benefits society receives from its investment in higher education.
Studies have documented that those who attend college are less likely
to commit crimes, give more generously to charity and community
service, and are more engaged and informed regarding their civic
responsibilities.\6\ It is difficult to believe that the states would
provide the $65 billion on higher education that they will spend this
year collectively if they did not believe, and have evidence, that this
public investment earns a positive return for each state.
---------------------------------------------------------------------------
\6\ Institute for Higher Education Policy. (1998). Reaping the
benefits: Defining the public and private value of going to college.
Washington, DC: Author.
---------------------------------------------------------------------------
As I stated earlier, I believe there are some problems with the way
public support for higher education is currently structured. When I
testified before the Subcommittee on 21st Century Competitiveness in
2003, I encouraged the Subcommittee to examine ways to simplify the
process of applying for and receiving federal student aid. Congress
went ahead and mandated that the Advisory Committee on Student
Financial Assistance conduct such a study, and the Advisory Committee
issued its report earlier this year. This report has a number of
excellent recommendations for ways to improve the processes of applying
for and delivering Title IV funds, and eight of the ten recommendations
would require no increase in the costs of these programs. While I do
not have enough time to describe them here, I encourage this Committee
to consider their implementation.
Pell Grants are the foundation of student aid for low- and
moderate-income students, and I encourage the Committee to strengthen
Pell by increasing its purchasing power. Pell Grants are the most well-
targeted student aid program for these students. Data from the
Department of Education indicate that 94 percent of Pell Grant dollars
awarded to traditional-aged college students go to those from families
with incomes below the national median of approximately $45,000 per
year. In contrast, only 60 percent of state aid is awarded to students
from the bottom half of the income distribution, 35 percent of
institutional aid, and 33 percent of private scholarships.\7\ These two
actions--strengthening Pell, and making it easier for students to apply
for and receive federal grants, will help to promote access to college
for academically qualified and financially needy students.
---------------------------------------------------------------------------
\7\ National Center for Education Statistics. (2005). National
Postsecondary Student Aid Study 2003-2004 data analysis system.
Washington, DC: U.S. Department of Education.
---------------------------------------------------------------------------
I know that this Committee is concerned with promoting competition
among the various types of higher education institutions in the nation.
The diversity of choices available to students is one of the strengths
of our system, and Congress should not eliminate these options. Student
choice is well supported by the federal student aid programs, which
allow students to use their grants, loans, and work study assistance at
any of the more than 6,000 Title IV eligible institutions in the
nation.
There are proposals in front of the Committee to eliminate the 50
percent rules, which restrict access to the Title IV programs for
institutions who enroll a majority of their students or offer a
majority of their courses via distance education. While the Department
of Education has shown some positive results in the Distance Education
Demonstration Program, I think it is important to note that this five
year program included only two dozen institutions, many of whom were
part of or affiliated with traditional, campus-based institutions. The
Secretary of Education, in her report on the Demonstration Program
issued earlier this year, noted some concern regarding the student loan
default rates of institutions participating in the program. I recommend
that before Congress eliminates the 50 percent rules in their entirety,
that it move cautiously and heed the recommendations in a GAO report on
distance education issued last year.\8\ A key recommendation, one with
which Secretary Spellings concurred in her report, is that continued
oversight of distance education providers is indeed ``critical.'' \9\
---------------------------------------------------------------------------
\8\ U.S. General Accounting Office. (2004). Distance education:
Improved data on program costs and guidelines on quality assessments
needed to inform federal policy. Washington, DC: Author.
\9\ U.S. Department of Education, Office of Postsecondary
Education, Office of Policy, Planning and Innovation. (2005, April).
Third report to Congress on the Distance Education Demonstration
Program , p. 20.
---------------------------------------------------------------------------
In closing, I want to return to the Higher Education Act to
highlight the key objective established by President Johnson and the
89th Congress. Title IV opens with these words:
It is the purpose of this part to provide, through institutions
of higher education, educational opportunity grants to assist
in making available benefits of higher education to qualified
high school graduates of exceptional financial need, who for
lack of financial means of their own or of their families would
be unable to obtain such benefits without such aid (Sec. 401).
I hope that this Congress, in its reauthorization of the Act, can
stay true to this objective.
I want to thank the Committee again for the opportunity to address
these important issues. I would be happy to take any questions you may
have.
______
Chairman Boehner. I want to thank both of our witnesses for
your testimony, and I think we can all agree that to the extent
possible, the Federal Government has tried to keep its promise
to America's low- to moderate-income students and last year
spent--or this year will spend, you know, in the vicinity of 75
to $80 billion trying to make sure that low- to moderate-income
students have the access that they need.
It seems to me--let me ask both of you, in terms of
traditional 4-year schools, 2-year schools, how many new seats
are being built to accommodate this increased waive of students
that we're seeing in the not-for-profit sector? Are we building
new capacity? Dr. Vedder?
Dr. Vedder. You're asking if are we constructing new
buildings and things of that nature?
Chairman Boehner. New seats.
Dr. Vedder. Seats?
Chairman Boehner. New seats to accommodate more students.
Dr. Vedder. Put that--that's an interesting way of putting
it. We are, of course, there's a large amount of capital
construction going on.
Chairman Boehner. Well, I know there's a lot of building
going on. But I'm talking about in terms of increasing
capacity.
Dr. Vedder. Well, you're on an important point. Most of the
allocation of funds to universities these days, or it seems to
me, and I think there's some evidence to support this, and my
book is filled with it, evidence that he doesn't talk about, by
the way, that the instructional component, which is what you're
getting at, kids going to take classes, is being shortchanged
relative to the total picture.
Chairman Boehner. Dr. Heller, do you see any increase in
the capacity of our traditional two- and 4-year schools?
Dr. Heller. Chairman Boehner, unfortunately, there are too
few examples of this. There are some examples, for example, in
the last five, 6 years, both California State University and
the University of California have built brand new campuses, but
those are, unfortunately, some of the few examples.
What we're seeing more is changes at the margin with
universities trying to increase the number of seats by
relatively small numbers. I think as Professor Vedder
mentioned, the capital costs, never mind the operating costs in
the face of the cuts in appropriations that public institutions
have faced, but the capital costs of putting up new campuses is
a real barrier.
I think we have seen some growth in the distance education
area, and while that does hold some promise, I think by itself
it's not going to be able to accommodate all of the growth.
Chairman Boehner. Well, the reason I asked the question is
because it's clear that we don't really see any new capacity in
our traditional schools, and we know from the evidence there's
this increasingly large wave of students wanting to attend an
institution of higher learning.
Dr. Vedder is an economist. I studied economics a bit. You
don't have to know much about economics to know that if you've
got increased demand, no increase in capacity, that you're
going to drive tuition higher. It seems logical to me. But it's
not only tuition going higher, because many schools have their
own grant and aide programs. And while we talk about the
hyperinflation in terms of tuition and fees, the harder thing
to get your arms around is what is the real price.
Now I've talked to the Jesuit colleges and universities.
I've talked to other groups about what is the real price,
because everything is being judged on the sticker prices, the
more I learn about this, are becoming irrelevant. Dr. Heller,
do you have any evidence of what the real price is?
