| October 16, 2012
An idea to help parents afford college
As The Oklahoman recently noted in an excellent editorial, tuition and fees in Oklahoma continue to skyrocket. “In-state tuition and fees at OU in 1980 were $1,713 (adjusted for inflation). Today, they're $7,340. At OSU, tuition and fees jumped from an inflation-adjusted $1,677 to $7,441 today. That's an increase of more than 300 percent, after inflation, at both schools.”
The good news is that change is coming to higher education. As Heritage Foundation scholars Lindsey Burke and Stuart M. Butler observe, “higher education appears to be on the verge of the same kind of massive transformation—or “disruptive innovation”—that has changed the news/newspaper industry so dramatically.” One TIME columnist suggests that within 10 years college may be essentially free for many students.
Whatever the case, we know that transformation takes time. If there is one thing our higher education system does well, says University of Texas philosophy professor Robert C. Koons, it is “defend itself against political pressures to change. Universities have assembled the most impressive parallelogram of political forces in modern history.”
But as higher ed does continue to change, and as policymakers continue to seek to make it more affordable, they would do well to consider an innovative idea that comes to us from the arena of K-12 reform: Education Savings Accounts (ESAs). A new report by Matthew Ladner, “The Way of the Future: Education Savings Accounts for Every American Family,” makes the case for this innovative delivery system, “which enables parents to withdraw their children from public schools and use state-funded savings accounts for other education expenses.” Dr. Ladner, who also authored an education-reform report published in 2010 by the Friedman Foundation, the Oklahoma Business and Education Coalition and OCPA, points out that Arizona last year was the first state to create an ESA program.
Through that program, the state of Arizona deposits 90 percent of the funds for a participating child into an account, which can cover multiple educational services through use-restricted debit cards. Parents can choose to use all of their funds on a single method—like private-school tuition—or they can employ a customized strategy using multiple methods (e.g., online programs and community college classes). Critically, parents can save some of the money for future higher education expenses through a 529 college savings program.
As a parent who doesn’t choose the public-school option, I can tell you the idea of an Education Savings Account is very attractive. A rough back-of-the-envelope calculation reveals that my wife and I have saved our fellow taxpayers more than a quarter-million dollars (so far) by educating our children at home rather than sending them to the government’s traditional or charter schools. (Because some of our children are still young, this figure will continue to mount.) We couldn’t spend 90 percent of our children’s state education funds if we tried. Thus, our ESA would be pleasantly plump, allowing us to send our children to college with little or no debt.
One would think this idea would be attractive to higher education officials, too. After all, the various tax consumers (common ed, higher ed, Medicaid, etc.) are always eyeing each other warily like the proverbial starving men in a lifeboat. Certainly higher ed resents common ed for wasting so much money that otherwise could have been theirs. ESAs are a way for higher ed to capture some of it.
Politicians should like the idea, too. As James Marshall Crotty points out over at Forbes,
With ESAs, state governments are looking at a potential economic bonanza. Indeed, if ESA statutes were expanded to allow parents to invest more of their dedicated K-12 education funds into, say, mutual funds (as one can with HSAs), the potential for dramatic investment returns—and, thus, higher tax revenue—is far greater than if the funds sat parked in some low-paying savings account.
Moreover, as parents better monitor and distribute their dedicated public education funds, they will have more money to pay for their children’s secondary and college education. Such additional revenue streams could also level the playing field in secondary and college admissions, as poor and middle class parents will be able to afford the private K-12 tutoring, coaching and test prep services currently reserved for wealthier families.