Published in The Tennessean, Sunday, October 30, 2011
by Richard J. Grant
The Obama administration recently nationalized the college loan industry. Then this week the president announced an income-based cap on the repayment rates of student loans. After 20 years, any unpaid portion of the loan would be forgiven, that is, paid by taxpayers.
The net effect of this policy will be to encourage disproportionately those students who are least likely to benefit either themselves or taxpayers in the pursuit of higher education. The most heavily subsidized students will be those who enter the lowest value-adding professions.
In the world of educational subsidies, higher education has always offered the lowest returns to taxpayers. This effect is merely exacerbated by the involvement of the federal government. But none of this matters to those who know that the real name of the game is No Vote Left Behind.
In contrast, some state governments have been moving their educational policies toward greater efficiency and better outcomes. After more than a century of increasing state involvement in schooling, they are acting to benefit from decentralized decision-making and the freedom to choose in education. That century of experience has demonstrated that governments are not particularly good at education. They are not even good at picking winners in vocational training.
Perhaps the kindest explanation for why governments got involved in schooling was to ensure that all children, regardless of family circumstances, were introduced to reading, writing, and arithmetic. This could easily be organized at the local level. But as the curricula grew more ambitious, and providers saw gain in political organization, the spending power of state governments was recruited.
The trend toward school choice for government-funded students reflects the recognition that governments have a knack for raising funds but a poor record in running schools. When states such as Indiana, Wisconsin, Ohio, and Florida introduced school voucher programs, they empowered families to find and select their own educational opportunities. The state got out of the way except to ensure adequate funding and the prudent use of those funds.
In Tennessee, State Senator Brian Kelsey is sponsoring a bill called the “Equal Opportunity Scholarship Act,” which would give low-income families the power to send their children to the schools of their choice. Students in the four most populous counties would have available to them vouchers amounting to half of what the state and local school systems would have spent on them. In essence, these are scholarships that can be spent at any approved private or government-run school.
The effect, when tried elsewhere, has been improved student performance. When families are free to choose, and schools are free to compete, the schools have an incentive to be better and the families get to choose what works best for them. To attract and better serve their students, the schools will necessarily direct their resources to those uses that best serve their needs.
School choice depoliticizes the school environment and reduces the need for cumbersome administrative structures and bureaucratic assessment systems. It would also reduce the need for state and local governments to be involved in the expensive construction and management of school grounds and buildings. And it works better when more students are eligible.
Ironically, the acceptance of freedom in education will require education. Special-interest groups, such as teachers unions, will argue against any change that allows families alternatives to unionized schools. Families have something to teach the teachers.
Richard J. Grant is a professor of finance and economics at Lipscomb University and a senior fellow at the Beacon Center of Tennessee. His column appears on Sundays.
Copyright © Richard J Grant 2011