Dr. Heller. Well, there's lots of good data from the
Department of Education, and unfortunately, to be honest, with
about 17 million students in higher education in the United
States, you probably have pretty close to 17 million different
prices.
The reality is that every university when it packages
financial aid and it combines resources from the Federal
Government, from state aid, private scholarships and its own
institutional funds, it can make decisions on how much aid it's
going to award literally on an individual student basis.
So we certainly have data that provides averages that show
on average here's what students pay in public 4-year
institutions or private 4-year institutions or community
colleges.
But, you know, literally you've got very different prices,
you're absolutely right, paid by different students. And that's
a factor of the way we've constructed the system of having a
stated sticker price and then discounting from that by offering
financial aid, whether it's need-based financial aid or merit-
based aid.
Chairman Boehner. Dr. Vedder?
Dr. Vedder. I've done--it's very, as Dr. Heller indicated,
it's very difficult, given the data and so forth and the
complexity of higher education and you are--there are various
types of schools and so forth, and the picture probably varies
somewhat from one type of school to another.
But I have tried to estimate what the, quote, the ``net
tuition fee'' paid by the average student has been or how that
has changed over time. And I would agree that it has risen
significantly less than the sticker price fee. But it is still
rising relative to the rate of inflation, and it is still
rising relative to income levels in the last ten or so years.
Now that may not be a long-term trend.
So the issue of affordability is still an issue. Another
way of looking at cost is what percentage of our national
output, put aside the issue of who pays for it--someone is
paying for education--we now spend close to 3 percent of our
gross domestic product on higher ed. Again, you get in some
interesting measurement issues. Do you count the Lincoln
laboratories at MIT as part of higher ed or not? You know,
they're running them for the government. So you get into some
interesting accounting issues.
But we're spending close to 3 percent of our GDP on higher
ed. If you went back to when you were a toddler, Mr. Chairman,
if I guess your age halfway close to right, it was closer to 1
percent.
Chairman Boehner. There's a lot more people attending
higher education today than when I--
Dr. Vedder. Yeah. There are more--
Chairman Boehner [continuing]. Was born.
Dr. Vedder [continuing]. Attending. But even on a student-
adjusted basis, it has gone up. I've calculated the amount of
GDP it takes to send one kid to college today relative to 20 to
30 years ago. It's in my book. And that has risen. It has
risen. Now it doesn't take you more of your GDP to buy a car
today, I mean a larger percentage of GDP to buy a car today or
to buy bread or buy most anything. But it does take more to buy
a college education and health care. Those are the two--
Chairman Boehner. But comparing tuition to GDP gets a bit
esoteric for this Committee.
[Laughter.]
Chairman Boehner. Now, it may not--
Dr. Vedder. You said that, I didn't.
Dr. Heller. Mr. Boehner, Mr. Chairman, if I may respond.
Chairman Boehner. Dr. Heller.
Dr. Heller. This issue about financial aid is an important
one. And I think one of the key recommendations that the
advisory committee made in its report about simplifying the
Federal system is to try to make a commitment of financial aid
earlier in students' careers.
Right now, most students don't find out how much aid
they're going to receive until about April of their senior year
when they receive an admittance letter from a university that
has a financial aid offer along with it. That's really too late
in students' careers, because they're going to get hit by this
newspaper headline that says it costs $40,000 a year to go to
an elite private institution.
We want students and families to be able to learn earlier
how much aid they're going to qualify for. So if we could find
ways to make commitments of aid to students earlier in their
high school careers, then students can prepare themselves both
academically and financially for college and not wait until the
end of their senior year when for many students it's really too
late.
Chairman Boehner. My time has expired. The Chair recognizes
the gentleman from Virginia, Mr. Scott.
Mr. Scott. Thank you, Mr. Chairman. Let me follow up on
that point. When you talk about aid coming in early, you really
don't need to know that you're going to get--exactly what aid
you're going to get, but you need to know that you can actually
go.
And if people, if your older brother went and your next
door neighbor 3 years ago went, and they were able to make it,
just knowing that you can go would offer an incentive to stay
up late and do your homework sophomore and junior year so that
you will be ready to go.
There's no question that a college education offers--
expands an individual's opportunities is there, Dr. Heller?
Dr. Heller. There's no question. The advantage that you
earn in labor markets of going to college compared to going out
into those markets with only a high school diploma has widened
in the last two decades. You know, it used to be a generation
ago you could be a high school graduate and get a good job that
we used to call paying a middle class wage without having any
college.
A lot of those jobs have dried up, and more and more jobs
today that pay a decent wage and pay decent benefits for
workers and families require some form of postsecondary
education, not always a bachelor's degree necessarily, but some
form of postsecondary education. And that's why it's critical
that we provide the opportunity for all students to be able to
go.
Mr. Scott. And I would think it would be inconsistent with
a democratic society to deny those opportunities based on your
socioeconomic station at birth. Compared to the '60's and
'70's, what is the ability of a person, a low-income student to
be able to afford to get into college?
Dr. Heller. Well, there's good news and bad news in that
story. The good news is that when you look at students by
income, all groups have increased the rate which they go to
college. As Chairman Boehner pointed out, we've got a lot more
students in college today than we did a generation or two ago.
That's the good news is that we have more lower income students
going to college.
The bad news is if you look at the gap between the rich and
the poor in this country, that gap has stayed just about the
same over the last three decades. We haven't made much progress
on closing the gap. Because while there are more poor students
going on to college, there are also more students from the
upper income groups going to college.
So if you're concerned about equity and you measure equity
as the relationship of one group to another, we haven't been
able to close that gap when you look at students from different
income groups.
Mr. Scott. What portion of a college education did a Pell
Grant pay in the '60's, '70's and '80's?
Dr. Heller. Well, if you go back to the early 1970's after
the BEOGs, now Pell Grants, were first created, you could get a
Pell Grant and you would be able to pay for about 80 percent of
the total cost of attendance, not just tuition, but tuition,
room, board, books, transportation, at a typical public 4-year
institution. That was about 80 percent. And for many states,
you would be able to get that remaining 20 percent with a state
grant or by working a few hours, as Chairman Boehner referred
to.
Today we're down to less than 40 percent of that cost of
attendance is covered by a Pell Grant.
Mr. Scott. And if you wanted to work your way through
college when it was at 80 percent, you could do it 15 hours a
week and a little summer job. What would it take you to work
your way through college today?
Dr. Heller. We have the data from the Department of
Education show that we have students who are literally trying
to work full time, work a 35 or 40-hour week, while also trying
to go to college full time. And for most students, you just
can't juggle those two things.
There's a huge amount of work that students are doing, and
we know from the research that the more hours they work,
especially if it's off campus, not working in the library or
the dining hall, but if they're working at the local mall in
retail, that kind of behavior is very detrimental to their
ability to ever get a college degree.
Mr. Scott. A suggestion was made that financial aid ought
to be based on your grades. If you were relegated to a low
income--in many low income areas around the country where the
educational opportunities frankly were not as good as others,
and therefore had worse preparation to go to college, should
you be punished again by getting less financial aid?
