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Originally published Wednesday, October 2, 2013 at 4:28 PM

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Guest: Education public option won’t help rising costs

While it’s tempting to assume that tuition-free public colleges would solve our higher-education problems overnight, merely moving resources around is no panacea, writes guest columnist Andrew Kelly.

McClatchy-Tribune News Service

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SKYROCKETING college tuition threatens educational opportunity in America.

While median household incomes have shrunk since the economic crisis, published tuition at public colleges has jumped 25 percent since 2008, largely in response to state funding cuts.

Net prices — what students pay after grants and scholarships — have not risen as quickly thanks to a one-time, unprecedented increase in Pell Grant spending. But with income and tuition moving in opposite directions, students increasingly face a bleak choice: Take on crippling debt or forgo college altogether.

Some say the solution is to create a “public option” for higher education — to reallocate existing federal student-aid dollars toward a European-style system of free public colleges.

In a recent book, University Council-American Federation of Teachers President Bob Samuels argues that we could pay for a public option by directing federal student-aid investments to public campuses and requiring those schools to focus resources on instruction.

While it’s tempting to assume that tuition-free public colleges would solve our higher-education problems overnight, merely moving resources around is no panacea for rising costs and low rates of student success.

First, a public option would change who pays for higher education, not necessarily how much it costs to provide it.

Economists argue that traditional higher education is like other service industries: Because the product entails interaction with highly educated labor in small groups, it is difficult to raise productivity. As wages rise, colleges must pay employees more even though their output doesn’t increase, leading to higher costs.

Simply shifting who pays the bill will do little to change this equation. So while existing federal and state investments might cover the cost of a public option today, those same sums won’t go as far next year or the year after unless colleges also make changes to their cost structure. Taxpayers would have to foot an increasingly large bill.

Second, it’s not clear whether a public option would automatically raise student success. Take California’s community colleges, which have the lowest published tuition in the nation — $1,135 in 2011-12 — and are essentially free to many students who qualify for Pell Grants.

A 2012 analysis by the Institute for a Competitive Workforce found that retention and completion rates across California’s community colleges were above the national average. But completion rates were even higher at two-year colleges in Wisconsin and North Dakota, where tuition is two to three times as high and Pell Grant recipients make up a larger percentage of enrollments.

The point isn’t that tuition prices don’t matter. These outcomes suggest pushing tuition to zero may not be a silver-bullet to lackluster student success.

Third, many consumers equate high tuition prices with quality. So even if there were a public option that costs nothing, many affluent families would likely still opt to send their kids to private colleges, leaving less-advantaged students in the public option. Increased sorting by income could further exclude lower-income students from the “peer effects,” an important part of educational quality.

Finally, a public option would crowd out innovations that emerge from private colleges.

Western Governors University, Southern New Hampshire University, Excelsior College in Albany, N.Y., and Capella University in Minneapolis — all private — are perfecting competency-based models where students get credit based on what they know rather than how long they sit in class.

And upstart online-course providers like StraighterLine, Udacity and Coursera allow students across the globe to access low or no-cost courses. A public option might weaken demand for those products and dampen the pace of change.

Solving the college-cost crisis will require fundamental changes in cost structures, not just tuition prices. Leaders need to foster competition across all types of providers, not create a public monopoly.

Andrew P. Kelly is director of the Center on Higher Education Reform at the American Enterprise Institute:

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