November 2, 2014

I worry about American higher education, not only as the president of a university but also as a citizen. I worry that too many people – from pundits to politicians to philanthropists – are pressing policies that sound attractive but will do great harm both to the quality of what our colleges and universities do and to the equality of meaningful access for talented citizens born in the wrong zip code. I worry that higher education, long the great instrument of upward mobility, will become the tool of social stratification. I worry that leaders who avidly seek seats for their own children in the nation's best (and often most expensive) schools, colleges, and universities (from $30,000 kindergartens to $60,000 colleges) will rest easily having unintentionally relegated the children of the poor, the middle class, the uninformed, and the unconnected to colleges or universities to which they never would send their own progeny. I worry that this increasingly evident disconnect will exacerbate what President Obama has called “the nagging feeling” among the poor and the middle class that “the deck is stacked against them.”

In this Reflection, I try to highlight some of these issues and offer an alternative way of thinking about these problems. After outlining some of the major challenges facing American higher education, I advance suggestions to help address those challenges and to shape a more effective system. What I propose builds upon the extraordinary institutional diversity within the American higher education sector and is designed to increase the chances that students will attend the college or university that matches well with their capacities and desires.

To enable students to identify the right college or university, I suggest that we provide key information (both standardized data and important qualitative elements verified by peer review) and, where necessary, counselling to guide prospective students and their families through the information and the application process. To help ensure that, once matched properly, the students can afford to attend the best school for them, I propose that we offer income-contingent loan repayment plans to help reduce the burden of debt. These suggestions, I argue, offer a way to provide each capable student with the college or university education that gives him or her the best chance at a joyful, productive, and fulfilling life. And it provides America the educated citizenry it needs as we enter the knowledge century.

I. The General Context

Most Americans know that the great societies of the future will be driven by ideas and creativity, and they know that the keys to building a society driven by ideas and creativity are found in colleges and universities. Put another way, they know that it is important to make a quality higher education available to all who can seize its wonders, and who, having seized those wonders, can drive a modern economy.

Even in these times of austerity most of our leaders at least pay lip service to the proposition that we must educate our people well and that we must find a way to achieve excellence in the education we offer our citizens. Yet many who shape our policies and many in the commentariat often urge approaches that will compromise the quality of American education. They claim they want a quality education for all; but, as in so many areas, they urge a result without supporting the investment that is its predicate. Instead, they assume away the fiscal challenge by suggesting that the cost of higher education can be reduced significantly without compromising quality (though they offer no evidence that this can be done).

The disjuncture between the widespread recognition of the importance of investment in education and our nation’s failure to take serious action to make those investments is, in a way, unsurprising. We increasingly are a society in need of immediate gratification (thus, we borrow to enhance our lives today and ignore the consequences of that behavior on our children and our grandchildren) and we are less and less a society willing to plant trees (or preserve existing ones) under which future generations will sit. Moreover, it is our sorry lot that we have created a political climate that rewards those who offer slogans and simple solutions. We have developed an allergy to nuance and complexity; serious conversation is in short supply.

Now is the time for serious conversation about our colleges and universities – informed conversation that moves beyond facile slogans and headlines. Before it is too late. The quality of our future depends upon it.

II. The Status Quo: Excellence Built on Diversity

For the moment, the best of American colleges and universities are the world standard. As problematic as rankings are, it still is significant that for many years and across various measures the top American universities have dominated. For example, Shanghai's Jiao Tong University compiled data emphasizing research and natural science achievements: American universities occupied eight of the top 10 spots and 30 of the top 40. A second ranking, Rating of Educational Resources, featured an expert evaluation of academic performance, research performance, faculty expertise, resources available, web presence, and international activities: American universities placed in seven of the top 10 and 27 of the top 40 spots.

Another indicator of the general strength of American colleges and universities is their capacity to attract talent. In academic year 2012, there were over 120,000 international scholars teaching or researching in the United States. And the number of international students studying in the United States has risen steadily since it dipped a bit after 9/11; in 2012 such enrollment was more than 40% higher than in 2002.

Of course, not all American colleges and universities are excellent; indeed, some are mediocre or downright bad. This is especially the case in the for-profit sector where the education provided frequently is poor, completion and placement rates are shockingly low, and students often are left with debt but without the degree for which it was to pay. Still, the serious problems of the for-profit sector notwithstanding, it must be noted that mediocrity is not limited to that sector; there are a significant number of not-for-profit schools that underperform as well.

I will not defend colleges and universities that are not providing value for the tuition they are given. And I believe that our higher education policy must be structured so as to penalize those who are not performing, and reward those who are. I applaud performance-based funding, so long as the criteria of performance are carefully constructed. I must note, however, that there are signs that we should worry about the position of our higher education system and the quality of the education we are providing our citizens, even if every low-performing college and university were closed.

Economic powerhouses like China, India, and the Gulf States have developed a keen interest in improving their higher education systems. China, for example, is investing aggressively in its universities; and India recently announced that over the coming five years it plans to build a dozen major new universities. Countries that traditionally have sent their intellectual talent to the United States now strive to keep it at home, and they are creating universities that they hope will both do that and also attract talent from around the world. Worldwide, higher education systems modeled explicitly on America’s are being developed. Soon, large numbers of scholars who once automatically would have come to the United States will have attractive options elsewhere – for many, in their own countries. It is conceivable – indeed, likely – that a change in the flow of talent will occur and that this change will rebalance the world of higher education.

At the same time, America's recent record in delivering a post-secondary degree of any kind (let alone in science, technology, engineering, and math) to its own citizens is a poor one. Ten years ago, the United States led the world in the percentage of its population aged 25 to 34 with at least one such degree; today, it ranks fourteenth. In America, 42% of people in this age group have one of these degrees, compared to over 60% in Korea and over 50% in both Japan and Canada. Worse yet, the demographics of America's current population combine with the problems that haunt our primary and secondary school system to portend, absent major intervention, a deterioration in our relative position: simply put, the fastest growing segments of our population are the segments we as a society fail to move through high school to a college or university degree.

Some cast the challenge as primarily (or even exclusively) a pipeline issue. On this view, we simply must move more and more of our young people through to a high school diploma and, then, on to college. But increased attainment is a necessary but not a sufficient condition to creating the educated citizenry America needs for the decades ahead; focusing simply on the numbers who attain degrees is a mistake unless we assure that the degrees obtained are quality degrees suited to the students who obtain them.

Around the globe, policymakers are discussing the “massification” of education – how we can bring education to the world’s billions. The American version of this conversation is about access and attainment. My fear, however, is that these conversations will lead inexorably to a reductive trend toward simplistic, quantifiable, and easily achievable goals. This, in turn, will produce the stratification of education – with only the well-informed, the well-connected, and the well-resourced receiving the highest quality education and with countless students who could thrive and blossom (if only they were given the chance) relegated instead to the new, larger “common” pool, their special talents underdeveloped or lost. To avoid this result, we must give careful attention (beyond simply increasing the numbers moving through the system) to ensuring that students obtain quality degrees that match their needs and desires.

This is a critical point. Many who are shaping the conversation about higher education talk as if all college and university degrees are the same. They embrace what I call the fungibility fallacy. Although they, like most people, know instinctively that homes, cars, vacations, or even widgets are not equal and that variations in the price of such items generally reflect quality differences, they have shaped the conversation on higher education as if all degrees are the same. On this assumption, the easiest way to achieve the important goals they set on access and attainment (“massification”) is to settle for (or, at least, to convince most others to settle for) the least expensive option – in effect, to hollow out the degrees obtained by most students (excepting, of course, students from the families of those in the know), reducing their content to the least common denominator.

But here, as is so often the case, the easiest way is not the wisest way. Though we cannot afford to lose a single mind, there is strong evidence that the children of those who are less connected, less informed, and less resourced tend to choose schools that have less to offer them than schools chosen by similarly qualified children of parents who are better connected, informed, and resourced. In this way, education too often functions as a tool of stratification. Thus, though I will be among the first to celebrate if we achieve President Obama’s laudable goal that by 2020 60% of Americans in the 25 to 34 age group will have post-secondary degrees (recall that the number now is 42%), I fear that there will be enormous pressure to reach that goal by compromising the quality of the degrees conferred and relegating worthy students to an education that is less than they merit – to change not attainment but the appearance of attainment. The real challenge should be to provide significantly greater attainment (both greater access and greater completion) while both maintaining existing quality and matching each student with the option appropriate for him or her within a remarkably diverse higher education system.

III. Matching Students with the Right Educational Pathway

Not every student – not even every high school graduate – should pursue a college degree. People are different, and so are their capacities, passions, and interests. Some do not have the intellectual capacity to do college work; others lack the desire or the discipline to do the work; still others have a passion that takes them in a direction that requires different training. It serves no useful purpose to entice everyone into college, and it is subversive to dilute the content of a college degree so that the recipients of that degree can be counted as graduates in some politically inspired statistical contest.

There are, of course, millions (not all of whom are below 20 years of age) who should go to college (or to a college more suitable to their needs) who are not doing so. This is especially lamentable, since the lives of these students could be greatly enhanced with tools that are already available: information, guidance, motivation, and resources. We must use these tools to match each potential student with the tertiary education that is best for him or her.

Let me make clear an assumption that lies beneath this claim. At least by the time students approach higher education, their individual aptitudes, passions, talents, and needs vary substantially – whether viewed through the eyes of the student or through the eyes of a society seeking to maximize the capacity of its citizens. We therefore would be very wrong to assume that a particular version of a college is “best” for all. One of the great strengths of American higher education is its diversity of form – community colleges through research universities, public and private, faith based and secular, liberal arts and professional, and so on. At its best, the system is a symphony orchestra of opportunities, with its elements clearly recognizable by prospective students who make informed choices about which instrument is meant for them.