Dr. Heller. No. Absolutely not. And that's why I pointed
out in my testimony that I have grave concerns about tying Pell
Grant eligibility to measures of merit.
Let me note that Pell Grants already have a measure of
merit. You have to maintain satisfactory progress at your
institution as determined by that institution. But tying Pell
or loan eligibility to grades I think is going to work against
the interests, and I know from the data will work against the
interests of lower income students who are really dependent
upon Pell and other aid to be able to go to college.
Mr. Scott. Thank you, Mr. Chairman.
Mr. McKeon [presiding]. Mr. Castle.
Mr. Castle. Thank you, Mr. Chairman. First of all, this is
a great hearing, Mr. Chairman. I mean, I've been dealing with
this problem for a number of years now, and I just don't know
what the answer is. I see universities and colleges announcing
their tuition increases, you know, the day before a big
vacation or something of that nature, perhaps on a Saturday, so
nobody knows what the heck's going on.
Mr. McKeon. That's true.
Mr. Castle. The Chairman's question, it's just incredibly
confusing to separate cost versus price versus financial aid
packages and tuition and fees. You try to talk to a college
president about it and they confuse you so quickly it's
ridiculous.
And I think we would all agree on that. And I think it's
gone up way too high. And you're absolutely right. It's health
care costs and higher education have been the two big drivers,
or at least the two big leaders in terms of cost of living
increases. And yet I just--I'm still amazed. I mean, we have
all these young people here and they probably have all kinds of
debts, but I'm just--there's no public outcry for this.
And, I mean, I have your book here, Dr. Vedder, ``Going
Broke by Degree,'' and I would imagine not a whole lot of
people are reading it. I hope you're selling a lot of them, but
it isn't John Grisham, if I--
Dr. Vedder. I'm not going to get rich from it.
Mr. Castle. Right. You're not going to get rich on it, and
people aren't going to pay a lot of attention to it, and we
just keep increasing this. And I just don't understand what the
heck it takes. I mean, to me, Congress has not done a good job
with this. But why the heck we haven't gotten the attention of
the public in terms of reducing some of these costs.
My question is, do either of you have suggestions on what
we can do to get a focus on this better than we're doing now?
Because whatever we're doing now doesn't seem to be getting the
job done. Because to me it's going to be--it's not going to be
something we do in Congress; it's going to be the public will
saying enough's enough, and we've got to do something about it.
Dr. Vedder. Could I take a first crack? And I'm sure my
colleague would want to join in. First of all, one reason why
people put up with this, you know, you're saying why aren't
they rioting in the streets? Well, I don't know if you said
rioting in the streets. Why aren't they raising more fuss about
this? And I would agree with my colleague here, the immediate
return to the student herself or himself of going to college is
greater today than ever.
And one reason why colleges have been able, quote, ``to get
away with it,'' if you like, raise tuition costs and so forth
so much, is that while it is true that the costs of going to
college have gone up a lot, it's also true that the return in
terms of income differentials have also risen a lot.
Mr. Castle. Well, am I wrong to fuss about it then? I mean,
the return is good enough that it's worth the investment?
Dr. Vedder. Well, to the individual, most of the time it's
a good investment. Most of the time it's a good investment.
Having said that, incidentally, it's not clear that that gap
between, say, what high school kids make and college kids make
is going to grow forever and continue to grow at the same rate.
No one really knows for sure that. And if that stops, I suspect
it's going to be more difficult for colleges to raise their
tuition. Because in a pure investment sense--
Mr. Castle. Get back to my question.
Dr. Vedder. Yes.
Mr. Castle. Which is, what can we do to shed light on this?
Dr. Vedder. Well, costs are--colleges are--costs are going
up like crazy within the colleges. No one has talked about
that. I will. It takes--let's just--
Mr. Castle. You and I are talking about it at this hearing.
Dr. Vedder. Yeah. OK.
Mr. Castle. But they're not talking about it on ABC News.
They're not talking about it--they talk about it occasionally,
I mean--
Dr. Vedder. Well, talk to these people over here. Don't
talk to me.
Mr. Castle. I mean, there's not enough substantial focus in
this country on it. Dr. Heller, what do you think about all
this? Because I have a couple of other questions.
Dr. Heller. Well, I think you're right. And the example I
gave of what Penn State did in the face of a large budget cut
in our appropriation from the commonwealth I think is an
example of what universities have to do more of, to be very
honest.
I don't think any of us can sit back on our laurels and say
that we're, you know, so great that everybody's just going to
keep knocking on our door and pay those prices, and that
Congress, frankly, is going to continue to keep writing the
check.
But I think, to be fair, that most universities are looking
at ways to try to control the growth of costs, and if they
hadn't done this, the price increases we've seen in recent
years probably would have been even higher. The fact of the
matter is that higher education is a very highly labor-
intensive business. And if you ask the typical 18-year-old
going to college and you say to them, would you like to get
your education via the Internet--it might be a little bit
cheaper--or would you like to go to a college campus and sit in
a classroom with other students and a professor, I think that
most students are voting with their feet and still going to
traditional campuses for that.
Mr. Castle. Well, it's a rite of passage to a degree. It's
something more than just education.
Dr. Heller. Right. There's more of an experience than just
education, and that's what students want.
Mr. Castle. Right.
Dr. Vedder. It's partly a consumption good as well as an
investment good when you go to college.
Mr. Castle. Dr. Vedder, I want to ask you a separate
question. In your book, you argue that for-profit institutions
offer a less expensive product whose market discipline is
stronger, and I would agree with that. You also argue that
these institutions offer a tangible measure of success.
In some cases, these institutions support your argument
surrounding government subsidies since they do not generally
receive as much government assistance; in many cases none, as a
matter of fact. Wouldn't you agree that we should not be
opening the for-profit sector up to more government aid?
Dr. Vedder. Well, I would agree if you mean should we be
giving aid directly to institutions in the for-profit sector.
Of course, I completely agree. We should not do that.
The issue is whether we should--if there are examples where
not-for-profits try to thwart the for-profits through their
accreditation organizations or other way to prevent--in a way
to sort of restrict competition, I think there might be a
Federal issue there. I don't know to what extent that's
happening, and I'm concerned about it.
But I would agree with you.
Mr. Castle. Well, I would agree with your last conclusion,
but I also worry about bringing new people into the government
largesse in all--
Dr. Vedder. You know, I completely agree with you, Mr.
Castle.
Mr. Castle. Thank you. I yield back, Mr. Chairman.
Mr. McKeon. Mr. Bishop.
Mr. Bishop. Thank you, Mr. Chairman. First I want to thank
both of the panelists for their testimony. And I have several
questions for Dr. Vedder. I was a college administrator for 29
years, and I need to say at the outset, I hope not impolitely,
that the colleges you describe, places lacking in
accountability populated by underemployed, overpaid
administrators and underemployed, overpaid faculty, those are
colleges with which I have no familiarity at all. And I would
be interested to find colleges that fit that description.
Although I must say I found myself back in my comfort zone
having, you know, sort of disdain heaped on administrators. I
was, you know, sort of familiar with that.
[Laughter.]
