The higher ed customer

The higher ed customer

October 29th, 2012 By Robin Smith in Opinion Columns

Robin Smith, former Chairman of the Tennessee Republican Party and congressional candidate.

What if a customer purchased a product or service that would make the claim to increase in value over time and with more use? There is a caveat, however. The product's cost increases an average of 5.2 percent annually. Worse, the cost projections outpace inflation and the growth in personal income for the unforeseeable future.

What is this valuable product that is saddled with such outrageous cost increases? Higher education.

In a recent Politifact article, John Morgan, the chancellor of Tennessee's Board of Regents noted that "students now pay 67 percent of the costs of their educations at the state's universities and 60 percent at community colleges."

I'm curious, Mr. Morgan, shouldn't students pay all of those costs?

In truth, taxpayers fund a huge portion of higher education.

Chancellor Morgan observed that while 33 percent is now a subsidy of the state, a few decades ago, higher education received "state appropriations that comprised up to 70 percent ... and students and their parents picked up the rest."

The cost of tuition and "fees" for higher education have "more than doubled since 2000, outstripping the inflation rate across all goods as well as the growth rates of energy, housing and healthcare costs," according to the July 2011 issue of Moody's Analytics.

Remember that government-subsidized goods and services increase in cost and artificially alters the market. We all recall the recent housing market fiasco caused by easy subprime loans that sent the real estate market spiraling with reduced home equities.

The doubling cost of tuition since 2000 coincidentally mirrors the explosion in college loans with student loan debt now at $1 trillion.

And who guarantees those student loans offered at low interest rates? Yep -- the taxpayer again.

The federal government insures these student loans and, as of July 2010, is the sole lender of guaranteed student loans President Obama turned the Department of Education into a bank with the profits to be used for ... wait for it ... Obamacare.

Moody's Analytics observed that "federal grant aid nearly doubled from $26 billion to $52 billion between the years reviewed of 2008-2009 and 2010-2011."

In the Oct 24 publication of Syracuse University's student paper, "The Daily Orange," a student submitted an opinion with this observation: "Government aid, by purpose and effect, enables people to pay more for some good or service ... federal student aid empowers students to pay more than they otherwise could for college, federal college aid empowers colleges to raise prices."

Chancellor John Morgan concluded in Politifact, "I believe we are at a point where we can't raise tuition much beyond general-inflation increases without impacting enrollment. We may already be seeing that effect this year: enrollment is down on average across our system although historically enrollments rise during recessions and flatten out or decline somewhat during recoveries ..."

A recent educational report by Demos, a national public policy organization, worried that states have been forced to prioritize spending and balance budgets which reduced tax-dollars for colleges and universities. The result has been "an irreversible slide of the United States' higher education's becoming a collectively-funded good to that of an individually purchased private good."

Education is a national necessity. It has both value and cost. When it is collectively-funded, it has proven to be non-competitive and unresponsive to its customer: the student. It's time for reform with the customer's needs being driven into the market of higher education.

Robin Smith, a consultant at Rivers Edge Alliance, is a wife and mother living in Hixson. She served as chairman of the Tennessee Republican Party from 2007 to 2009.