Over 150 years ago, John Cardinal Newman, in a series of lectures, outlined the basic “idea of a university” as he saw it. In his view, there was a single ideal: a university education should pursue knowledge for its own sake; it should feature a mentoring relationship between professors and students; it should cultivate generally the ways of the mind and critical thinking in particular, with little regard for vocational preparation; and it should build character.

Twenty years ago, Jaroslav Pelikan, in homage to Newman, described the university which (in Pelikan’s view) Newman would have created if he had known of the modern research university: it was a university that placed the key elements of the general education Newman had envisioned in the context of research on the frontiers of knowledge, integrating even undergraduates into the processes of idea creation through meaningful contact with those doing the research. This was a significant addition to Newman’s ideal; but, as magnificent as it is, it describes only one element in what is and should be an increasingly complex higher education picture.

The structure developed fifty years ago by Clark Kerr for the University of California system provides a starting point for the picture I envision: the research universities provide undergraduate, graduate and professional education and are the locus of research activity, which itself provides a context (both formal and informal) for all levels of instruction; the comprehensive universities focus on undergraduate education, even as they offer some graduate education; and the community colleges offer academic and vocational instruction to students (including older students) through the first two years of an undergraduate education (culminating in Associate Degrees) and they provide workforce training courses (culminating in certificates).

Today, we supplement Kerr’s three-part structure with both technical colleges (for example, in engineering) and specialty colleges (for example, in the performing arts), each of which might offer programs from the most basic to the most advanced, and each of which might feature research as well as instruction.

Then, into this differentiated picture, we add private universities – some with missions that mirror precisely the structure just described (thus fitting seamlessly in those sectors), some with added differentiating elements ranging from academic structure (like NYU’s focus on preparing students to lead a globalized world) to environmental elements (like faith-based colleges or universities).

Finally, we must add the various possibilities created by the introduction of technology both as an independent medium (with full degrees offered online) and as an element of each of the various models already listed. In this view, it is worth noting that a recent study by McKinsey reports that more than 30% of American college and university students already are taking at least one course for credit online. Whether supporting independent programs or adding an element to existing ones, technology is and will be an important feature of the emerging higher education landscape: when MIT offered its first online course (which did not carry credit at MIT), the course attracted more students than the total number of living MIT graduates.

It is largely through its extraordinary diversity of forms that the American higher education system is capable of addressing very well the student as an individual. And this diversity of educational possibilities fits well with the needs of a diverse student population, ranging from the “typical” relatively young student who moves to college soon after graduating from high school to the increasingly prevalent older students who come to college later in life. In all cases, though, we should not force students to be too focused (or professionally tracked) too soon. For many (especially young students), a broad undergraduate education is best or a mixture of professional studies with a liberal arts core is the right choice (at NYU, all of our undergraduate professional school students, from business to dance, take a liberal arts core curriculum). Strong, intellectually flexible undergraduate preparation equips students for an unpredictable world, a world which the most broadly prepared among them will shape.

Ideally, each student is matched with the learning environment best suited for him or her, and each student goes as far down the path of learning as his or her capacities permit. Both the prospective students and society have a significant interest in this matching process. Americans love lists and rankings; we yearn to know which college or university is “number one,” as if colleges and universities were like their sports teams. God forbid! The fact is that there is no single “best college or university.” Indeed, a college or university that is just perfect for one student could well be a disaster for another; and this proposition encompasses much more than differences in the academic specialty of the school (an aspiring mathematician should not go to Juilliard, just as an aspiring dancer should not go to Cal Tech), extending to more subtle factors such as the ethos of the school (competitive or cooperative), the mix of its students (graduate or undergraduate, older or younger, working or not), its setting (urban or rural), its size (large, medium, or small), or myriad other factors. So, the key is matching students with the environment in which they will thrive. The informed and the connected know this, as illustrated by the ritual, well-established in many social circles, of touring campuses as the application process begins.

Unfortunately, there is evidence that America generally does an unacceptable job matching students with the higher education environment appropriate for them.

First, there is powerful evidence that we are allowing high-talent, college-ready students from lower socio-economic groups to slip through the cracks – that is, to see high school graduation as the termination of their time in school. Thus, a longitudinal study by the Education Trust, “Falling Out of the Lead” (2014), reveals that, of the 60,000 students who scored in the top 25% in the nation on standardized math and reading assessments and who come from families in the bottom socio-economic quartile nationwide, 23% did not even take the SAT or ACT exam and 22% did not enroll in college (compared to 5% of similarly accomplished students in the top socio-economic quartile).

Then, even for those students from lower socio-economic groups who do go to college, “undermatching” occurs. In Crossing the Finish Line: Completing College at America's Public Universities, Bill Bowen, president of the Mellon Foundation and former president of Princeton, (writing with Matthew Chingos and Michael McPherson) demonstrated that students from the top socio-economic quartile tend to be “overmatched” with colleges or universities (that is, they attend schools that offer a more advanced program than they merit, all things being equal), but that students from the lower socio-economic quartile tend to be “undermatched” (they attend schools that offer a less advanced program than they merit). Moreover, when students are “undermatched” with a school, they tend to perform less well than they would have performed if they had been properly matched. They miss out on key programs, they are not pushed by a peer group of comparably gifted students, they become bored by the lack of challenge, and so on.

As President Bowen put it in his 2012 Tanner Lecture at Stanford:

The serious consequences of this persistent pattern of undermatching are related directly to the by now well-documented empirical relationship between completion rates and the selectivity of colleges and universities. Even after controlling carefully for differences in the qualifications of entering students, evidence shows that students who attend institutions that enroll high-achieving students are themselves more likely to graduate, and to graduate in four years, than are comparable students who attend less selective institutions. This finding may seem counter-intuitive at first – shouldn’t it be easier to graduate from less selective (and presumably less rigorous) schools than from those that are more selective (and more rigorous)? But it is correct. Presumably peer effects, differences in expectations for graduation, opportunities to work closely with faculty, and institutional resources such as libraries and laboratories are very important.

He concluded:

Where one goes to school is by no means the “be all and end all,” but it can be important. I am reminded of an experience I had in the aftermath of the publication of the book Derek Bok and I wrote on affirmative action. I was at a gathering in Washington, DC when a white woman stood up and said that surely there are many fine schools in America, and she couldn’t understand why minorities make such a fuss about getting into a place like Stanford (yes, that was her example). An African-American woman stood up and replied: “Wait a minute. Are you telling me that all those white folks fighting so hard to get into Stanford are just ignorant? Or, are we supposed to believe that attending a top-ranked school is important for the children of the privileged but shouldn’t matter to minorities?” There was dead silence. Interestingly, evidence in The Shape of the River shows that the gains associated with attending the most selective schools are, if anything, greater for minorities.

Allowing significant numbers of high-talent, college-ready students from low-income families to miss college altogether is a national tragedy. And undermatching, combined with further stratification of American higher education (through the emergence of stripped down, low-cost, and questionable quality programs) is an added threat to what many people seek in a college degree: social mobility and stable, strong financial futures.

In a way, proper matching in a diverse system is the obverse of the fungibility fallacy: it deploys the different forms of higher education in service of maximizing talent development. Proper matching should be a primary concern in public policy conversations about higher education; however, the current conversation, so often embracing as it does the fungibility fallacy, proceeds as if we will have succeeded so long as a student obtains a degree.

Paying serious attention to matching students with the best school for them means attending to four distinct factors: we must make sure, first, that there is a broad range of easily available, reliable, and transparent information upon which applicants can base their selections; we must make sure, second, that they have capable assistance in navigating the information and the application process; we must make sure, third, that they perceive the importance of matching themselves with an educational environment most likely to develop their talents; and we must make sure, finally, that the resources are available for them to seize the opportunity that is offered.

IV. Providing the Information to Facilitate Matching

Any sensible system seeking to facilitate matching prospective students with the higher education most likely to maximize their potential would offer clear, consistent, and verified data on a list of standard, objective matters of universal interest: tuition, net tuition, course offerings, class sizes, faculty/student ratios, faculty awards, student profile (SAT or ACT percentiles, standing in high school class, gender, nationality, race, and so on), placement ratios (for six months, a year, and five years after graduation), student satisfaction, income data on graduates in various programs (one, five, and 10 years after graduation), and so on.

There is much discussion among policymakers about making this kind of data available in standardized, easily accessible formats. And, as a general matter, that is good. But if this is the only data available, there is danger that an inaccurate picture will emerge and that this incomplete picture would be as bad as (or perhaps even worse than) none at all. If we are not careful, students and those who help them make decisions about their educations will think they have the data relevant to the choice they are making when they do not; and perverse incentives will be created, causing some who run colleges and universities to emphasize the elements that are captured in the data chosen for collection at the expense of critically important but difficult to measure elements.

Take just one example. President Obama and Secretary of Education Arne Duncan have announced that they will set in motion a program which by 2018 will rank colleges and universities by the “rate of return on investment” produced by their degrees. At first glance, this seems eminently reasonable; but, unless the “ranking” is carefully crafted (and I am not certain it can be), the unintended consequences would far outweigh any advantage provided by the “information” obtained – which in fact may be data that is inherently misleading.

Presumably, the “return” that would be measured under the President’s proposal will be calculated by examining the income of graduates. Put aside the difficulty of deciding what overall number (disaggregated or aggregated) would be tagged to a university like NYU (which has undergraduate programs ranging from business to dance, from engineering to philosophy); the very notion of measuring the value of a degree in these terms would be rejected by the likes of Newman and Pelikan. And what are we to make of the fact that, in the 15 years following his graduation from Columbia College and Harvard Law School, the rate of return on President Obama’s education was negative? Do we want to transmit to future generations the message that vocations producing less favorable “rates of return” (from elementary school teaching to the ministry, from community organizing to music) are less worthy? Parenthetically, the fact is that by age 40 the average classics major earns more than the average accounting major. The point here is not that data is bad, but that some data (at least if not properly contextualized) can mislead prospective students in serious ways and can drive colleges and universities to adopt undesirable policies. And, in this particular instance, the task of proper contextualization once the data is produced will be monumental (if at all possible).