Mr. Bishop. One of the central points that you make in your
written testimony, if I understand it correctly, is that the
availability of student financial aid has driven up demand and
therefore driven--resulting in an increase in costs. And you
don't say it directly, but you certainly imply that that's a
bad thing, correct?
Dr. Vedder. I certainly--I would agree that it's driven up
costs. It's probably a bad thing as well because I think it has
contributed to some inefficiencies in the higher education
community.
Mr. Bishop. And those inefficiencies are manifest in terms
of how colleges distribute their expenditure budget?
Dr. Vedder. I--that's certainly a way you can see it, yes.
We, for example, have six nonteaching professional staff for
every 100 students today. In 1976, we had three. Now we have
six. That's a doubling in nonprofessional, nonteaching staff,
generally college graduates who work for universities who don't
teach. We've had a doubling per student in that.
To me, that is a sign of some--it may not be inefficiency
if those--if you can prove that there is a lot of burst in
noninstructional output coming from those employees, but I
frankly, I've been in the higher education business too for
longer than--well, I don't know about longer than you. I think
we probably rival each other in that, for over 40 years, and I
don't see it.
Mr. Bishop. You know, I don't want to be argumentative, but
you've cited a statistic that in 1929 we spent 8 cents on
administration and now we're spending 14 cents on
administration.
Dr. Vedder. Digest of Education statistics.
Mr. Bishop. No, I'm not suggesting that the statistic is
wrong. I'm suggesting that it's misleading. For example, what
do you think we spent on academic computing in 1929? Or what do
you think we spent on instructional technology in 1929, or on
health insurance, or on Social Security compensation? Probably
not a lot.
Dr. Vedder. But those aren't administration.
Mr. Bishop. Yes they are. When you look at how budgets are
calculated, all of those expenditures would fall under
noninstructional costs or administration.
Dr. Vedder. Well, that's an empirical issue we would have
to examine.
Mr. Bishop. Let me just go to really perhaps the threshold
question. Do you believe that access to higher education
irrespective of social economic status is a good thing?
Dr. Vedder. Oh, absolutely.
Mr. Bishop. OK. Now--
Dr. Vedder. Completely.
Mr. Bishop. But it's your thesis that the way to get there
is to withdraw student aid so that colleges are forced to drive
down costs. Is that correct?
Dr. Vedder. That is not the primary emphasis. If you were
to read my book, this hearing is on this topic of financial
aid, and so I have emphasized that in my discussion here.
I am saying that if--that increases in financial aid do not
have the results with respect to access that you intend them to
have because of the rising costs.
Mr. Bishop. But--and let me go back to the question. Do you
believe that the better way to achieve access is by reducing
cost as opposed to increasing aid?
Dr. Vedder. I think reducing costs is particularly
critical, yes.
Mr. Bishop. OK. And so my question to you is, outside of
some of the things that we've talked about, do you really
believe that we can reduce cost such that college will be
affordable for low- and middle-income families? Do you really
believe that there's that much play in expenditure budgets for
the average college that they can get that job done?
Dr. Vedder. First of all, and I think I was misrepresented
somewhat even if you listen to my testimony, I did not say I
want to eliminate even Federal aid. I just said I want to stop
the growth--slow down the growth. There's a big difference
between getting rid of it and slowing down the growth.
Mr. Bishop. I'm not addressing that.
Dr. Vedder. Well, I am. I have tenure. You have term limit.
No, you don't have term limit.
[Laughter.]
Dr. Vedder. That's my old line when I speak to the Ohio
legislature. I say they have term limits. And I say, lookit, I
got the upper hand in this debate. I think we should not get
rid of student aid, either private, philanthropic,
institutional, or other aid. And I would agree with Dr. Heller,
who emphasized that a lot of this aid now at the institutional
level has become merit-based because everyone is trying to get
higher in their U.S. News & World Report rankings. That's
another issue that we have not turned on.
Indeed, I think a very compelling case can be made that the
4-year state universities often have lost their way with
respect to their original goal, which is to provide access to
low-income students.
So not only do I agree with you, I would go one step
further. And if you look at the data comparing Hispanics,
blacks, whites or you look at low income or high income, and
even adjust for educational quality, say as measured on the
National Assessment of Educational Progress, there is a very
strong smaller percentage of participation among these
disadvantaged groups. It is a problem, and I am the first to
admit it--and not admit it. I think it's one that is
legitimately one that needs to be addressed.
Mr. Bishop. My time is up. Thank you, Mr. Chairman.
Mr. McKeon. Thank you. I want to thank both of you for
being here. I think this is a much needed discussion, and it's
something that's concerned me for years. And I don't know that
I have a total answer, but I did introduce a bill last Congress
that kind of awakened this discussion. And you're probably
familiar with it.
I was attacked by the higher education community as
imposing cost controls, and kind of the tenor of what was said
was, look, we're doing a great job. We're the best in the
world. Leave us alone. Send more money.
But I really am concerned that the cost of living--the cost
of tuition fees is going up four times the rate of people's
ability to pay, and too many students are being cut out of the
opportunity of getting onto that ladder to realize the American
dream.
And the study that we have says that by the end of this
decade, two million students will be excluded. And I just--I
don't think that's acceptable. And I think some way we need to
come together and instead of fighting each other, we need to
come together with the best minds--students, parents, state
legislators, school administrators, financial leaders, Federal
Government--we all need to come together on this problem.
Because I think it reaches far beyond how we're kind of
discussing it right now.
Some of us just went to China and looked at what's
happening over there, and I'm concerned where we're going to be
in the next 20 years vis-a-vis China and India and how we're
going to be able to compete and have a trained, educated
workforce.
How do you think we can get the public concerned over these
costs? Or how do you think we can get the people I mentioned,
everybody together to get a handle on this problem? Both of
you.
Dr. Vedder. Do you want to start?
Dr. Heller. I'll take the first try at that, Representative
McKeon. It's a difficult process, and I don't have a real quick
answer to it, but I think you're right. You named the players
who you need to bring together to discuss these issues. And I
think that to be honest, to get colleges involved in that
dialog, you need to try to bring them along voluntarily and not
with the threat of any kind of legislation that's going to put
undue burden on them. I mean, I've been in higher education
long enough--not as long as Professor Vedder, I don't think--
but I've been an administrator, a student and a faculty member
in higher education long enough to know something about the way
colleges work.
Mr. McKeon. If I may just interrupt just a second. I went
through this same process in '98. We did the reauthorization. I
was concerned about it then, and we did that. And we talked
about this and how we needed to work together harmoniously and
all of those different things, and nothing changed. That's why
we came out with a bill that maybe put a stick included with
the carrot. So, excuse me.
Dr. Heller. Well, you know, again, I'll be honest and say
that I can't be the apologist for universities. I think that,
you know, trying to get them together to talk about it is an
issue. I think trying to get them to understand the real needs
of parents and students, particularly lower income students, is
part of that dialog.
I think that most college presidents are very concerned
about that. They're the ones who get the phone calls when their
child has to drop out because they can't afford that tuition
increase.
But I think that a lot of the recent evidence since the
last reauthorization, particularly the last three or 4 years,
as I've said, when we've had skyrocketing tuition prices, is a
reflection of the state of the economy, particularly with
respect to public institutions.
