PROSPER Act: Impacts on US Higher Ed Institutions?

No one can expect perfectly when and how policy may change over time.  Higher ed institutions only have a limited ability to affect future legislation, which usually are conducting through lobbyists.  What Harvard president said, echoed and perhaps  represent how the US Colleges and Universities, in general, feel how the new regulation will effect their own institution.  If one of the most stronger private universities in the US, such as Harvard has expressed it concerns, perhaps other smaller institutions may have more challenges to navigate the change.

As the Association have mentioned in the past, any reduction on the demand side of the equation will have negative impacts on the suppliers.  Therefore, the most efficient organizations will survive the industry restructuring process, while others will be wipe-out from the competition map.  We have shown which institutions have higher probability to take that route.  Among the group, institutions such as for-profit; private not-for-profit alike will first feel the pitch.  Then state-owned schools will have to work with a smaller budget.  Instead of cutting the cost or downsizing, some of these institutions plan to increase tuition.  This pricing strategies perfectly may nail the coffin.

But, why the law makers think the changes are necessary?  Well, we are not a fortune teller, but one may expect that there is no smoke without fire.

  1. Adam Smith’s Theory of Moral Sentiments does not work as it should.  Because moral may not be considered in the decision making process, especially when self-interest & money is involved.  Therefore, interventions by the policy makers are needed.  Or perhaps, the Theory only applies to the for-profit entities?
  2. Lack of control such as SEC in the stock market.  IPEDS reporting system may not a successful deterrence means to keep institutions in line.  This proves IPEDS reporting is ineffective, perhaps close to useless.  Gathering data, without a clear purpose, proved to be expensive, unnecessary and adding inefficiently in the whole system.
  3. Other means of college accountability needs to be developed, applied and enforced in-full, consistently and persistently.  But who is going to do it?  Not DOE, for over the years, and the past facts show that all of those supposed to be a watch dog, proved to be incompetent.
  4. Accreditation agencies which are expected to participate actively in the controlling process may have done sub-optimal work, and have become the problems instead of the problem solvers.
  5. Higher institution organization such as AACU, AAU or others have, indirectly set the general policy and trends in higher ed industry.  They resemble and therefore may act like the oligopolists.  That said, these players have the “market or policy” power, at some point, to direct or redirect the so-called business model in the whole industry.  One may be surprise to find out that higher ed institutions have worked in harmony in pricing policy.  Example, prior to 2015-16, college tuition and fees have increased harmoniously, across the board.  The numerous associations seem to work against the American public, unfortunately.  Students and their families are experiencing financial stresses and long-term suffering from the organizations’ reckless behavior (business model).