One important element of proper contextualization is the availability of a broad spectrum of information (I call it a “dashboard”) beyond the obvious easily measurable items. Fortunately, interesting models already are available that illustrate how we could capture some of the more difficult-to-measure elements that nonetheless should be available to students as they choose the best place for themselves.

One such system, familiar to architects and builders, is the LEED system of rating buildings for environmental quality. In this program, builders voluntarily choose to meet best practice standards at a certain level of quality (determined by an independently developed and informed point system), and a building is rated platinum, gold, silver, or bronze using these standards. This verified rating can then be advertised publicly to attract to the building those who care about the environment.

The Jed Foundation, a leader in fighting the plague of student suicides that afflicts American colleges and universities, has developed a similar system to certify quality student wellness programs on campuses. In its first stage, it offers simply a “seal of approval” to schools that submit programs meeting a minimum standard experts in the field have developed (30 schools have been certified). In a second stage, it too will offer various “levels” of certification (platinum, gold, silver, bronze) as does the LEED program. Schools which meet the “Jed Standard” can indicate that in admissions materials, thereby signaling to prospective applicants that they care about and commit significant resources to student wellness.

Similar systems could be created for dozens of activities potentially important (or unimportant) to prospective students. And independent peer panels could validate submissions by institutions interested in featuring a particular characteristic – rating them platinum, gold, silver, bronze, or unworthy of certification. The school then could use the collection of such ratings it creates to paint a dashboard picture of itself to inform student choice. Presumably no school (or very few schools) would secure ratings in all possible categories; and the absence of such a rating could be taken to indicate that the school does not claim the characteristic as a key descriptor of what it takes seriously. In any case, combined with a fairly obvious list of numerical data (like those listed above), schools could paint a fairly accurate picture of their characteristics and priorities, and students could determine whether those characteristics and priorities matched with their needs and interest.

On this system, for example, NYU no doubt would feature (in addition to the obvious fact that it is a major research university in New York City) strong ratings for its study away programs, its student wellness systems, its comprehensive career placement service, its extensive internship offerings, and, perhaps surprising to some, the balanced approach of its athletic program (Division III varsity competition against other strong academic schools committed to building sports programs that emphasize academics). Students interested in these characteristics would be drawn to it; students who did not see themselves needing or utilizing such opportunities would think twice about coming to NYU, because NYU’s tuition would nonetheless reflect the cost of the listed programs.

I would add one additional element: I would require, as part of the accreditation peer review process, that each school state its essential philosophy and purpose – its ratio studiorum – and how it aligns its various programs with that goal. As part of the periodic accreditation and peer review process, it would be asked to explain, with examples, how it drives the program of students toward its stated goal. The reviewers would audit the stated evidence as part of their visit and grade the institution (again, platinum, gold, silver, bronze, or failure). And this statement, with the grade, would be available to prospective students.

Armed with this information, a student could make an informed choice, at least narrowing the field of choices to a list of schools that would match well with his or her talents, desires and passions. Such a sifting process is routinely practiced by many students now – often with the aid of family, school guidance counselors, and hired experts. The less fortunate often do not know the importance of matching well and, still more often, do not have the capacity to access or decipher the information, even if they knew to care. Thus, if the information is to serve its purpose, some mechanism must be created to mobilize the interest and capacity of all students for using it to match well.

I would create an analogue to Teach for America to serve this purpose. Call it Guidance Counselors for America, a corps of recent graduates who would be available to encourage the use of matching information and to press the importance of doing so. They could assist students throughout the arduous admissions process.

The beginnings of such a program already exist and have proven successful. The College Advising Corps (CAC) places trained recent college graduates from two dozen partner institutions as full time college advisers in underserved schools. These advisers help students search for an appropriate college, complete admissions and financial aid applications, and take the final steps needed to complete enrollment. Because advisers are close in age and background to the students they serve, they connect with students in ways that others often cannot.

Since the program’s launch at NYU in 2011, cohorts of NYU graduates have dedicated two years after graduation to CAC service. The results have been outstanding: for example, in 2014, 84% of the students at NYU’s 16 partner high schools qualified for a free or reduced price lunch; yet, at two schools, 100% of the class took the SAT and at one school 98% of the class already has submitted college applications. In 2013 (the data for 2014 is not yet available), 81% of the students served by the Corps were accepted to at least one college. Indeed, the NYU CAC volunteers helped secure over $12 million in scholarships and institutional grant aid for their students.

Where it has been tried, CAC also has produced a significant impact on actual matriculation and persistence to degree. One partner high school experienced a 71% increase in college enrollment in just one year; at another, enrollment doubled. And, nationally, 74% of the enrollees served by CAC persisted through their sophomore year, far exceeding the national persistence rate for low-income students.

This proposal works; but, while CAC now has over 469 advisers in 484 high schools serving 140,000 students, the need is much larger. We need a national effort, fully scaling CAC, if we are to fulfill the potential of all of our citizens.

But we should do still more to increase the chances that every student can find the school that is right for him and her. So, in addition to initiatives like CAC that provide mentors, we should use technology and social media. The United States Army, at its website, features “Sergeant Star,” who guides interested potential recruits through the process of choosing a career in the service; it is quite sophisticated and could be emulated in the college admissions process. A national “chat room” about colleges could be created and made readily available. And a set of activities not so directly connected to “college admissions,” like aptitude correlated contests and games (chess, math, crosswords, and the like) could be used to spot talent that could be pursued through outreach programs. Every tool must be used. We cannot afford to waste talent.

V.  Facing the Cost and Price of Higher Education

Once the student is matched with a college or university that is well suited for him or her, and the school has ratified that decision by expressing its interest in the student through the admissions process, the price of attending the school becomes important. There is a lot of confusion about this topic, and, since a clear understanding is a necessary predicate to considering the issues involved, let me now offer a few words about the subject.

First, cost and price (the latter also known as tuition or the cost of attendance) are not the same and the distinction between them is important. Cost is the amount required to produce the education the school delivers; price is the amount actually charged to the student to pay in part for what is delivered. In most of American higher education (and, indeed, in most systems around the world) the cost of what is provided exceeds the price that is charged, with the difference made up through some sort of subsidy (in most cases from government, from an allocation out of the school’s endowment, or from current philanthropy). The notable exception is the proprietary (for-profit) sector for which the goal is to create a profit margin by keeping cost below price.

Second, it is in some ways inevitable in a functioning, modern, complex economy that the cost of the most comprehensive forms of a college or university education rises more rapidly than general inflation – indeed, that this is the mathematical outcome of a formula reflecting the impact of widespread technological advance throughout the economy on a high-talent service sector (an economist’s way of describing these comprehensive forms of higher education in business terms).

Two sophisticated formulations of this phenomenon are presented in the book Why Does College Cost So Much? and in the American Council on Education working paper The Anatomy of College Tuition. The essence of the argument is that the key components in a comprehensive college or university education at the highest level (one tailored for top students) are the quality of the faculty (students at the top of the talent pool should be taught by faculty who are drawn, at the very least, from the top of society’s talent pool) and the degree of student exposure to that faculty; consequently, the greater the quality of the offerings, the more it costs to sustain them. An obvious example is the increased costs associated with a lower faculty/student ratio.

True, even in the very best universities and colleges, technology can drive down some costs (certain courses might be offered largely online); nonetheless, as the cited works show in detail, in colleges and universities catering to the most advanced students and populated by the most talented faculty (who are involved, typically, in the most advanced research), technology adds to the cost, counterintuitive as that may be. For example, it is important to train our top students in the use of the very latest technological tools and it is vitally important to arm our best researchers with them; this causes a cycle of investment in new technologies on the affected campuses, an investment that drives up cost. So, at least at the best of our colleges and universities, technology is not a silver bullet that can be used to lower costs.

Third, the price of the education provided (specifically, the tuition or cost of attendance), on the other hand, need not rise. Indeed, even in the face of rising costs for the various components of a quality education, price can be suppressed either by introducing additional subsidies or by reducing the quality of what is provided.

Fourth, to the extent that the proposition about the inexorable rising cost of a quality college or university holds (and, as I say, the evidence for the proposition is very strong), an interesting trio of quality (translated as cost), subsidy, and price (tuition) rules: to maintain quality, either subsidy or price (tuition) must rise; to reduce price (tuition), either quality must diminish or subsidy must rise; to reduce subsidy, either quality must fall or price (tuition) must rise.

Fifth, the last three decades have seen a tectonic shift in the way our public policy views higher education, moving from seeing it as a “public good” (see, as examples, the GI Bill or the early versions of the New York State Regents Scholarship) to seeing it as a “private good” (students benefit, so they pay). The primary corollary of this has been a reduction in the public subsidy provided for higher education, and a concomitant cost shifting to individuals. This shift of policy combines with the upward pressure on costs to accelerate the rise in price (tuition).

Sixth, as in every sector, there are inefficiencies (that is, unnecessary costs on any standard) in higher education; anecdotes highlighting outrageous cases abound and often capture the conversation. It is common ground that all genuine inefficiencies must be eliminated or at least minimized, but our notion of inefficiency must not capture programs that genuinely increase the richness of a student’s roster of educational options or enhance the student’s flexibility. The general reality is that, because American higher education is highly competitive both internally and externally (other countries emulate American colleges and universities, not the reverse), our colleges and universities strive to be as efficient as possible. Steps must be taken to ensure this remains the case. Yet, as important as greater efficiency is and will be, even achieving maximum efficiency is unlikely to provide a significant brake on higher costs, at least in the most comprehensive of our colleges and universities.

Seventh, even in pursuing a college or university education, a given individual may be perfectly happy sacrificing elements of what normatively may be the most comprehensive college or university education in order to lower his or her cost of attendance (that is, because it has a lower price). Moreover, absent an external intervention (like a scholarship), even if not happy to do it, some will be forced by their financial circumstances to make that choice. We make such choices with most purchases and we do it often with our most expensive purchases like houses, automobiles, vacations, or appliances.