There is no question when you look at the evidence that if
states de-fund public institutions, the main other source of
revenue for these institutions is to turn to students and their
families. And rather than shut the doors or take away some of
those seats that Chairman Boehner was talking about earlier,
most institutions opt instead to raise prices. And when doing
that, they try to protect the interests of the poorest students
to make sure they can still afford to come and be successful
once there.
But institutions have limited resources. And if the states
can't bring the money and the Federal Government can't bring
the money, then we are going to see the impact on poor students
that the advisory committee laid out in their report and you
just made reference to.
Dr. Vedder. If I may comment, I would agree that there are
problems with congressional mandates on institutions to cut
costs in certain specific ways. I think you have to give
institutions a good bit of flexibility to meet their needs.
But I think there is some justification for it,
nonetheless. Having said that, that's the downside. The upside
is, is that the evidence is that there is in parts of the
higher education community a certain arrogance, a certain sense
that we are our own bosses. There's a certain lack of
accountability. He talked about his university. I'll talk about
mine.
We've done the same thing. We let 100 administrators go and
so forth, but we also spent $4.9 million on a new airplane for
the president last year at the same time we were increasing
tuition 14 percent. Now that's an arrogance I think of power
and of misuse of funds, and I think those kinds of things have
to be stopped.
And to blanketly prohibit universities from buying
airplanes would probably be a mistake, some of them for one
thing run avionics--aviation programs. But at the same time,
there needs to be some limits on this kind of behavior. My
suggestion of sort of cutting the dollars coming into
universities is another way of dealing with this besides
passing specific rules and regulations dealing with specific
types of expenditures. I think it's better to cut--if you want
to sort of contain that kind of behavior is to cut the dollars
coming in rather than to say don't do this or don't do that.
But it's an arguable point.
I commend you, by the way, for shaking up the community a
little bit with your legislation. I was at a meeting with 13
college presidents last week and your name was mentioned in
about every other sentence.
Mr. McKeon. Everybody loves me. You know, when you propose
one way to cut or to eliminate the dollars going in, what I was
saying in my bill was they had 8 years just to get the--to cut
their increase down to twice the rate of inflation. And if they
couldn't do that, then all we were talking about was why should
we continue to give you some of the money that we're giving you
now?
Dr. Vedder. I think--well, my testimony was consistent with
that in one point today.
Mr. McKeon. I know.
Dr. Vedder. It's a--it has promise.
Dr. Heller. Representative McKeon, just to be fair, I think
that a lot of the objection was the concern that it would be
students ultimately, particularly lower income, lower or
middle-income students who would be punished by their
institutions no longer being eligible for grants and/or loans.
So I think that's what a lot of the concern was on the part of
the institutions.
Mr. McKeon. But the students could take their Pell Grant,
and they could go to the schools because we asked the schools
to put on a website where we could make apples-to-apples
comparisons where parents and students could make better
decisions on going to a school instead of saying, well, it's go
to be Harvard or Princeton because they have, you know, 100
years of credibility, we could go to the schools that are doing
a good job of providing education and controlling their costs,
and we can still get a good education and we can afford it.
Dr. Heller. I agree wholeheartedly. More information for
parents and students can only help in the process of
understanding which college charges how much money. I wouldn't
disagree with you at all about more information.
Mr. McKeon. Thank you. Mrs. Davis.
Mrs. Davis. Thank you, Mr. Chairman. Thank you to both of
you for being here, for your challenging comments. If we could
go back a second just to a discussion about the value of a
university education.
And I believe if I'm not mistaken, Dr. Vedder, you said
something to the extent it wasn't so much for what students
learn in college but that the diploma certifies a high
probability that there is some minimal level of competency. Is
that the way you would characterize your university?
Dr. Vedder. That's a sort of a simplified--yeah, in a
simplified form, I have said that. I didn't say that today, but
I have said that, yes.
Mrs. Davis. I guess I'm wondering how the people at the
university reacted to your statement.
Dr. Vedder. Well, it's--incidentally, there's a long
literature for the last--the university, we don't even want to
go on that route. In the last 30 years, there's been a
literature in economics--this is not new, it goes back to the
'70's--that argues that higher education in part is a screening
device. It's a way for employers to, in a quick and dirty way,
without spending a lot of money, to find out whether a
prospective employee has a certain level of competence.
And in effect, those pieces of paper, while they don't
prove--absolutely guarantee anything, they do increase the
probabilities, the likelihood that a person will be reasonably
literate, will be reasonably sober, reasonably energetic, et
cetera. And these are skills that are increasingly desired.
Given the, some argue, decline in K through 12 standards--
that's debatable, I know, but the gap has widened and so forth.
And so the issue is, when kids go to college, are they
getting--is the return because of what they learned in college
or is the return from these other things? And the answer
probably is both. Certainly an accounting major in college is
learning practical skills, or an engineering major, that is
very directly germane to their employment. I don't deny that.
But there is also this other dimension, and that makes it
difficult in assessing the returns to higher education, to
society and so forth. It makes it very difficult to measure
those in a direct, specific way.
Mrs. Davis. But I guess that would certainly drive whether
or not people feel that it's an important thing to be in those
institutions.
Dr. Vedder. Sure.
Mrs. Davis. Dr. Heller, did you have a--want to respond?
Dr. Heller. Dr. Vedder is absolutely right that when people
go to college and then they go off into labor markets with that
bachelor's degree, for example, they're getting the benefits of
both, whatever human capital, intelligence, the other
characteristics that Professor Vedder referred to, as well as
the knowledge that they gained, the skills they gained in
college, as well as that stamp from that college.
And there's a reason why people are willing to spend
$40,000 at a private institution when they could get a
bachelor's degree in the same field for less money at another
institution.
But I think Professor Vedder said it accurately that it's
both of those functions that's happening in universities. If
all universities did was to put that stamp of approval on
people, then we'd be doing a great job of hoodwinking about 17
million students. And the fact that students still want to pay
for a college degree is an indication that they believe that
there's added value there. Otherwise, a bright 18-year-old
would go off to an employer, let's say go off to Riggs Bank in
Washington, and say, hey, I'll agree to work for you for free
for 6 months to prove to you I've got all those characteristics
you want. You then pay me a salary after 6 months. And they'd
save a lot of money from going to college. But that's not the
way things work.
Mrs. Davis. Yeah. We certainly have plenty of examples of
people who dropped out of college and went on to be very
successful individuals.
Dr. Heller. Right.
Mrs. Davis. So I think that makes your point. But I am
interested in knowing, given that, that that's probably true,
that it has a lot to do with our--really our model of college
graduates, that we can fully address educationally what in fact
students are getting into and how parents can be educated in
order to make those choices, whether again it's an expensive
school or whether it's a nonexpensive, you know, a school that
is less expensive.
Dr. Heller. Right.
Mrs. Davis. And how we get there is an open question. You
also referenced the probability or I guess the issue of whether
or not transferability between public and for-profit and not-
for-profit schools. What role should we be playing in the
universities in order to enable students to do that? Should the
accreditation institutions be engaged in that discussion, and
how should they do that?
