We Need An Education Policy, Not A Campaign

Rhetoric and policymaking are two different skills with two different aims. Though politicians need both, it can be tempting to substitute one for the other.

President Obama has never had a problem with the rhetoric. It’s what made him such an effective campaigner. Unfortunately, in playing to his strengths, Obama is inclined to continue to craft ideas that sound more like the attractive watercolor of a campaign platform than the unglamorous blueprint of real policy reform.

The new college affordability plan the president unveiled at the start of his recent Northeast bus tour is a perfect illustration of the problem.

“Higher education cannot be a luxury,” Obama said at the University of Buffalo unit of the State University of New York. “It’s an economic imperative. Every American family should be able to afford to get it.”

In the transition from “what” to “how,” the stirring rhetoric gave way to fuzzy policy. The president proposed to create a ratings system for universities that would eventually tie federal financial aid dollars to the schools’ performance and value. The idea is to create an incentive for colleges and universities to limit costs without sacrificing the future success of their students.

Another component of the plan is to ease student loan burdens by expanding the existing “pay as you earn” system, allowing more borrowers to cap their monthly payments at 10 percent of their discretionary income and, in many cases, to have the balance of their loans forgiven after 20 years (10 years if the borrower is employed full-time for a public service organization).

Almost everybody wants to get college costs down, but Obama’s plan displays a flawed understanding of what is driving them up. We will not rein in costs by enabling more students to borrow more money, more cheaply. And how do you create responsible, cost-effective borrowing by telling the borrower that the less economic return she earns on the money she borrows, the less of it she has to pay back?

Making borrowing easier up front and less risky down the line will postpone the day that students and their parents finally abandon the most expensive schools as out-of-reach. When students find it easy to borrow the cost of tuition, schools can raise those costs without experiencing any substantial dip in their admission pools.

Further, you can’t put more people through school, or keep them there longer, by limiting the number of schools at which you will finance their educations. All this will do is create more competition to get into the schools that are favored by the president’s rating system. As Andrew Kelly points out at AEIdeas, the American Enterprise Institute’s blog, capacity in existing institutions is finite, and schools are already rewarded for selectivity; the more people apply, the better for the perception of the institution’s desirability. These slots will become the focus of even fiercer competition if they also become the only ones offering federally subsidized aid.

What happens to everyone who can’t get into a top-tier school? How, specifically, would the top-tier schools even be determined? Campaigns don’t bother with specifics; the president hasn’t said.

The real problem is that schools are in the business of selling not a skill set, nor even an education, but a ticket – a degree from an accredited program. The academic community, with a powerful financial interest in the status quo, sets accreditation standards that determine which programs are ticket sellers. The result is unsurprising: You generally can’t go on to any sort of graduate-level education without first having paid the toll at a four-year undergraduate school. And more and more jobs require at least an undergraduate degree.

If we really want to reform education, accreditation practices have to change. The government should set standards for college-level courses just as it does for high school. We could go further. How about accrediting courses – whether traditional on-campus, high school Advanced Placement, or online – rather than entire undergraduate-level programs? Government-accredited courses, in a variety of combinations, could lead toward a government-issued degree, more or less the way high school diplomas work today. The equivalent of a high school graduation can be earned via the GED test. There is no reason not to offer the same sort of option for an undergraduate degree.

A degree that reflects a sequence of accredited courses, however the credits were earned, ought to be acceptable for admission to many if not all graduate-level programs, enforced by the federal government’s role in financing graduate education. Nobody should have to sleep in a dorm or eat in a college dining hall in order to get into a nursing program. Admission to most graduate-level programs ought to be available by testing in. It should not be a function of having paid for a certain number of undergraduate-level credits, whether outright or with loans. It certainly should not be a prerequisite that one has paid a college activity fee.

This sort of reform will not eliminate the traditional campus model, any more than public high schools and the GED eliminated private prep schools and other academies. But it could create a much cheaper, mass-scalable avenue toward an education that is appropriate for the 21st century. A host of occupations require specialized training in addition to a four-year degree – training that is not so much beyond undergraduate work as apart from it. If students and parents chose a four-year degree in this scenario, it would be a conscious form of consumption, not the only way to access specialized graduate work or entry-level white collar jobs. And a more-flexible model could educate a workforce based not on years studied or credits collected, but more precisely on subjects studied and mastered.

Education is valuable, but not everyone wants or needs to be educated in the same way, or at the same price point. Putting the choice back into students’ hands would be real education reform. It would stand the current financing model on its ear, and it would channel money, regardless of its source, far more efficiently.

It will take a whole reform program, not just a campaign, to create this sort of change. I wish I could say the president’s proposal is a start, but it isn’t. It is just another campaign speech from someone who does not seem to realize that his campaign days should be over.

About Larry M. Elkin 553 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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