Thus, in the interest of lower price (cost of attendance), an individual student might well forgo schools with a richer curriculum, a lower faculty-student ratio, an extensive tutorial/mentoring ethos, a robust program of international experiences, a rich co-curricular program, a highly developed student wellness service, an extremely strong placement office, a particularly talented/diverse student body (the product of a careful admissions process and generous financial aid to other students), quality facilities (from labs to dorms to athletic facilities), and so on. For some students, some of these elements will be unimportant and, therefore, not worth the additional price involved.

However, some others may be forced by the higher cost of attendance to sacrifice elements they see as potentially important to their full development. We should worry about these cases. The children of those who need not worry about price rarely choose to sacrifice the quality of the education provided to save money. In New York, for example, many, having invested enormous effort in enrolling their children in K-12 programs that cost $35,000 a year or more, often spend considerable added money for tutoring and counseling services so that their children have the opportunity to choose a higher-price college or university.

And, finally, eighth. Especially in the knowledge century, society has a significant interest in maximizing the level of each and every citizen’s development. To that extent, we must strive to minimize the number of cases where a student is forced by price to accept the less than optimal development of his or her talent. This inevitably requires a subsidy to bridge the gap between the price (the cost of attendance) and the ability of the individual to pay for it; as tuition goes up, therefore, the subsidy provided must rise.

VI. A Special Word on the Role of Technology

As technology permeates our society – disrupting sectors as diverse as the newspaper/magazine/publishing industry on the one hand and the taxi industry on the other – many commentators argue that American higher education is caught in an “old model” and has not adapted to this new and very different environment. These commentators assert that the preeminence of American higher education is its weakness and that those in charge of our colleges and universities are complacent (like GM, Ford, and Chrysler in the seventies and newspaper publishers more recently) and bound to be outdone by foreign competitors or new delivery methods (the way Volkswagen and Toyota undid the American players in the auto industry and blogs and online journals have disrupted the business model of newspapers).

These claims are erroneous. Whereas the auto industry faced foreign competitors who, indeed, did have a better way, even the competitors of the best of American colleges and universities view them as having the better way. Moreover, the leaders of American higher education are anything but complacent, competition within the sector for talent (faculty and student) is fierce, and the impetus for innovation (not least because innovation attracts faculty and student talent) is very high. Complacency is the last thing one finds in the halls of academe. Indeed, whether through research on methods or the development of new delivery mechanisms, the major innovations in the application of technology to education have been spawned on the campuses of America.

There is no doubt that in the coming decades technology will play an increasingly important role at all levels of education, including higher education. In some areas, as in the general economy, it will help drive down costs (and this should be reflected in price); no doubt, some degrees will be offered wholly online at dramatically reduced cost and price. For some students, most notably older or working students, an online college degree may be the best match. As far as I know, nobody in higher education is resisting these truths.

That said, there are those – I among them – who argue strenuously that, as we embrace technology, we must take care to integrate it appropriately into our diverse higher education system and into our particular colleges and universities. Quality must be the lodestar: quality in context. And context matters.

There are advantages that no doubt will flow from the integration of technology into higher education: some courses will be enhanced by the introduction of technology before, during, or after a more traditional interaction between a professor and students; some courses will be supplemented with exercises and games made possible by technology; some courses, thanks to technology, will take place in multiple locations simultaneously or asynchronously, sometimes creating a richer curriculum by introducing dimensions or persons not otherwise available; and some courses, delivered primarily or even exclusively through technology, will introduce savings and lower the costs of delivering elements of a degree. Each of these developments is significant, adding to the quality of the educational product offered in some way. Some will lower costs; some will add costs, but the costs will be worth it, because the educational outcome is better and/or more widely available.

Perhaps the greatest immediate impact of technology (seen, for example, in the emergence of the massive open online courses or MOOCs) is the possibility of bringing education to vast numbers of people through the internet. It is here that attention to “quality in context” is important.

I am chairman of the President’s Council for the University of the People, an online university created and run by a visionary man, Shai Reshef. The University of the People admits any student who has a high school diploma, is fluent in English, and has internet access. The students take classes in relatively small sections, using open source material and peer-to-peer learning guided by volunteer professors; at the end of the course, a secured exam is administered; when the student completes the course requirements, a degree is awarded. Some schools already accept University of the People credits, and just this year the University was formally accredited by the Distance Education and Training Council. And, but for a modest (and waivable) exam fee, the education is free.

The first time I saw Shai present his university, a technology enthusiast who was moderating the panel exclaimed: “You are the future!” Shai wisely responded: “I hope not. We are simply the source of hope for those in Haiti or Africa or India for whom the alternative is nothing.”

Context is key: even the bare bones approach provided by the University of the People is better than no education at all; but, if we can avoid it, we should not relegate talented young people who inhabit the villages of Africa or Haiti or India to a bare bones approach to their education. Thus Shai and I have started a program whereby students who show special promise in their first courses in the University of the People can make their way (with the assistance of financial aid) to NYU; and we have invited other universities to join the effort.

Used this way, online education can be an important tool, bringing the possibility of higher education to millions who otherwise might not be able to obtain it. Additionally, it might provide an education to still others who might have access in theory to a college or university education but who, as a practical matter, cannot pursue a traditional course of study (because they have a job they must give priority over taking classes offered at times that will not work with their employment, because they have family obligations, because they live in a remote area, and so on). The importance of using technology in this way, as part of the “massification” (some would prefer “democratization”) of higher education, cannot be emphasized too much.

However, there is a danger that, as technology enables the claim to be made that greater and greater numbers are receiving degrees, the massification will lead to stratification – that is, that only the children of the poor, the unconnected, or the uninformed will be relegated to college online, while the children of others reap the benefits of a technology-enhanced, traditionally strong college or university experience. This would be a perverse effect of an intense focus on the price (cost of attendance) of college without an equally intense focus on the quality of the education provided; if we are not careful, higher education, for generations the great vehicle for upward mobility, could become the vehicle for creating the educational equivalent of a caste system.

This brings me to a final point about the use of technology in higher education: once we become aware of the danger that some proposed uses of it might (in the name of progress) lead to a socially disastrous segregation, we could take meaningful steps to use technology as a powerful search engine, deployed to ferret out students of talent and make it possible for them to move up a ladder of opportunity. This is a variant on the earlier discussion of the importance of matching students with the college or university that will develop their talents best. Just as the University of the People has identified students of talent who, given the opportunity and adequate financial assistance, could thrive at NYU, so also technology-driven courses and MOOCs could identify talented students that might otherwise be unnoticed and lost to the world. Awareness of the dangers of stratification actually could produce huge benefits, so long as the development of technologically provided courses is accompanied by the creation of identification processes usable to spot talent and financial aid programs capable of providing for all ladders of opportunity.

There is nothing wrong with “a $10,000 college degree,” so long as it is freely chosen by students who are aware how different it is from a degree that costs $180,000. The bare bones education provided by the $10,000 degree should not be forced on someone who could and should do better. Our efforts to increase the percentage of our citizens with college degrees will not be successful – no matter what the numbers show – unless each of our citizens is given a chance at the genuine realization of his or her potential.

VII. The Dangerous Rhetoric about Tuition and Student Debt

As commentators have concentrated on the phenomenon of rising tuition, a set of “facts” has become embedded in the conversation that are only loosely tethered to reality. Since the picture created might cause a loss of hope, a sense that a college or university education is beyond many Americans, it is useful to lay out the actual data on tuition and student debt trends. Since the national conversation thus far has focused on undergraduate education and the debt incurred for it, I will focus on it as well. In my experience, the actual numbers surprise most who hear them, because we have been conditioned to apply adjectives like “exorbitant,” “shocking,” “staggering,” and “crushing” to student debt (even as we have been conditioned to avoid applying similar adjectives to far larger amounts of debt incurred to purchase homes).

In his 2012 State of the Union address, President Obama, himself the product of a high quality university education received at a price in tuition much less than its actual cost, wagged a finger at the leaders of the nation’s colleges and universities and warned: “If you can’t stop tuition from going up, the funding you get from taxpayers will go down.” He offered no suggestion about how leaders might stop tuition from rising, let alone a suggestion about how a further reduction in the subsidy provided by government would not cause still higher tuition.

Then, he cautioned: “Higher education can’t be a luxury – it’s an economic imperative that every family in America should be able to afford.” Taken alone, this statement expresses beautifully a laudable national goal – so long as the “higher education” available to every family is a quality one suited to the capacities and passions of the students involved. And, to the President’s credit, he has advocated serious investment in higher education. Still, a search of the President’s public statements in the aftermath of the State of the Union reveals only a focus on the cost of attendance, with little attention to the challenge of reducing price without compromising quality.

The President’s 2012 State of the Union echoed a speech two months earlier by Secretary Duncan. The Secretary began by highlighting what he called an “iron triangle” of “quality, access, and cost” (which I would rephrase as quality, access, and price). He conceded both that “elevating quality can raise costs” (true) and that “expanding access also can raise costs because additional services and assistance to students may be necessary” (also true). Indeed, he stated that “reducing costs might impair both quality and access,” but he did not let that observation get in the way of his broader argument; after making the observation, the Secretary turned his focus solely to reducing costs and price, with no consideration of the effects of cost or price reduction on the quality of the education received.

The Secretary reported with admiration that “dozens of colleges and universities have either cut or frozen tuition.” He praised one university which had offered a 50% tuition discount in one of its schools. Nowhere did he examine the effect of these reductions in tuition (notably price, not cost) on quality. Quality may have been maintained (for example, through some increase in subsidy or some equally effective but less costly method of delivery); but, if this was the case, the Secretary did not mention it.