Dr. Vedder. One thing I am seeing, for 20 or 30 years, the
junior college, 2-year colleges in the '70's and '80's were
actually losing enrollment relative to the 4-year schools.
Because as people, as the Nation became more affluent, more and
more people wanted to go to, quote, the ``better'' 4-year
colleges. Whether they're better or not, I don't know. The more
expensive colleges.
In the last few years, it's kind of trended the other way.
More and more people are going to 2-year colleges I think
because of affordability issues. And a strategy that I'm
hearing increasingly--my wife is a guidance counselor, so I
hear this in the guidance counselor community--is let's send
the kids, Johnny or Susie to junior college for 2 years and
then let them transfer into the 4-year university and thus save
some money because the 2-year schools have considerably lower
tuition charges. It's a strategy that I think is one way of
dealing with the affordability access issue. And I'm just
saying let's not put obstacles in that happening as we go along
and be sure that Federal policy is consistent with allowing
that to happen.
What that means in terms of specific statutory language or
even changes in current law, I am not sure. But I'm just saying
as a matter of principle, we should allow transferability to
occur because it aids in the process of affordability and
access and it aids in competition.
Mrs. Davis. Dr. Heller, did you want to comment?
Dr. Heller. I would be very reluctant to encourage this
Committee or the Congress to get involved in telling
institutions what they should do with respect to transfers and
who they should allow to transfer into their institutions.
I think that we've made a lot of progress in recent years
on establishing articulation agreements that spell out in good
detail for students what they need to do in a 2-year
institution, for example, to be then prepared to transfer to a
4-year institution and a bachelor's degree program. And a
number of states have made statewide agreements. Florida is a
good example of this, where they've gone to a unified system
that says that English 101 in a community college is the same
as English 101 at the University of Florida. And I would not
encourage this Committee to get any more involved in that, and
I think the system is working well as it is.
Mrs. Davis. Thank you. I appreciate that. Mr. Chairman, if
I may, just for a second, I think at least in the University of
California system, a lot of students basically have been forced
to go to community college because they just don't have the
seats there available to them, so that we're preparing a lot of
kids who actually are getting in at university level, you know,
with four points--four point averages, and they're still not
able to find a seat.
Thank you.
Dr. Vedder. But that's partly because the colleges have
themselves, in the case of California it's partly state law,
but it's partly some of the state universities have tried to
act more like private schools, and I think they've gotten far
away from the notion of access as a major goal helping poor
kids.
We want to get higher in our U.S. News rankings and so
forth, so we've become more selective and we've rigidly let
enrollments, you know, be limited to 18,000 or 19,000,
whatever, getting to the question of seats that was raised
earlier. We're not increasing seats in some cases as I think we
intended when the Morrell Act and other legislation was passed.
Chairman Boehner. The Chair recognizes the gentleman from
Puerto Rico, Mr. Fortuno.
Mr. Fortuno. Thank you, Mr. Chairman. Dr. Vedder, you
mention briefly the Colorado voucher program. Could you expand
a little bit on that?
Dr. Vedder. Well, I'm not an expert on Colorado, but last
year--and it's an interesting scenario of political events how
it happened. It related in part to their taxpayer bill of
rights Tabor amendment which restricted state expenditures, and
one way to get around that was to give vouchers to kids rather
than to institutions. Apparently that got around the Tabor
limits.
And so even Betsy Hoffman, who was president of the
University of Colorado, supported this move. It was a move that
was opposed by the higher education community. As I understand
it, and I may have these numbers wrong, Congressman, in the
fall of 2005, I think $1,200 vouchers will be given to all
students who attend schools in Colorado, all public
institutions and the case of lower income students, three
private institutions, including Colorado College, which is
probably arguably one of the finest liberal arts colleges in
the United States west of the Mississippi. And you can talk to
the president of that college, and they're very much excited
about this, a former Democratic Governor, by the way.
So this is the plan. The Governor of Colorado wants to
expand that to a larger amount in future years. There's several
states have said let's keep state appropriations constant in
dollars and give incremental or increased money not to
institutions but to the students in this forum. I think it's an
interesting idea, and it would be interesting to see how it
works. I am fairly optimistic that it will have no negative
effects. As to the extent of positive effects or not, obviously
I would agree that until it's done, we don't know.
Mr. Fortuno. Do either of you know of any other similar
examples in other states?
Dr. Heller. It's pretty widely recognized that Colorado is
the first state to do this with the state funds. I mean, you
know, certainly there's an aspect of vouchers to Pell Grants in
that they're portable and students can use them at any one of
the 6,000 Title IV eligible institutions. Many state grants are
similarly portable that way. But this is the first state that
has decided to take a portion of the appropriation and turn
that around to a voucher for the students.
Mr. Fortuno. Thank you. Dr. Vedder, you also mentioned the
idea for privatization of universities. Could you expand
further on that?
Dr. Vedder. Pardon? I didn't hear.
Mr. Fortuno. Privatization of universities. And I have some
questions about accountability and oversight issues regarding
the privatization of universities.
Dr. Vedder. Organization, accountability issues?
Mr. Fortuno. Yes.
Dr. Vedder. Well, that's a broad question, Mr. Fortuno, but
universities don't face the bottom line of profits. Most
government--but a lot of groups that are at least partially
governed by the political process face some accountability from
the political process. Government agencies, for example, have
political accountability.
Universities are somewhat unique in that even state
universities, although they face some rules and regulations and
they certainly face the financial constraint imposed by the
state, they have a high degree of independence. And I think in
some cases for justifiable reasons, for academic freedom
reasons, for reasons we want our universities to be -- we want
them--we want people to express themselves freely and so on.
But it does sometimes have a cost in terms of leading to
behaviors that are not dealt with in any important way through
any--there's no huge accountability. We have 35, 40 percent
attrition rate. No one has mentioned attrition in this room.
And incidentally, they're hard to--how do you measure
attrition? It's hard to measure. But 6-year graduation rates at
universities. Many universities are, you know, 50, 60 percent
of the entering people.
Why don't we hold the universities accountable in that
area? Why don't we say if you're--get your attrition rates
down, we'll give you more money? Of course, one way you can get
the attrition rates down is give everyone A's, you know. So
there are issues here. I mean, there are ways you can deal with
it that are not acceptable.
So this is an issue. The football coach is held
accountable. Did I have a good year last year or not? We have
student evaluations for me. Even if they're bad, though, I keep
teaching because I have tenure. You know, there's no measure.
Whereas in the private sector, by and large, there is a
measure, and we use that to govern--to help condition behavior.
And we don't have that sort of conditioning of human behavior
in a positive way in the higher education community. And the
for-profits do to some extent. And that's why I find that an
interesting experiment to see how they're going to develop over
time, and they're growing 20, 30 percent a year, which says
that maybe there's something in that model that is useful.
Mr. Fortuno. Thank you, Mr. Chairman.
Chairman Boehner. The Chair recognizes the gentleman from
Massachusetts, Mr. Tierney.
Mr. Tierney. Thank you, Mr. Chairman. Dr. Vedder, I take it
you weren't offering back your tenure?
