David Lei | Bailing out education

First there was the massive rescue of the financial industry - the $700 billion fund set aside to scoop up troubled assets from banks. Then in December, the American auto industry secured an emergency reprieve from the government to avoid bankruptcy worth billions and still possibly more. And now, if President Barack Obama's economic stimulus is passed into law, higher education gets to win an ill-conceived bailout of its own.

The House of Representative's current draft of the stimulus plan includes $7 billion for much-needed infrastructure projects at colleges and universities across the country. The money would be made available by the Department of Education in the form of grants or loans.

According to The Chronicle of Higher Education, colleges and universities - mainly public institutions - are accumulating lengthy maintenance backlogs due to the recession. The Chronicle warns that buildings and energy systems at many schools "are outdated, inefficient, even crumbling." They're in desperate need of repair that is impossible due to spending freezes.

For several years, the deceptive strength of the economy made it possible for university administrators to aggressively pursue new construction projects. When the financial market crashed, many realized that, due to poor planning, they had bitten off more than they could chew, just like their counterparts in the financial and auto industries. State schools, in particular, are suffering - drastically lower tax revenues have resulted in massive budget cuts.

Cup in hand, the leaders of these schools are seeking the support of their local congressional delegations for projects of varying scope. Though they seem to be getting far less than they had previously requested, they're avoiding the same public scrutiny bank and auto company executives have faced - no grilling on C-SPAN by visibly disgruntled senators. No demand to seek better business models. No call for accountability to the American taxpayer.

In the past several months, we've seen that government bailouts can run the risk of encouraging bad management practices. Moreover, they may keep unviable businesses alive at the expense of taxpayers' money.

The problem is that very few media outlets (the Chronicle being an exception) have yet to point out that this $7 billion looks a lot like a bailout for institutions already heavily dependent on taxpayer funding. But if it looks like a duck and quacks like a duck .

Equally worrisome is the stimulus plan's provision for enough funding to increase the maximum available Pell Grant by $500 (from $4,731 to $5,231) at a cost of $15.636 billion.

Although many will welcome this move, federal grant-based financial aid is not a viable long-term solution to the problem of rising tuition. Subsidizing the costs of higher education does little to contain it. And university administrators will feel little pressure to minimize those costs if federal or state governments do it for them.

At a time when the personal savings of the average American are declining and university endowments have shed so much value, increasing access to higher education and college affordability is a sensible goal. It isn't surprising that Congress typically passes increases to the Pell Grant with significant bipartisan support.

First of all, the stated goal of the stimulus has always been to provide an immediate boost to the American economy. The benefits of increasing college affordability now are years away, at best. Therefore, including it alongside the jolts needed to get the economy moving right now is deceptive, as well as bad precedent for higher education.

But more importantly, greater federal and state subsidization through financial aid can mask cost increases that don't directly benefit students. A recent report from the Delta Project on Postsecondary Education Costs cited by Inside Higher Ed, finds that "rising tuition dollars [at public research universities] are merely being used to make up for lost revenue" rather than pay for better teaching.

From 2002-2006 state colleges increased tuition by 27 percent, on average, with only 1 percent more being spent per student. (Private universities, though, were found to have increased the quality of education as they raised tuition.) That's because the increases in tuition were used to offset budget cuts.

This is indicative of how reluctant university administrators can be to make the necessary sacrifices to keep their operating costs low. Ultimately, accountability for improving college affordability must fall squarely on them - with a limited role played the federal government.

In that sense, the timing of this Pell Grant increase seems a lot like a bailout as well.

David Lei is a Wharton junior from Brooklyn, NY. He is the former Executive Editor of The Daily Pennsylvanian. The Lei-bertarian appears on Mondays. His email address is lei@dailypennsylvanian.com.

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