In other illustrations, the Secretary praised institutions that cut the costs of delivering an education and thereby provided degrees at a lower tuition. For example, he praised one university that awards degrees without regard to “seat time” or “credit hours” (indeed, with no course requirements at all) but with regard only to success on a set of narrowly focused competency exams that ignore most of the outcomes provided by high-quality traditional schools; not surprisingly, the costs and hence the price of such an education are lower than the costs and price of a traditional degree. But once again the Secretary did not discuss the effect of the cost reduction on the comprehensiveness or quality of the education received. He treated the question of educational quality as though it were nothing but content delivery: he never mentioned the collateral formal elements associated with higher cost (and price) alternatives. Foreshadowing the President’s incomplete narrative in his State of the Union, Secretary Duncan concluded his review of low-price educational offerings with the hope that “these promising innovations,” though “still the exception today,” would “be the norm.”

Critically, the Secretary failed to recognize the important differences among different types of higher education for different types of students. Awarding credits based on competencies might make sense for adult learners who have gone back to school, but such systems are not optimal for most students attending college directly after high school who greatly benefit from the full range of experiences and the lifetime network of relationships that traditional colleges and universities provide. The fungibility fallacy at work.

In their presentations, the President and the Secretary were merely reflecting the dominant motif of the conversation about higher education as shaped by the commentariat. Across a spectrum that ranges from “news” stories in the New York Times and the Economist to a breed of “experts” who have built careers by attacking higher education, there is a common framing of the conversation which is essentially incorrect but nonetheless pervasive.

The rhetoric begins with the contention that colleges and universities are “gold plating” their facilities and services to attract students (buttressed by reporting stories about rock climbing walls); it then proceeds with a claim that campuses are rife with inefficiencies (administrative bloat, undue support for faculty research, and other costs); it continues with an assertion that colleges and universities will spend whatever tuition or government assistance they are provided and hence will not restrain costs if left to themselves; and it then concludes with the prophecy that the higher education “bubble” is about to burst, just as the recent housing bubble and earlier bubbles burst. Isolated anecdotes supporting this narrative notwithstanding, this as explanation for rising tuition is at odds with the reality of life within a college or university.

First, one person’s “gold plating” is another’s critical element; such is the reality of a system that offers a wide variety of choice. From student wellness programs to a placement office, from courses in classics to small group seminars, from study away sites to internships, any enrichment to a school’s offerings could be seen as “gold plating.” Or, it could be a key element of a student’s success in studies and in life. Each enrichment adds cost and, absent subsidy, raises tuition; yet, for a particular student, the extra enrichment (and consequent tuition increase) may be the difference between the school that will fulfill his or her full potential and one that will not. The key is matching each student with the environment best suited for him or her.

Second, as noted, while there no doubt are inefficiencies on college and university campuses, most colleges and universities have engaged in serious efforts to minimize their administrative costs. For example, between 2007 and 2011, NYU cut nearly 20% of university administrative costs both by combining functions so as to reduce the number of administrators and by introducing savings in areas from energy (NYU now has its own cogeneration plant) to support staff (even the most senior officers share support staff). True, the number of administrators on campuses is higher that it was two or three decades ago, but this is due to a laudatory increase in attention to some areas (like student wellness and placement services) or to dramatically increased regulatory and compliance demands. Simply put, since higher education is one of the most competitive sectors in the economy, featuring as it does a continuous contest for talented faculty and students (each of whom requires subsidy for their work), restraining costs through efficiencies that do not compromise quality is a high priority. Doing so provides the resources necessary for the highest priority – talent attraction. There is, of course, always room for greater efficiency; but, given the persistent attention to this on campuses, the additional savings generated (so long as quality is maintained) will not restrain significantly the rising price (tuition) of higher education.

At this point, critics of higher education usually slide to a third argument, wherein they claim, by analogy to the health care sector, that in higher education, as in health care, the presence of a third party payer – in higher education the government when it provides grants and loans, in health care the public or private insurer – eliminates the incentive for the providers (the schools on the one hand, the hospitals and doctors on the other) to restrain costs. There are many reasons this analogy is false; here, I offer only two.

To begin with, in health care those who decide to make a higher expenditure (the doctor and the patient) generally do not pay the marginal increase in price, whereas in higher education those who decide to make a higher expenditure to attend one college rather than another (the students and their families) pay the lion’s share of the increase (either immediately or through loan repayments). Of course, if the government provides a subsidy that brings the price to zero, that would not be the case; but nothing like that is occurring (indeed, taken as a whole, state and federal governments are reducing the share of tuition that they provide).

The other reason the health care analogy fails is that colleges and universities compete fiercely (in a way doctors and hospitals frequently do not) for their clients, the students. And, by hypothesis (as Secretary Duncan reported), students and their families are deeply concerned about the price of higher education (tuition). Thus, restraining price (to the extent possible without compromising quality) is important to a college’s or university’s success in the competition for talent.

After initially working through anecdotes about “gold plating,” then shifting to a claim that “inefficiencies” are pervasive in the higher education sector, and then shifting again to the assertion that higher education (like health care) suffers “a third party payer problem,” the argument reaches its fourth stage, a prediction: that those in the higher education sector soon will see the “bubble” burst, because students and their families will not continue to pay the continuously increasing price of attendance.

Those who offer this argument usually reference the dot-com bubble, the housing bubble, or the tulip bubble that preceded them centuries ago. This talk is particularly ill conceived. The cited bubbles were the result of speculation: investors purchased stocks and homeowners borrowed funds to purchase an asset on the speculative assumption that it would increase in value so that it later could be resold at a price sufficient to repay the borrowing and deliver a profit. In a bubble, the process feeds upon itself for a time, but then stops, with a dramatic decline in value; ultimately, the investor or borrower is “underwater” because the speculation proves to be wrong.

This is where the analogy to student borrowing fails. Students do not obtain a degree in order to resell it to someone else. Education is a good in itself, a lifetime benefit. Moreover, to the extent there is an interest in monetizing the value of a degree (into lifetime earnings, for example), the return on investment is not speculative but rather easily ascertainable from available data on placement in various career paths. A dance major embraces different prospects in this regard from the business major; however, with clear data and good guidance, the dancer can make an informed choice, not a speculative bet. In other words, when it comes to higher education, an intelligent choice about debt level can be made.

In the end, through the din created by the commentariat and the political class, Americans know that a higher education is important, that it creates the predicate for a more successful life, and that it positively and significantly affects lifetime earnings. Indeed, the pay gap between college graduates and others reached its highest point last year, according to an analysis by the Department of Labor Statistics.

For sure, there is confusion. Whereas most Americans understand that a home is a capital investment, they do not view higher education in the same way. This is especially troubling because the value of a home (as we have been reminded by the dramatic developments of 2009) can drop quickly, whereas the value of a properly tailored, quality college or university education never diminishes. This is the case whether we measure the value of the education narrowly (simply as economic gain) or more broadly (as a quality of life matter).

The popular framing of the issue exacerbates confusion, especially among those who are less financially sophisticated. So, much is made of the fact that America’s total debt for higher education has passed its total credit card debt, truly a comparison of apples and horses. Credit card debt is consumer spending, not capital investment; by contrast, total borrowing for higher education is far less than mortgage borrowing, the far more comparable category of debt. In other words, Americans are being told that, whereas it makes sense to assume a $250,000 mortgage (and additional monthly maintenance charges) to buy a small one-bedroom apartment in one of the outer boroughs of New York City, it is unwise to assume significantly less indebtedness for a college education (even the worst examples on the most extreme lists of horribles show the average student debt for a college education is a small fraction of the average mortgage held by homeowners).

Thus far I have highlighted the way in which the prevailing rhetoric around college tuition and student debt has framed the discussion of higher education policy in a misleading and dangerous way. However, it is not just that the framing of the issues is flawed; often, the facts are wrong (or are presented in misleading ways).

Start with the discussion of tuition. True, nominal tuition levels - the “sticker price” of full tuition – have been increasing, in most schools more rapidly than headline (CPI) inflation. As noted, this is understandable, given the nature of the enterprise in higher education (the need for very high-talent personnel) and the reduction in subsidy provided by the government and other sources. Adjusted for inflation, however, the actual numbers are not as dramatic as most would guess: over the last ten years, nominal tuition (plus fees) at four-year public universities has risen 51%; over the last five years, 27%; over the last two years, 4%. The comparable numbers at four year private universities are 25% (10 years), 14% (five years), and 4.4% (two years).

Of course, many students do not pay full (nominal) tuition. A subsidy in the form of a financial aid grant often is provided, producing the net tuition number which is what the student actually pays. Therefore, to have a more accurate picture of trends, the trends in net tuition should be used. Here, the increases for public universities, reflecting as they do the reductions in governmental support, still are significant: 62% (10 years); 60% (five years); and 11% (two years). In private not-for-profit colleges and universities, however, the picture is very different. Net tuition actually has decreased over the last 10 years (-8.4%) and the last five years (-8%). Thus, the College Board reports that today the average student at a private college or university pays only 57% of the price listed for tuition, room, and board (down from 68% 10 years ago), resulting in a net price in tuition, adjusted for inflation, that is lower than it was 10 years ago at such schools. This certainly is not what one reads in most papers, but those reports are wrong.

Similarly, the magnitude of student debt is not what you would imagine from most of what you read. According to a recent Brookings Institution report, 58% of students borrow less than $10,000 total; 76% borrow less than $20,000; and 93% borrow less than $50,000. Indeed, the share of income graduates are using to service student debt has been relatively stable over the last 20 years (3.5% in 1992 and 4% in 2012). Furthermore, and perhaps counterintuitively, the borrowers who default actually have borrowed less (average loan $14,000 total) than those in good standing (average loan $22,000 total). And, it should be added, by far the greatest number of defaults are by students who attend relatively low-priced for-profit schools.