Dr. Vedder. Pardon? I--
Mr. Tierney. You weren't saying that you wanted to give up
your tenure. I didn't think so.
Dr. Vedder. I'm actually semi-retired, so I even am better
than tenured. I have a pension coming in, too.
Dr. Heller. If they'd pay us like the football coaches,
some of us would be willing to give up our tenure very quickly.
Mr. Tierney. Exactly. Exactly. Let me focus on just one
aspect of this, because I mean there are parts--I think we can
reach agreement on all of this. The Chairman mentioned the lack
of new seats in education. I think that's a critical problem.
If we're talking about a need to have a global competitive
strategy, it means giving more people higher education so that
they can take the jobs at the higher level. And I think it was
Tom Friedman who said something to the effect that China and
India aren't racing us to the bottom, they're racing us to the
top. So we've got to do that.
But I think when you look at the number of people that need
access and affordability, I think that public higher education
should play a greater role, and I think in states like mine in
Massachusetts and other states that deemphasize that. We have a
lot of nice private institutions, and they sort of think that's
going to take care of itself.
We have a lot of people that are just falling by the
wayside, and if we want to start competing in numbers with
China and India and others, we had better find a way to get
those people into the education process and through it to the
top.
So in Massachusetts, the state senate just came down with a
report saying that investment in public higher education in
Massachusetts has gone down about 36 percent in the last
several years. I think that's indicative of what's happening in
many states across the country. Would you agree with me and the
state senate in that, that in fact that's the case, that public
investment by states in their public higher education has gone
down significantly?
Dr. Heller. Yeah. As I said in my testimony, since 2001--
Mr. Tierney. I'm don't--I'm not going to interrupt you,
only because I--I just want--both of you agree to that?
Dr. Heller. Yes.
Dr. Vedder. It's happening.
Mr. Tierney. Let me ask you the next question on that then.
Would it be appropriate in each of your minds to have Federal
policy encourage states to better support public higher
education in one way or another? Either by conditioning
something on that or by somehow encouraging them to do that,
that they've got to be a full partner in this just as the
Federal Government and families are?
Dr. Heller. I think anything the Federal Government can do
to encourage states to invest their own funds is a step in the
right direction for the reasons that you stated, Representative
Tierney. The LEAP program, for example, is a good example of a
Federal program that can encourage state behavior by providing
matching funds when states invest in--
Mr. Tierney. It would be if the President wanted to fund
it, but unfortunately, that's not the case. Dr. Vedder?
Dr. Vedder. Well, you know, this is going to sound
heretical, but it wouldn't be the first thing I said today that
does. Massachusetts is one of the few states in the Union that
spends less than 1 percent of its personal income on higher
education through state appropriations, one of the few. There
are several--a few others.
You go next door or nearly next door to, say, Vermont, they
pay--spend two, two-and-a-quarter percent. But which state has
the larger percentage of college graduates among its adult
population? It's Massachusetts. Now there are reasons--part of
it is--
Mr. Tierney. Which state has more private institutions.
Dr. Vedder. Yes. It's a history of private education. But
that's--there are schools.
Mr. Tierney. Can I just--
Dr. Vedder. They're educating kids. That's the issue.
Mr. Tierney. Can I just focus you on this? Do you--you
agreed with me earlier I think that the states have to step up
to the plate, you know, that they have to, you know, start
supporting public higher education.
Dr. Vedder. No, I don't agree.
Mr. Tierney. You don't agree with that? You think that
states should be given a walk on this?
Dr. Vedder. I'm not saying I necessarily favor the
elimination of state support immediately over higher education,
but I don't necessarily draw that conclusion, given the
empirical evidence that the proportion of kids going to college
does not seem to be very closely related to the amount of state
support going to education.
My goal is to see kids go to college. And if state support
is not having a big impact on their going to college, or at
least it's unclear whether it's having a big impact, then I
think we need to think about that.
Mr. Tierney. Dr. Heller, do you think it's unclear that the
state support for public higher education makes an impact?
Dr. Heller. I think the evidence is very clear. In my
written testimony--I didn't speak too much on this in my oral
testimony, but in my written testimony, I talk about the fact
that there are a number of studies out there that show that
there is a positive social return, not to the individuals, not
just to the individuals, but states and the Nation benefit from
the public investment in higher education, and I think those
are very good studies that demonstrate that.
The other point is that we've got states now spending about
$65 billion on public higher education. And I just can't
believe that all of our 50 states are so hoodwinked that they'd
be spending that money if they didn't think that there was a
return other than to the individuals attending those colleges.
Mr. Tierney. I suspect the business community would feel
hoodwinked also, because they're constantly pounding for this
type of investment.
Do you think that the dissemination--the Federal
Government's role would be appropriate to identify best
practices of colleges and universities that are in fact putting
in place good cost containment things and disseminating that
amongst the other universities and colleges?
Dr. Heller. I think that's a wonderful idea. The Department
of Education has a program called FIPSE, the Fund for the
Improvement of Post-Secondary Education, and that's exactly
what a lot of the grants in that program are intended to do, is
to identify best practices in areas like efficiency and
productivity and then to promulgate those to other
universities. So I think that's a great role for the Federal
Government, and I would like to see that program continued.
Dr. Vedder. In principle, I agree, too.
Mr. Tierney. I'm happy to go on, but I think I'm out of
time.
Chairman Boehner. The gentleman's time has expired. The
Chair recognizes the gentleman from New Jersey, Mr. Holt.
Mr. Holt. Thank you, Mr. Chairman, and I thank you, Dr.
Vedder and Dr. Heller, for interesting testimony. I'd like to
pursue some of the more, well, outrageous statements that
you've made, Dr. Vedder, but let me not do that.
I do want to mention that Ms. Jennifer Surovy in my office
has launched on a career in public service because she was
inspired by you as a student.
Dr. Vedder. Oh, really?
Mr. Holt. Even though she says that she's pretty much
unconvinced by most of your arguments.
[Laughter.]
Dr. Vedder. Strange things happen in the world.
Mr. Holt. I must say that intemperate, provocative
statements may be better for inspiring students than making
policy.
Dr. Vedder. It's a great teaching technique, I'll tell you.
Mr. Holt. It is, indeed. Let me, rather than pursue those,
let me get to the basic--and I should thank you for inspiring
her, by the way. She is really contributing to help people in
many ways. Let me get to the basic question. There's a lot of
wailing and gnashing of teeth about increased cost of higher
education, and Mr. McKeon has spent a lot of time on that.
But I'm trying to understand, and I'm asking this question
without any bias, what is the harm that's being done? Is it, as
Mr. McKeon says, that people are being excluded from the
American dream? Which seems inconsistent, Dr. Vedder, with your
statement that in fact we've pumped up demand so much that
there are more people going to college, that there's still
upward pressure because there's more demand than colleges can
handle. Or, is the problem that it just doesn't seem right that
their prices are going up faster than inflation? And just, you
know, it's hard to justify that.
Well, then, should Mr. McKeon introduce a bill that puts
price controls on pharmaceuticals which are going up faster
than inflation, or should he look at computers that are going
up in price slower than inflation and mandate price increases?
What is--what is the problem that we're trying to address here?
