The Coming College Divestiture

Thirty years ago, William J. Bennett became Ronald Reagan's second Secretary of Education. He succeeded Terrell Bell, whose major accomplishment was issuing the landmark 1983 report, A Nation At Risk, which decried "a rising tide of mediocrity" in the nation's elementary and secondary schools. Though a fundamentally decent man, Bell was not a reformer. Reagan pledged during his 1980 campaign to abolish the U.S. Department of Education. Bell never really had Reagan's ear and was shown the door after the president was re-elected.

Bennett, now a talk-radio host, was a writer, political philosopher, and, when nominated by Reagan, head of the National Endowment for the Humanities. Within days of taking office in early 1985, Bennett caused a major uproar by suggesting that perhaps too many college students were - in today's colorful phrase - coddled. They might even be lazy.

Bennett proposed student aid cuts and prioritizing federal financial assistance to poorer students. Whereas Bell was mild-mannered and avuncular, Bennett went for the jugular. Some families, he said, might have to "tighten the belt even further." As for the students, his approach "may require from some students divestiture of certain sorts: stereo divestiture, automobile divestiture, three-weeks-at-the-beach divestiture."

The education establishment (which Bennett repeatedly called "The Blob") responded with outrage. But Bennett knew what he was doing. He wanted to get the country's attention and mobilize public support for structural reforms that would strengthen our postsecondary-education system.

Bennett knew that banks participating in the student loan program did so thanks to generous interest and special allowance payments, in addition to the government's default guarantee. Defaults were rising sharply for taxpayer-guaranteed student loans, and Bennett was determined to eliminate the system's bad actors. If students wanted taxpayer subsidies, then they might have to adjust their lifestyles accordingly.

Bennett considered a high student loan default rate a proxy for a school's quality. If default rates were high, quality and completion rates were usually low. The default fault, however, did not lie entirely with the students; a high default rate often indicated that schools were ripping them off, pocketing the loan and grant money, and not delivering an education that translated into employment. Under these conditions, the taxpayer subsidies and guarantees should disappear - and so should those schools.

Bennett's student loan default initiative was a huge success and was continued by both the George H.W. Bush and Bill Clinton administrations. Default rates dropped, and many poorly performing schools closed. Now, however, almost 20 years later, more troublesome problems have emerged: defaults are rising again, along with overall postsecondary-education costs. Students now owe roughly $1.3 trillion in student-loan debt, a stunning figure that exceeds American credit card debt.

If Bennett were Education Secretary today, he'd possibly call for another "divestiture." But this time, I suspect that he would see the students as the principal victims. His target now would be the institutions - and the people who run our colleges, universities, and proprietary schools. They have created a system in which postsecondary-education spending between 1982 and 2012 rose twice as fast as health care and four times as fast as the Consumer Price Index.

Many factors explain this unsustainable explosion of postsecondary spending, but spending sprees at too many of our postsecondary institutions clearly have jacked up the costs for students and parents. In addition to more campus buildings and administrators, unbridled spending has funded amenities that are much closer to country clubs than college campuses. For example, we find a plethora of administrators with six-figure-plus salaries; elaborate student unions; posh dining halls; athletic programs and facilities heavily subsidized by student tuition; concierge facilities; and state-of-the-art recreation centers with rock-climbing walls.

The escalating costs have finally awakened the American public. Students and parents are now asking more probing accountability questions about all of this spending, especially when there are very few quality indicators commensurate with the spending inputs.

Given the spending and cost increases, what are our children actually learning? As Richard Arum and Josipa Roksa state in their eye-opening book, Academically Adrift: Limited Learning on College Campuses, the short answer for many is "not much," as today's students devote relatively little time to reading, studying, and preparing for class. Moreover, many college and university leaders are reluctant to agree to assessments that would report on the value-added of their institution's teaching efforts.

The combination of unsustainable price inflation, global competition for students and faculty, and new, cheaper technologies for delivering classroom instruction is upending the existing postsecondary education business model. Soon, the current prevailing belief that college and university presidents should devote their time to courting donors who will sustain and expand a brick-and-mortar campus may neither be achievable or even desirable.

There are signs that change - even real divestiture - is coming. Purdue's president, Mitch Daniels has frozen tuition, as has Ohio State University's Michael Drake. The University of Wisconsin's Milwaukee campus, which faced declining enrollments, made millions of dollars in budget cuts and is reportedly considering increasing faculty workloads and merging several schools and colleges from 14 to six.

At Georgia State University, several administrative positions have been consolidated, and the restructurings have actually helped increase the school's six-year graduation rate. Brooklyn Law School has reduced its tuition and committed to refunding 15 percent of total tuition if its graduates have not found a job within nine months after receiving their diplomas.

U.S. News & World Report observed on September 17, 2015, that many colleges "seek to reduce sticker shock by slashing tuition more than 40%." The column also noted that "[s]ome colleges are lowering their tuition, as families are eliminating prospective schools based on price."

The new focus on costs, along with other disruptive forces such as competition and new technology, make change desirable, even inevitable. These pressures are here to stay, and the people who govern and manage our postsecondary institutions, like Bill Bennett 30 years ago, should embrace, not dismiss this new age of divestiture. For public universities, the customers are beginning to demand it, and very soon the taxpayers, to whom those universities are ultimately accountable, will expect it.

Charles Kolb served as Deputy Assistant to the President for Domestic Policy from 1990-1992 in the George H.W. Bush White House. He was president of the Committee for Economic Development from 1997-2012 and now serves as president of Partners 4 Affordable Excellence @ EDU.