A more granulated review of the numbers on student debt and defaults shows that the most serious problem is among students who undertake student loans for higher education but do not complete the degrees for which they borrow; they therefore are left with debt and without a degree, the worst of all worlds. Not surprisingly, these students most often attended for-profit schools or not-for-profit schools with fairly observable records of mediocrity (seen most clearly in low completion rates, low placement records, low scores in student satisfaction, weak peer reviews, and so on). This only underscores the importance of good guidance that matches students with schools where they are likely to succeed.

In sum, the data is overwhelming that a college or university education is one of the very best investments one can make. Put aside the important but unmeasurable enhancements to quality of life; judged in merely economic returns, the return on investment is enormous. And an MIT economist, David Autor, estimates that the true cost of a college degree (tuition/fees minus the gap in lifetime earnings) is a negative $500,000 (adjusted for inflation and the time value of money). Moreover, the value today is greater than it was decades ago. The combined effect of this kind of nuanced economic analysis is dramatic: a recent Federal Reserve study reveals that the average student (average debt, average worklife) graduating in 1973 took 23 years after school to repay his or her student debt; today, that average student takes just 10 years.

Of course, there is another element of the price of attending college: the opportunity cost of attending (that is, the amount of foregone income a student loses by going to school rather than being employed). Interestingly, a recent study by the New York Federal Reserve reveals that this element of the price of attending college (which the study shows comprises about 80% of the price of a college education) declined dramatically over the 10 years between 2001 and 2011; indeed, it declined so dramatically that when this decline is combined with the other elements already discussed, it is much cheaper to go to college (public or private) today than it was a decade ago. So, on this measure as well, college is worth every penny of its price.

Faced with these numbers, those who feed on building the story of a “student debt crisis” recently have introduced a new argument: students who engaged in borrowing fare significantly less well in life than others, even if they do not default. For this proposition, they cite the inaugural Gallup-Purdue Index Report, a study of the life outcomes of more than 30,000 college graduates. The relevant section, titled “Loan Debt Can Cripple Well-Being,” states: “The amount of student loans that graduates take out to pay for their undergraduate degree is related to their well-being in every element. The higher the loan amount, the worse the well-being.”

The most important thing to notice about this survey is what it is comparing: one group of college graduates (those who borrowed) and another group of college graduates (those who did not borrow); the most significant differences the survey measures are between those who borrowed more than $50,000 (about 2% of all graduates) and those who left school with no student debt (about 43%). Once you focus on the groups being compared, the results are just common sense: across various dimensions of well-being, those who have no debt tend to feel better in general that those who have debt, and those with no debt tend to feel particularly better than those with the greatest debt. Or, put another way: if you hold everything else constant, a person without debt feels better off than a person with debt. This, to say the least, is not surprising. The actual question should not be whether you would be better off if you had the dollars you borrowed in your pocket; the question should be whether you are better off with student debt and the degree for which it paid than you would be without the debt and without the degree. On this, the evidence is overwhelming that you are better off with both the debt and the degree.

Beyond this common sense point (the fundamental flaw in the way many are using the survey), there are significant methodological flaws in the study. Even those who did the survey concede that they cannot claim causality between the debt incurred by those who borrow and their relative feeling of well-being: so, for example, students from low-income families tend to borrow, but they face many obstacles that remain after graduation in addition to their debt. Seen in this light, some findings of the survey are actually pretty surprising in a way that discounts the effect of debt: for example, those with debt were about as likely to say they were “thriving socially” as those with no debt.

And one finding of the survey is quite remarkable (though not cited by critics of higher education costs): the key factor in later life well-being reported by graduates was a connection with a professor on campus who encouraged them (grads with such an experience are three times more likely to “thrive”) – still more for graduates who had done a seminar project or who had been extremely involved in extra-curricular activities. This should be a significant revelation for those who see online education as the solution to student debt.

In a similar vein, a recent report from the Federal Reserve Bank of New York found that individuals with student debt are now less likely to own a home by age 30 than people without debt. However, a review by a researcher at the Brookings Institution of this Federal Reserve study found that when controlled for education, income, age, and race, homeownership rates for those with debt have been lower than for those without debt for the last 20 years, and so are not the result of an increase in the level of student debt. The Brookings review continued: “It’s dangerous to promote this narrative without conclusive evidence, as negative attitudes toward debt have the potential to encourage debt aversion which can prevent students from enrolling in college in the first place." I would add that, even for students who do enroll in college, the negative narrative might discourage them from attending the college or university that might be the best match for them.

Uncorrected, the misconceptions about the fundamental issues surrounding the true cost of attendance, the nature and effects of student debt, and the value of a college degree not only will compromise the level of fulfillment of the students who are misled and discouraged but also will diminish our nation’s prospects. As a Chinese friend put it to me: in Confucian societies like China, the education of the next generation is the primary obligation, with homes, automobiles, and vacations taking a secondary position both for families and for their government; in America, public policy assigns education a lower status than one or even all three of these alternative priorities (one leading policy maker recently lamented publicly that a graduate carrying the average $28,000 in student loans would be forced, by virtue of the loans, to defer the purchase, presumably on a loan of roughly the same amount, of a car).

In a way, this is just a special version of a more general tendency of Americans to value short-term benefits over long-term rewards (one can see this attitude in everything from the debates on the federal budget to the behavior of American corporations). But, as we enter a century in which the success of societies will depend on the educational attainment of their peoples, it is a particularly troubling manifestation of the general proposition.

Given the absence of any nuance in the treatment of the cost and price of higher education among the commentariat, it is not surprising that the national conversation focuses on price (tuition) rather than quality. And when this talk is pervasive, it is not surprising, as Secretary Duncan noted, that “three in four Americans now say college is too expensive for most people to afford” and that “three-fourths of [young adults] believe that graduates today have more debt than they can manage.” He concluded: “We need to listen closely to these fears.”

He is, of course, correct. And he is appropriately concerned about the price of higher education and the danger of people unwittingly saddling themselves with debt. What we must keep in mind, however, is that there are different kinds of education, various mixes of educational services, ranging from a mere focus on transmission of content (much as is done by a book) to serious attention to the educational, social, and emotional development of students. These two products are not the same and their price is not the same. So what we should seek is a system that provides information and transparency about the nature and the quality of the different educational possibilities sufficient to enable students to make intelligent choices about how much they are willing to spend for it. Thus, as we address the fears of students and their families about rising tuition, we must explain accurately the causes of rising tuition, unravel the misconceptions about their roots, and offer proposals to soothe the legitimate concerns about them. Such is the role of leadership. And a clear understanding of the issues involved can lead to intelligent policies to address them.

VIII. Mitigating the Burden of Student Debt: Income-Based Repayment

In a knowledge economy, it is in the public’s interest that every mind be developed to its full potential; those blessed with extraordinary mental capacities are especially to be prized since, if we unlock their creativity and ingenuity, they will provide the new ideas and activities that will create opportunities and joy for others. And these special individuals are not concentrated in any particular zip code or social class, whether defined by income, gender, race, or ethnicity. We therefore must be particularly sensitive to any tendency to confine the benefits of the most advanced forms of higher education to those who are born to privilege. Society cannot afford to squander talent, wherever it is. And we certainly must be vigilant, lest higher education, traditionally the vehicle of hope, become an instrument in inequality, effectively preserving the social status quo.

In an ideal world, higher education would be seen as a public good, a right available to all who could benefit from it. This once was the case, but the political reality is that (at least in the United States) it no longer is. Given this unfortunate truth, the best way to make a college or university education available to every qualified student – one that matches the student with the college or university best for him or her – is an income-based loan repayment program. Such programs, if properly designed, should give students confidence that they can borrow money from the government to finance a high-quality degree without facing undue financial burden after graduation.

Versions of income-based repayment programs already exist in Australia and the United Kingdom; and two recent studies of higher education - Securing a Sustainable Future for Higher Education: An Independent Review of Higher Education Funding & Student Finance (The Browne Report) and Loans for Education Opportunity: Making Borrowing Work for Today's Students (The Hamilton Project) – present nuanced and comprehensive alternative versions of this type of plan. Other alternatives can be developed, and I will later suggest a number of possible modifications. Moreover, such plans are affordable and make economic sense, even if their positive outcomes are judged in narrow economic terms.

The "Pay as You Earn" (PAYE) program implemented by the Obama administration in 2012 could be the foundation for an effective income-based loan repayment program. The program is straightforward in its structure. It applies 10% of a borrower's adjusted gross income above 150% of the federal poverty level (FPL) for 20 years or until the borrower's debt is discharged. The amount that a borrower is required to pay during any year is capped at the lower of two numbers: the 10% of income just described or the amount that the borrower would have been required to pay under a standard full recourse loan with a 10-year amortization period.

For example, a graduate with $30,000 of debt upon graduation borrowed at the current interest rate for Direct Unsubsidized Loans (4.66%) would be required to pay roughly $3,800 annually under the standard 10-year repayment program. If that same student were enrolled in the PAYE program, his or her annual debt service would be based on the parameters of the program described above, but would never exceed $3,800, even if the applicable percentage of income would otherwise result in a payment greater than that. This payment cap is determined using the initial loan balance upon enrollment in the program and does not fluctuate over the life of the loan. The 150% of FPL amount currently is approximately $17,505 for an individual and approximately $29,945 for a family of three. So, if the hypothetical graduate cited above (with $30,000 of debt) had an adjusted gross income of $25,505 (and filed as an individual), his or her loan payment would be $800 a year (10% of $8,000) instead of $3,800. Thus, the PAYE program significantly relieves the burden of student debt for students who limit their borrowing to Direct federal loans up to the maximum of $31,000 for so-called dependent students and $57,500 for students who are “independent” of their parents.

State plans can be a valuable supplement. For example, New York Governor Andrew Cuomo has proposed the Get on Your Feet Loan Forgiveness Program, which will allow New York residents who graduate from college and continue to live in the state to pay little or nothing of their student loans for the first two years out of school if their income is not high enough to cover their student debt burden.