And then if there's time, a subsequent question more specific
is, what should we be doing with Pell Grants?
And back to the first question about what harm is being
done, we all agree, or you all agree anyway, that it is for an
individual a good investment and for society a good investment,
even at today's prices. You come out ahead, we come out ahead
if more students go to college.
So what is the problem we're addressing?
Dr. Vedder. Well, you've asked a question that--
Mr. Holt. I'm asking both of you, so please allow time for
each other.
Dr. Vedder. Yeah. You've asked a very long--a very broad
question. Let me say right away, I'm not sure I completely
agree with what you said that I agreed with; namely, that
society is getting a good investment from higher education. I'm
not saying higher education is bad or disastrous. I'm saying
there are individually high returns to higher education.
I'm not so sure that society or governments or the people
are getting higher returns. The states in the Union with higher
rates of economic growth in the last quarter of a century are
not surprisingly the states that have spent a lot of money on
higher education. And I have some discussion of that in my
book.
We have had more kids go into higher education than ever
before. That's the plus. And I agree with Dr. Heller, it's a
plus/minus thing. But if you look at Hispanics, just to pick
one group, that I happen to remember a statistic from, the
percentage of Hispanics going to college that are between the
ages of 18 and 24 are no higher today than they were in the
mid-1970's. Indeed, they're slightly lower. Now that's not true
of other groups. Most groups have risen somewhat. But we have
these huge gaps. So maybe we're dropping a lot of money into
student assistance, $80 billion of Federal money, but are we
getting a huge increase, a big increase for the amount of money
spent in the number going to college? What is the relationship
per student between the amount of money we spend at the margin
and the number going to college? I think you'll find it's a
pretty--it's not a very strong relationship because of these
tuition increases eating up a lot of the gains.
Mr. Holt. Dr. Heller?
Dr. Vedder. And to me, that's the issue we're talking about
here today.
Dr. Heller. Congressman Holt, I think the major problem is,
as I stated earlier, is that even with all of the money we are
spending on financial aid, which totals about $120 billion a
year from all the sources, we still have students who are being
left behind.
As I mentioned, 400,000 students who are academically
qualified by the Department of Education's own standards to go
to a 4-year institution but weren't able to afford to go there,
and 170,000 who couldn't even afford a community college, even
though they were academically qualified to go. That is what I
see as the major problem here.
Chairman Boehner. Well, let me, if I could follow up on the
gentleman's point, the goal, the No. 1 goal, of the Higher
Education Act is to ensure access for low- to moderate-income
students who are qualified.
Dr. Heller. Right.
Chairman Boehner. And the fact is, is you give the same
numbers that we have, about 400,000 students couldn't attend
last year. We also know that over the last 20 years, state
spending on higher education has declined. Federal spending on
education has increased dramatically, basically taking up the
slack. I think the big question for all of us is, what do we do
as we move forward in the reauthorization process? I'll ask
both of you.
Dr. Heller. Well, I think that as I said earlier, the Pell
Grant program is one of the best financial aid programs of all
out there because it's targeted at the students who need the
financial assistance. So certainly in terms of structure, Pell
Grant is very well structured, and I think the only problem
with it is that we need to find a way to get a commitment to
students earlier in their educational careers, and also to try
to return the purchasing power of Pell to something approaching
what it was back in the 1970's. If we can't get it to 80
percent of the average cost of attendance, let's try to get it
back there. And I recognize that the President has submitted a
budget that does call for a small increase in Pell over 5
years, but I'm afraid that that's going to be a very small part
of that road back.
Dr. Vedder. I think that we need to get more efficient use
of the money we give out. Part of it you give out in the form
of various forms of aids and grants, tuition tax credits and
the like, and I don't think we're getting a high return on that
investment. And one way to do it is to target a little more
than we have who gets these grants. Is it, for example,
possible for a student in their fifth or sixth year in college
to get a Pell Grant, or to get a grant? To get a Stafford loan?
Chairman Boehner. How about year 17?
Dr. Vedder. Or year 17. I think these are questions that
are legitimate ones to ask. Society may have an obligation to
offer access to students who take that seriously and work hard
and perform at least adequately well, not necessarily 4 point
averages, but do well. Do we have to serve everyone though? Do
we have to serve the student who gets into problems with
disciplinary problems, that is immature, who is in their fifth
or sixth year in college? Some will say, well, we don't have
many of those kinds of students. Nonsense. Look at the data. We
have lots of those kinds of students.
In other words, we need to get a little more hard nosed
about it and target the money to the deserving poor. And I
would agree that the deserving poor, maybe we should have
bigger Pell Grants for them. I'm not opposed to that. In my
testimony, I actually raise that as a point. I agree with
Robert Reich, who--the principal who argued for progressive
vouchers. Let's give more to the poor than to the rich. I think
that's what public policy is about. I'm all for that. But let's
get more efficient and smarter about it, and I don't think we
are.
Dr. Heller. When we look at why students drop out of
college, Chairman Boehner, and particularly lower income and
middle income students, they're dropping out because they're
running out of money. They're dropping out because they're
working too many hours, and they're not able to afford to go to
college without working all of those hours. They're not
dropping out because they're out in riots--
Chairman Boehner. I'm well aware of that situation. I was
there. I went through it. I see the picture. And obviously to
the extent that we can guarantee them a sufficient amount to
get started, chances are they're going to do better. But given
the ever-increasing prices, it's a struggle for all of those
involved.
Let me just say thanks to our witnesses today. Oh, let me
recognize the gentleman from California.
Mr. McKeon. Mr. Holt left, but he referred to me several
times. I'd like to just say a couple of things.
Chairman Boehner. You want to defend yourself?
Mr. McKeon. Yeah. One thing is our population is growing,
OK? And as the population grows, we're not saying that every
student that graduates from high school wants to go to college.
What we're talking about is those that graduate from high
school that do want to go to college, and they are being cut
down. Even though more people are getting Pell Grants, more
money has gone into Pell Grants, we've doubled Pell Grants in
the last 10 years, we can't keep up. That's I think the
problem.
And then the question the Chairman asked about additional
seats, the capacity has not expanded to keep up with the number
of students. And so that drives the cost demand, that drives
the cost up. And one of the things that a member of the higher
education community told me, he says, well, you know, this is
free enterprise. Leave us alone. This is free enterprise. I
said it's totally different than free enterprise. I mean, in my
business, I had to go out and make a living, and at the end of
the year write a check for 5 percent and send it to the
government. In turn, we send him a check for 35 percent and
it's--and the difference is amazing. Because until we have more
seats than students, then they're not competing for students.
They might be competing for some students, but while they're
turning students away, there is no competition for that
student.
And I just think that this is something that we do need to
grapple with. I appreciate your--both of your testimony here
today, and it stirred the pot, and I think we've had a good
hearing. And thank you, Mr. Chairman.
Chairman Boehner. And I think that's the whole point of
today's hearing was just to help move the blinders back a
little bit and have people consider, you know, where we are,
what our goals are, and the challenges that we're going to have
in trying to reauthorize the Higher Education Act.
The hearing stands adjourned.
[Whereupon, at 3:43 p.m., the Committee was adjourned.]