Posted by: Haris H. | May 12, 2009

Cutting Out Middlemen

USA Today recently editorialized on plans to scrap the Federal Family Education Loan Program (FEEL) and replace it with direct government loans. (For more information on FEEL, read this short blog post.) Though we agree with eliminating FFEL, we disagree with the editorial’s prescription for higher education financing:

A government-run student loan program could also help Washington deal with tuition. By going through intermediaries, the government loses much of the leverage it could have over universities to control costs. … As the saying goes, if you want something done right, do it yourself. Sometimes that even applies to government.

One obvious oversight that the editorialists forget is that the government is itself an intermediary. If the best prescription is to cut out all middlemen, wouldn’t the most logical conclusion be to eliminate the government’s role in education altogether?

More to the point, though, the authors’ proposal for a government-run student loan program runs counter to what makes America’s colleges and universities among the best in the worldcompetition and innovation. While we are firm believers that the world of higher education could be much improved, it’s obvious that competition between colleges has helped produce innovative teaching techniques, better uses of technology in the classroom, and leading academic research.

These gains have been possible in large part because schools are free to experiment with new approaches, keeping those that work and discarding those that don’t. Differentiation among colleges has allowed the U.S. to more adequately meet the diverse needs of its students. Whereas some schools succeed by specializing in certain fields, others find success by offering a breadth of options. Some schools exist as low-tuition commuter schools for working students, while others have expansive campuses with dorms and hundreds of amenities. These differences ensure that all students can tailor their education to their wants and needs. Though competition can be problematic, it also has motivated U.S. schools to improve their final product.

In contrast, government approaches tend to be “one size fits all,” and allowing government to use its “leverage” as USA Today suggests may stifle competition and innovation that makes colleges better. Rather than relying on a universal government policy to reduce costs and improve product, we think it makes more sense to empower those who foot the bill – students and donors. Let colleges continue to compete and innovate as they seek to attract students who, funded by donor contributions, can choose just the right education experience for them.

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