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Expand and Improve Higher-Ed Vouchers in Oklahoma

September 1, 2015 - 11:13am CDT

Higher-EdOne of the great ironies of the school choice debate is that the United States has long been a world leader in school vouchers—for higher education. In fact, soaring tuition costs and outrageous bloat in higher education are not so much a result of government monopoly as they are a result of flaws in our collegiate school choice programs.

Choice is growing rapidly at the K-12 level, with more than 350,000 students attending private schools through 58 choice programs in 28 states. But school choice has been our dominant model in higher education for much longer. Starting with the G.I. Bill, for more than half a century we have provided a vast system of school vouchers for college.

We don’t normally call these programs “school vouchers.” But it’s a government subsidy that goes to the student for purchasing education rather than directly to the school. The student selects what school fits his or her needs; the money follows the student to the school of his or her choice. That’s a school voucher.

This voucher system has been one of the greatest educational success stories of all time. In 1950, only 8 percent of the U.S. population had a bachelor’s degree; today, 34 percent do. In fact, college education is now financially available to essentially every student who is qualified to attend college. The number of high school graduates each year who have the academic qualifications to attend college (such as meeting transcript requirements) and the number of people who enroll in college for the first time each year are almost identical. We can take pride that we have eliminated financial barriers to college for all who are academically qualified.

Granted, the desire to get people into college has become something of an idol. As a result, we have some people going to college who don’t need to. But nobody is proposing we go back to 8 percent. We were wasting a lot of human potential in 1950 by leaving college-qualified students without financial access. This is a much better country because we now deliver higher education to everyone who is able to benefit from it.

It has also been a success story for America’s democratic and republican values. In 1950, every competitive college in America was a bastion of wealthy white Protestant privilege. People got into college because of who they were, not because of their academic records. In a generation, as a direct result of college vouchers, that whole system was dismantled. The effects have been reverberating throughout our society ever since. (Civil rights laws were critical, too, of course—but they wouldn’t have meant much if racial and religious minorities hadn’t had financial access.)

Of course, there are still a few people today who can get into college without deserving it because of their privileged positions, as the recent scandals at the University of Texas show. But at least these days it’s a scandal. In 1950, no one raised an eyebrow when a senator’s stupid son flunked all his exams and still attended college. That’s what college was for.

We may complain about students who go to college without wanting a genuine liberal arts education. But there was even more of that in 1950 than there is today. People who went to college because they were born into a privileged, college-entitled social class weren’t really any more interested in philosophy or poetry or psychology or physics than students who go to college today because they need the credential to get a white-collar job.

We may complain about grade inflation, and rightly so. But at least it isn’t based on a wicked system of racial, religious, and economic privilege. Google the phrase “Gentleman’s C” if you think grade inflation is a new problem.

But there is still a lot of room for improvement. A huge portion of higher-education finances are run on the government monopoly model rather than on the school choice model. More importantly, our choice programs have a fatal flaw that needs fixing.

Public colleges get 45 percent of their revenue from appropriations and grants—almost $150 billion per year—compared with only 21 percent from tuition and fees. That funding could be voucherized to bring us greater benefits from expanded school choice. Let the funding follow the student and let schools compete for students.

There’s no justification for giving a special advantage to government-owned schools over private schools. In fact, there’s a lot of harm in doing so. State legislatures have been widely colonized by a higher education “blob,” similar to the one that runs K-12 schools. This blob is just as nasty as the K-12 blob, as you can find out by proposing any policy that cuts into their gravy train.

But the real problem is not so much extending school choice as fixing it. The way we fund higher education needs to be reformed to align incentives properly. Right now, the way college vouchers are designed creates enormous payoffs for inefficient behavior.

You may have noticed that college tuition is soaring. The reason is simple: colleges are jacking up prices in order to capture available subsidies. Every time we increase college tuition subsidies, they can jack up tuition to capture that additional subsidy. And of course those higher tuition prices create voter demand for—you guessed it—bigger subsidies. And so on, forever and ever.

The United States has long been a world leader in school vouchers—for higher education. Now we need a revolution in higher education vouchers similar to the revolution that is hitting K-12 vouchers in the form of education savings accounts (ESAs).

Colleges aren’t stupid. They’re going to raise prices until the market clears, just like any other business. Nonprofit businesses do this just as much as for-profit businesses, as you may have noticed the last time you walked into a nonprofit hospital and demanded free medicine. When they sell goods and services, nonprofits participate in the marketplace price mechanism on exactly the same terms as for-profits. The expectation that their behavior will differ in this regard is a politically convenient myth, one that is mostly propagated by the nonprofits themselves and their cronies.

Where does the money go? It goes to administrative bloat and fancy frills for students that have nothing to do with education. Colleges have been ramping up spending on “administration” much faster than on education for years. And as they compete for students, the quality of education is becoming less important than the comfort and frills they can offer to students—better food, bigger gyms, etc. And don’t forget about mom; they want her to see lots of campus police cars driving around when she visits.

We need a revolution in higher education vouchers similar to the revolution that is now hitting K-12 vouchers in the form of education savings accounts (ESAs). For years, K-12 voucher programs have created a miniature and far less severe version of college tuition creep in places like Milwaukee. Private schools raise tuition until it covers the full amount of the school voucher, leading to bloat. Instead of paying for tuition up to a certain dollar amount, ESAs give parents a savings account that they can only use to buy education services. This forces private schools to compete on price as well as on quality, cutting off the subsidy for bloat.

We don’t have the same problem at the college level as we do with K-12 vouchers. College education vouchers don’t reimburse for tuition up to a set amount, creating an incentive to raise tuition to that amount. Instead, the problem is that we have an established track record of responding to every tuition hike with a subsidy hike.

The solution is to incentivize alternatives that cut right around the existing system. Digital learning is one way to do that—states can recognize cost-efficient digital alternatives to residential education. Texas governor Rick Perry’s idea to require state colleges to provide a bachelor’s degree program that costs no more than $10,000 is another promising approach. This idea could be voucherized—make state funding available to students at any school, public or private, that offers such a degree.

In the long run, though, there’s no substitute for fiscal discipline. States have to start saying “no” to demands for more and more subsidies. As long as every tuition hike is followed by a subsidy hike, every subsidy hike will be followed by another tuition hike.

The fact that we run higher education on a voucher system is one of America’s best-kept secrets. The only thing the colleges are even more eager to cover up is the fact that they’re gaming this system to line their own pockets. Not even a school choice program can make people stop responding to incentives. That’s all the more reason to make sure the programs are well designed.

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