Governor Cuomo’s program supplements the federal PAYE program to make it still easier for college graduates to manage their student loan payments. For students who continue to live in the state following graduation and who participate in the PAYE program, New York State will cover 100% of their student loan payments for two years if they earn less than $50,000 a year. For those with incomes between $50,000 and $60,000 a year, the state will contribute a portion of the student’s loan obligation on a sliding scale until income reaches $60,000. Thus, by combining the PAYE program and New York’s supplementary program, eligible students will not have to make payments on student loans for the first two years after college.

Recently, there has been a backlash against income-based loan repayment programs in some quarters. Echoing the critique of student debt in general, critics charge that the easier availability of debt from income-based repayment programs simply helps to drive rising tuition. Others suggest that because the PAYE program may result in an increase in the total cost of borrowing compared to a traditional loan with a 10-year repayment period (though the level of monthly debt service is reduced, the total amount paid over the 20 years may increase), the program may discourage students from other borrowing such as a home mortgage. And still others charge that these income-based loan repayment programs create a "moral hazard" by encouraging students to take down student debt with the expectation that they will not need to repay it. These arguments are flawed and, in some ways, remarkably paternalistic in depriving the “protected” students of choices that are important to them.

It is important to remember that even with an ambitious income-based loan repayment program, schools still would have a strong incentive to provide as much financial aid as possible so as to compete successfully for the best students. Moreover, students would continue to be motivated to borrow as little as possible, since if they borrow less their loan payments will be lower (a student who does not borrow, for example, has no loan payments). Thus, colleges and universities will have to justify their higher tuition (or eliminate its effect through grant aid) to prospective students (or to the donors who support grant aid) by demonstrating that they provide additional value. Indeed, in general, every college or university has great incentive to restrain costs and price (tuition) as much as possible and to continue grant aid to make the price of attendance lower so as to attract the best students possible. Simply put, if a student were choosing between two otherwise equally attractive schools (A and B), one of which (A) sets net tuition of $38,000 and the other of which (B) sets a net tuition of $30,000, the student would choose school B. Since schools seek to maximize the talent they attract, the school has powerful motivation to drive down costs and price, even as the student seeks the lowest price possible for comparable quality.

The pressure to lower tuition or to increase financial aid is a desired effect of providing all of the information necessary to matching an education with a student (the “dashboard” of numerical and qualitative information that will be required) and making it possible for students and those advising them to understand it (where needed, with volunteer counselors). Students thus are able to assess the value proposition of each college or university (through the universal base data and the dashboard's peer reviewed elements); they can match their capabilities and passions with each institution's defining features; and they can make a judgment as to whether those features justify the expenditure (or debt) entailed. Since students and families have a deep interest in minimizing their indebtedness (indeed, all the recent chatter has raised to a peak their attention to this matter), a downward pressure on tuition is present, even if repayment of loans is income contingent, and the worth of the school's posited value proposition flowing from attendance (to the individual student involved) continuously is assessed.

There is no doubt that there will be students and families (hopefully, even from among the wealthiest) who prefer a low-price, low-"touch" (in terms of faculty-to-student and student-to-student contact time, in and out of formal classes), highly utilitarian (in terms of career goals), condensed (in terms of nuance and depth) education to the more robust possibilities. In other words, some students will choose to forgo added educational value (even value measured by their particular educational needs) in favor of spending or borrowing less. This happens all the time with other purchases. With education, however, it is particularly important that such a choice be informed and voluntary - and not dictated by economic or social class.

The process just described will over time have profound effects on the shape of the American higher education landscape. There likely will be far fewer "traditional" colleges and universities (ones that operate the way most do today); and there likely will be many that will have incorporated a significant, if not total, reliance on the use of technology to deliver courses. Schools where tuition is seen as too high given their value proposition will suffer. High-tuition, high-quality schools with a clearly articulated, significant value proposition will survive and, indeed, thrive; and, most importantly, under the offered proposal they will be available to all whose talents match with them. Another set of schools, those with a clear value proposition that appeals to a subset of interests (faith-based schools are one example), also will survive. But schools that do not offer a value that justifies the expenditure or debt involved will struggle and, ultimately, fail. It is impossible to estimate how many of America's roughly 5,000 colleges and universities will be unable to sustain themselves; in my view, the number likely will be significant but smaller than many would guess (in part because the described process will produce greater focus on providing value). The key is that the shape of the sector will be tailored, all things (including tuition) considered, to the choices of students and their families, none of whom will be trapped by circumstance.

There is one final argument against income-based repayment plans that deserves extended discussion: that the PAYE program and programs like it will impose substantial and unanticipated costs on the federal government. The likely total cost of even the present PAYE program as it relates to undergraduate loans (that is, without any of the increases I believe are desirable) is not yet clear; still, in the present political environment, such arguments carry special weight. Therefore, I asked researchers at NYU to estimate, as a baseline, the expected cost of the PAYE program to the federal government by modeling a likely repayment scenario based on publicly available census data. Using the assumptions shown in Appendix A, the estimated present value cost to the federal government of loan forgiveness after 20 years is approximately 16% in the case of college graduates with a loan of $31,000. When loans made to borrowers who did not complete college are factored in as well, this percentage increases to about 19%.

The number of borrowers entering the PAYE program is rising, but as of 2014 they still represent only about 10% of the total number of borrowers in repayment. Because of participation in the PAYE program by graduate students with student loans well above the maximum permitted for undergraduates, a little more than 20% of the loan balance of the Direct Loan portfolio is in the PAYE program. Because I believe income-based loan repayment programs represent the best policy for enabling students to attend the college or university to which they are best matched, I view the increase in participation in the PAYE program as a good thing. Nevertheless, to the extent that the PAYE program and others (perhaps more generous) like it are more costly to taxpayers than traditional loans, policymakers could consider adopting changes to the structure of the PAYE program which would have a relatively modest impact on most borrowers, but which could significantly reduce the aggregate amount of loan write-offs.

Some potential changes were proposed by the President in his most recent budget: relaxing the cap that limits monthly debt service on income-based repayments to the level they would be under traditional loan repayment programs, extending the repayment period from 20 to 25 years, and basing repayment on household income as opposed to individual income.

And there are other ways to lower potential costs. For example, the New America Foundation has suggested several reforms to the PAYE program that would have this effect: implementing a two-tiered loan forgiveness horizon based on initial loan balance, with loan balances less than $40,000 forgiven after 20 years and loan balances greater than $40,000 forgiven after 25 years (of course, the threshold could be set higher, say at $60,000, in order to be more generous); eliminating the payment cap that currently restricts monthly payments to no greater than what would be owed under the standard 10-year repayment plan, even if 10% of discretionary income exceeds this amount; instituting a loan forgiveness cap for the Public Service Loan Forgiveness program of $57,500.

And still other variations are possible. I would limit the overall cost of the program for the government by setting basic performance standards for colleges and universities before students attending institutions were eligible for income-based loans. Such standards might include minimum graduation rates (for example, 70% of the national average). Such a system could (and in my judgment should) lower the required minimum somewhat for schools that could demonstrate a significant effort to admit and work with lower-income, underrepresented, or at-risk students. The highly desirable effect of well-tailored minima of this sort would be that it would hasten the demise of the schools which today deliver little to students other than debt (usually, debt in exchange for a meaningless degree or no degree at all). In a virtuous circle, the elimination of such schools would lower default rates and hence lower the costs of the program.

In the end, it also is possible (and in my view would be desirable) that a combination of the various cost savings I have listed could support an income-based repayment model that would cover borrowing (up to a cap) at substantially higher levels than the borrowing covered by the PAYE program. For example, a cap set at the 80th percentile tuition in the private university sector would allow students true freedom to match with the schools best for them. For their parts, the schools still would have a strong incentive to give as much financial aid as possible so as to compete successfully for the best students.

For now, the exact details of the optimal income-contingent repayment plan are “to be determined,” and the variations I have sketched here are designed only to stimulate discussion. The main point is this: if we take as a given (as I think we must) that the United States no longer will provide, as a public good, the full cost of an appropriately matched higher education to each of its citizens, a well-developed income-based repayment program (viewing higher education as a “quasi” public good), would go a long way to creating the possibility that each citizen could maximize his or her opportunities and potential. The course on which our nation currently is traveling will not do that, and the price of not doing that will be enormous.

IX. NYU: A Case Study in Applying the Proposal

NYU is an elite, tuition-dependent research university, the largest private university in the United States. Fewer than 40 years ago, it was essentially a commuter university (with a few excellent units) that accepted almost every student who applied – and it was on the verge of bankruptcy (indeed, faculty and staff once were asked to wait two weeks for their salary checks). It had very few residential students, most students commuting from their homes in New York City and surrounding counties.

In 1981, a transformation began which Berkeley professor David Kirp has called “the success story in contemporary American higher education” (italics in the original). Today NYU is one of the world’s leading research universities, is highly selective, features its own “study away sites” in 14 cities on six continents, and allows students (from anywhere in the world) to enter through any of its three “portal” campuses (New York, of course, but also Abu Dhabi and Shanghai). If admitted, the student spends the majority of his or her semesters at the portal of entry; however, students may choose – and are encouraged – to circulate among the study away sites, including the other two portals. The entering undergraduate cohorts in Abu Dhabi and Shanghai are much smaller than the cohort entering in New York (by 2020 New York will admit 6,000 undergraduate students each year, while Abu Dhabi and Shanghai will admit 500 students each year). NYU students now come from every state and over 180 foreign countries.

The class entering the New York portal campus is, by any measure, “highly selective;” external examiners and polls annually place NYU New York among the most desired American universities.

The class entering NYU Abu Dhabi (which accepted its first class in 2010) is arguably the most selective in the world; its students (roughly 150 in each of the four initial cohorts) come from 102 countries and feature test scores and honors as good as any entering class in the world; the median student speaks three languages.

NYU Shanghai (which opened in September 2013 with a freshman class of 300) also attracts some of the world’s top talent, half of the cohort being Chinese (as good as the students entering the very best Chinese universities) and the remainder among the strongest students from around the globe.

