• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Markets—Not Price Controls—Will Reduce College Costs and Improve Quality

    Education entrepreneurs are about to do what President Obama’s proposed price controls on higher education never will: dramatically reduce the cost of attending college.

    In fact, the soaring cost of college could soon go the way of the once-bloated housing market, fulfilling the predictions of many that the higher education cost “bubble” is about to bust. As the cost of attending college continues to soar, private entrepreneurs are beginning to harness the seemingly unlimited power of digital education to democratize access to college coursework.

    The pricing strategy of the top universities could be on the brink of collapse as companies such as Udemy disaggregate the college product and offer low-cost prices at high volume, a disruption not unlike that which shook the traditional newspaper industry.

    Inside Higher Ed reports:

    Udemy, a company that allows anyone to create and sell courses through its online platform, has announced a new area of its site, called The Faculty Project, devoted to courses by professors at a number of top institutions, such as Colgate, Duke University, Stanford University, Northwestern University, Vanderbilt University, the University of Virginia, Dartmouth College and Vassar College. While Udemy is a for-profit enterprise, the Faculty Project courses will be free.… There are no caps on course enrollment. “It could be 10 people, it could be 100, it could be 1,000,” says Ben Ho, the Vassar College economics professor who is teaching the course on water and humans.

    While Udemy is currently designed to provide access to students across the country to lectures by some of the nation’s top professors, other budding companies, such as Udacity, created by Stanford professors and launched in late January, aspire “to administer quizzes and grade its anticipated droves of students, which may number in the tens or hundreds of thousands.”

    It’s a sign of what could be, and a necessary disruption to the traditional higher education system, which has grown too expensive while not always making good on its promises of providing degrees of high value. These new market forces placing pressure on ossified colleges are exactly what needs to happen to drive down costs over the long run and increase access and quality for students across the country.

    By contrast, President Obama’s proposal to reduce college costs, outlined in his recent State of the Union address, will likely have the exact opposite effect. President Obama “put colleges on notice” in his remarks, stating that his Administration would link access to federal higher education subsidies to colleges’ ability to reduce tuition and costs. Sounds like a reasonable plan; after all, shouldn’t taxpayers be able to hold colleges accountable for the dollars they receive from Washington?

    But President Obama’s approach encourages states to increase spending on higher education and increases federal Perkins loan spending to $8 billion (from $1 billion, annually). So while President Obama might have “put colleges on notice” to reduce costs in order to have access to federal subsidies, his overall plan includes significant new spending increases—just the type of increases that have led to price hikes for the past several decades.

    The cost associated with attending college has exploded over recent decades. Since 1985, the cost of attending college has increased 439 percent. And continual increases in federal subsidies have not alleviated the problem. Pell Grant funding has increased 475 percent over the same time period. The University of Virginia’s Keith Williams writes: “Ironically, these financial concerns come at a time when the cost of basic knowledge is lower than ever before.” And as Heritage’s Stuart Butler writes in National Affairs:

    If this transformation does come to pass, it could have profound and beneficial implications. It could significantly increase the international competitiveness of American workers in a world in which we need higher skills and productivity to compete. It could sharply improve the employability of those on the bottom rungs of America’s income ladder, giving them the tools they need to move up. And it could do much to restore the American Dream for those who have begun to believe that opportunity in this country is disappearing. In other words, such a change could hardly come too soon.

    Down the road, it’s entirely possible that students could earn a college degree of comparable—or even better—value for one-tenth of the current price. But it won’t be price controls from Washington or more federal subsidies that improve quality or lower costs. It will be the growing online learning industry coupled with the innovation of the free market, which has worked to reduce costs and improve services for every other sector of American life.

    Posted in Education [slideshow_deploy]

    3 Responses to Markets—Not Price Controls—Will Reduce College Costs and Improve Quality

    1. Bobbie says:

      What a terrible, terrible America. Where those in positions become a majority motivated only by money and social control, not productive or sincere in America's expectations, in what they're doing. The tools necessary comes personally through the instructors or professors without greed or the influence of government or UNIONS!

      America needs professors and Instructors who are sincere to inspire productive members of society. It isn't working in the government run and or subsidized facilities… get rid of the fed control and If the interest of the service isn't there or worth it or implies danger to society, neither is the money. Market consumer control works every time. No idea of feds is needed and any idea of feds leads to increase costs, complications, crisis, corruption and control.

      Let logic dictate, not government! Stop forcing sacrifice on us for the high pay that's proof is worth much less to nothing. Where no negotiation is fair since union takes full reign and the tax payers have no defense where it is unjustifiably put on the tax payers without defense. Let the market determine the worth, not unions, government or the staff themselves…

    2. Milan Moravec says:

      UC Berkeley (UCB) pulls back on admission offers to California residents. Chancellor Robert J Birgeneau displaces Californians qualified for public Cal. with a $50,600 payment from foreign students. And, foreign student tuition is subsidized in the guise of diversity while instate student tuition/fees are doubled.

      UCB is not increasing enrollment. Birgeneau accepts $50,600 foreign students and displaces qualified instate Californians (When depreciation of assets funded by Californians are in foreign and out of state tuition calculations, out of state and foreign tuition is more than $100,000 + and does NOT subsidize instate tuition). Like Coaches, Chancellors Who Do Not Measure-Up Must Go.

      More recently, Chancellor Birgeneau’s campus police deployed violent baton jabs on students protesting Birgeneau’s tuition increases. The sky will not fall when Birgeneau and his $450,000 salary are ousted. Opinions make a difference; email UC Board of Regents marsha.kelman@ucop.edu

    3. feifanchang says:

      Totally agreeing with the concept.
      Well written article post.
      thanks

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×