The admissions process for all three portal campuses is driven by a desire to insure, as far as possible, that NYU is the best match for the individual student’s talents and passion. Admissions officers make every effort to explain carefully that NYU is a research university, exploring what that means in an undergraduate education. They take pains to note the differences among the three portals that could make a particular portal more or less attractive to a given student. And, if a student is inclined toward our New York campus, they emphasize the variation in offerings among the 12 undergraduate schools at that campus (ranging from a traditional research university liberal arts education to our individualized study liberal arts track, to business, to the performing arts, and so on).

In all cases, admission is “need blind” (that is, students are admitted without reference to their ability to pay). Once a student is admitted, however, if admissions officers fear that (after factoring in both institutional and governmental grant aid) their debt burden (based on their likely borrowing) will be at the upper ranges, they have a conversation with them to make sure they understand the ramifications of their choice to attend NYU. For reasons that will become clear, these conversations, which mean NYU sometimes loses students it would love to have, occur only with students entering our New York portal.

NYU tuition is the same whether a student enters through New York, Abu Dhabi, or Shanghai; however, the financial aid available is different, depending on the site. And the story behind that difference is revealing.

In Abu Dhabi and in China, NYU partners with the government and, fortunately, the governmental partners in those countries embrace the notion (lost in the United States in recent decades) that it is a public good to provide the best possible education to the students who come. Abu Dhabi has set for NYU Abu Dhabi the explicit goal of finding (whether in major cities or in villages) the brightest students in the world and attracting them to NYU Abu Dhabi, where they will be formed into a leadership cohort for global civil society; and the government has made financial aid available so that, if a worthy student is identified who would have to borrow to attend (of course, many could not borrow even if they wished to do so), that student will receive a grant sufficient to cover the cost of attendance. And generous support is available at NYU Shanghai, where government support and private philanthropy enable it. But at NYU New York, which depends largely on the tuition paid by students to support its programs (including to support financial aid for the students who are least able to pay), financial aid at desirable levels is not available to many who need it. This provides a vivid illustration of the cost (quality), subsidy, price (tuition) equation in a tuition-dependent research university. So NYU New York is a useful example of how the proposed program of income-based loan repayment would work.

Today NYU’s tuition is among the highest in the country (top 5%); when the cost of room and board in New York is added, the full price of attending for a residential student moves even farther up the list. Still, in part because NYU students often work while going to school in order to minimize their indebtedness, the actual figures on indebtedness (for the vast majority of students) are lower than the anecdotes featured in the media would cause you to predict.

For the 2013 graduating class, the median (across the entire New York class) total debt after four years was $2,750. Of course, many students come from families that can afford NYU’s tuition; so a full picture requires drilling down a bit more. Thus, if only those students with loan debt are considered (that is, if those in the class with no debt are eliminated), the median debt after four years rises to $26,885. At the 75th percentile, the debt is $26,888 for the full class and $32,809 for those students with loans. At the 90th percentile, the numbers are $36,537 and $57,505. And at the 95th percentile, $57,542 and $84,625. In short, the extreme stories reported in the public conversation represent a tiny portion of the class.

These numbers have not bred complacency on our campus. We have made improving financial aid our top priority. NYU’s endowment still displays the effects of the University’s brush with insolvency a mere two generations ago. Notwithstanding the University’s present standing, and notwithstanding remarkable fundraising success (the University has raised over $1 million a day, 365 days a year, for the last 10 years), NYU’s per student endowment (the relevant number when isolating funds available for financial aid to students) is below the median for all private colleges and universities in the United States – and is far below any of its peer schools (at Harvard, Princeton, and Yale, for example, this per student number exceeds $1.5 million).

Over the last decade, NYU has nearly tripled its per capita endowment to $75,000 per student. At the traditional 5% rate of spending from endowment, this yields $3,750 per student; the comparable numbers at Harvard, Princeton, and Yale exceed $75,000 per student each year. These basic numbers mean that endowment support for financial aid at NYU New York is (to put it starkly) paltry, especially when compared to our peers.

We remain committed to moving from paltry to acceptable to excellent over time. In the most recent fiscal year, the University provided over $200 million in grant aid to its students. Of course, this adds to the University’s expense budget; but all students benefit from the presence of a more diverse class, and perhaps the wealthiest students benefit most by being exposed to students who come from very different backgrounds and/or who have to work a job in order to attend a class. And our efforts to increase financial aid have helped: ten years ago, NYU offset only 34% of the demonstrated need of its students; today it offsets 57%. But at least twice the current amount of grant aid would be necessary to provide NYU students with the level of assistance offered by peers blessed with endowments that have been built over generations (and, for some, centuries). Over the last five years the dollar value (without any adjustment for inflation) of the average total loans borrowed by NYU students at graduation has declined by 26%. But we struggle every day to do more.

Every school of NYU has set itself to the task of raising resources to ensure that every student for whom it is the right match can attend. To this end, for example, the undergraduate college of NYU’s Stern School of Business just announced that (thanks to a generous gift) it will provide full scholarships (including the cost of housing and books as well as summer job placement) to 10 high-achieving, low-income students from New York City. And Stern’s admissions team already has begun an aggressive effort, using all the mechanisms described earlier, to find talented young people who are present but undiscovered in the boroughs of our city.

There is, however, a lesson in the math of the tuition-driven financial aid that is a critical part of NYU’s effort to include all worthy students, a lesson that must be learned by those who advocate restraints on tuition (price). Stated in the most simplistic terms: if NYU were to hold its tuition at $40,000 instead of $45,000, it in effect would be awarding the equivalent of a $5,000 scholarship to the child of the wealthiest family in the school (as well as all other students, of course). Were it to raise tuition to $45,000 and use the difference ($5,000) to fund scholarships for the poorest 80% of the class, the wealthiest 20% of the class would pay the extra fee while (on average) the poorer 80% of the class would receive a scholarship of $6,350, leaving them $1,250 better. This is the way tuition-funded financial aid works. And this reveals the pernicious effect of “capping” or “flatlining” tuition (absent an increase in subsidy) – or of tossing encomiums at those who do so.

Primarily to enhance the quality of its curriculum and pedagogy, but also to restrain costs where possible, NYU has been integrating (without much fanfare) technology into its program. And, through programs like its recently created Media and Games Network (MAGNET) Center, it is at the forefront in research on how to use technology to improve learning (and, where possible, drive down cost). Thus, at NYU nearly 700 online or partially online courses are offered and several online degree programs (from an MS in Electrical Engineering to an Executive LLM in Taxation Law) exist (indeed, NYU’s Engineering School has been ranked in the top 10 online graduate engineering programs). Such initiatives have made an NYU education more widely available, but they do not address the fundamental financial challenges caused by NYU’s inability to provide the level of financial aid it would like to provide.

Fortunately, the relative inadequacy of NYU’s financial aid has not discouraged students – even financially challenged students – from choosing NYU. Thus, in the most recent entering class, 22% of NYU undergraduates were eligible for Pell Grants; the comparable numbers at peer schools tend to cluster between 11% and 14%. In the most recent entering class, 19% of NYU undergraduates are the first in their family to attend college; at NYU's Polytechnic School of Engineering, just under 40% of this year's class are first-generation college students. These students really want to be at NYU (we have matched well with them) and, as noted, many of them make it happen by working while attending; so 30% of NYU’s undergraduates work two jobs and about 12% work three jobs. This speaks volumes about the value these students see in an NYU education; most of them could have attended a school they saw as a less perfect match for them on a full scholarship or (at least) at a lower net tuition. They want what the children of the most advantaged in our society want: to attend the school that is best matched to their passions and talents. And we are humbled by the sacrifices these students and their families make to seize the opportunities of an NYU education.

I worry, however, that these students, though generally very pleased with the experience they have at NYU, are not able to take maximum advantage of our university – enrolling in all of the classes they would like to take (not just those that are compatible with their work schedules), joining clubs and teams, and taking a semester or two at one of our study away sites. If an income-based loan program of the sort offered in this Reflection were available, these students and their families could use government loans to pay for their NYU education, knowing the repayment of debt incurred would be limited to 10% of their discretionary income. As a result, they could take full advantage of that education, just as their wealthier classmates do.

In such a world, the financially well off would pay the full amount; the school, in its efforts to attract the best students possible with the widest possible life experience, would provide financial aid to some to bring the amount paid as low as possible (indeed, some of the poorest likely would receive enough financial aid to bring the amount paid to zero). From the student’s standpoint, were a proposal along the lines discussed here in effect, all repayment obligations would be income contingent for all but 5% of NYU students. No student would have to pass up an NYU education if it were best for him or her.

X. Conclusion

Over these last 12 years, I have been privileged to serve as the president of a great university and, along the way, to serve on (and chair) the boards of several of higher education’s major organizations. Moreover, as a president who teaches (four courses each academic year) and who loves students, I have gotten to know well thousands of NYU students and their families. Based upon these observations, I can report that the presidents of our nation’s colleges and universities join their students and their families in desiring the finest possible education for the students at the lowest possible cost. By and large they strive to discover the ideas that will liberate funds for financial aid, stronger faculty, or new programs. They are mission driven, and the mission is to advance knowledge and to produce as many graduates as possible who have it and its joys.

In these pages I have tried to explain clearly the elements of a system that not only would maintain the preeminence of American higher education but also would increase the numbers of those who benefit from it; moreover, with little (if any) investment of additional resources from government, this system would both match students with the college or university education most likely to maximize their advancement and provide a sensible way for them and society to finance it.

Were we to adopt a system with these elements, we would move in the direction of reembracing the notion that higher education is a public good that should be available to every citizen who can profit from it; yet it embraces that notion without commanding the huge (and hugely worthwhile) investment entailed in programs like the GI Bill of Rights.

The road is there for us to walk. If we choose another path, our children and grandchildren will regret it.