US Senate Committee on Health, Education, Labor, & Pensions

Alexander: Today’s American Higher Education System is Like the Auto Industry of the 1970s

Says higher ed system “offers a remarkable number of choices of the best products in the world at a reasonable cost,” but “is not doing much about challenges that will require major adjustments if, 20 years from now, it wants to be able to make that same claim”

Thursday, September 19, 2013Liz Wolgemuth 202-228-4729

"The stakes are high – just as the decline in the auto industry sent jobs and profits overseas, a similar failure in U.S. higher education would damage our economy and send the best minds overseas.  In a highly competitive world, there is no guarantee that we will continue to produce 25% of the world’s wealth.”

– Lamar Alexander

WASHINGTON, Sept. 19— The following are remarks prepared by U.S. Senator Lamar Alexander (R-Tenn.), the Ranking Member of the Senate Health, Education, Labor and Pensions Committee, for his opening statement at today’s hearing, the first in a series the committee is holding on reauthorization of the Higher Education Act:

The American higher education system of today is like the American automobile industry of the 1970s.

First, it offers a remarkable number of choices of the best products in the world at a reasonable cost.  Second, it is not doing much about challenges that will require major adjustments if, 20 years from now, it wants to be able to make that same claim of superior choices at a reasonable cost.

Sometimes we are so concerned about the direction of our country that we fail to notice what is going right and what is working. The United States doesn’t just have some of the best college and universities in the world. It has almost all of them. One respected Chinese University ranked 36 American universities among the top 50, eight among the top 10.

Our research universities, along with our national laboratories, have been the key to developing the competitive advantages that help Americans produce 25 percent of the world’s wealth. They are our secret weapons for innovation, and innovation is our secret weapon for competing in the 21st century global economy.

There are 6,000 higher education institutions among which students may choose ranging from Harvard to Nashville’s auto diesel college, from Yeshiva to Notre Dame, from the University of Phoenix to the University of Maryland, from Columbia State Community College to Morehouse College. And there are plenty of choices that almost any student can afford.

Three out of four students attend public institutions where the average in-state published tuition and fees are $8,655 for a four-year institution and $3,131 for a two-year institution.  Taxpayers heavily subsidize these opportunities.  Nationally, states pay more than half of the cost of a public college education. 

Half of college students have a federal grant or a loan to help pay for college. The federal government spends $35.4 billion a year on Pell Grants for low-income students. The federal government will make more than $100 billion in new loans to college students this year, will pay the interest on these loans for many of these students while they are in college, and will limit annual payments after graduation and even forgive the loans after 20 or 25 years.

To use an example, at the University of Tennessee, Knoxville, in-state tuition and fees are as low as $11,194 for new students because the state subsidizes the school.  Any student with a B average may receive up to $6,000 in a state HOPE Scholarship. In addition, a low-income student may receive up to $5,645 more in Pell grants. If even more money is needed, the institution may provide its own scholarships and there is a federal loan at 3.86% available for all undergraduate students -- with interest paid by the taxpayers for low-income students until the student graduates.

So if things are so good, why have these hearings?

David Halberstam’s book, The Reckoning, written in 1986 about the American automobile industry, provides the answer.  In the 1970s, the big three and the United Auto Workers became non-competitive and sluggish. 

Halberstam called it an oligopoly. They agreed among themselves to make big, profitable cars while Europeans and Japanese were perfecting smaller, more efficient cars. This eventually brought the American auto industry to its knees and, for a time, jobs went overseas.

When I became president of the University of Tennessee in 1987, I asked David Gardner, the president of the University of California, why his campuses were among the best in the world.

First, he said, autonomy. The California legislature basically created four branches of government and one of them is the university system, giving us the freedom to be as good as we could be.

Second: competition and choice.  California scholarships and federal grants and loans follow students to the campuses of their choice.

Third: a commitment to excellence by the faculty from the beginning.

I hope you will notice that the Dr. Gardner formula for success had nothing to do with orders from Washington, or even from Sacramento.

So as we seek to create an environment to help our 6,000 campuses to continue to provide the best choices in the world at a reasonable cost, I will insist that we remember his advice: Autonomy, competition, choice and excellence.

And we should focus on real problems, not imagined or politicized problems.

For example, student loans are a problem.  But 70 percent of federal student loan borrowers have less than $25,000 in debt and 40 percent have less than $10,000 in debt.  For a degree that the College Board says will earn you one million dollars more over your lifetime, that amount of debt should not be a problem.

What may be the problem is that certain students are borrowing more than they can ever afford to pay back and federal laws don’t allow colleges to say no to them. In other words, we in Washington are at least part of the problem.

Also, per capita state aid to public higher education has dropped sharply.  When I was governor in the 1980s, Tennessee paid 70 percent of the cost of going to a state college. Today it is 30 percent. 

But most of the problem is not in the states. Again, it is mostly us. Washington’s Medicaid mandates are soaking up the money governors would like to spend on higher education, which would in turn keep tuition down.  In the 1980s, Medicaid was 8 percent of Tennessee’s state budget. Today it is 26 percent.

We should be careful to resist the strange affliction that leads us to think that Washington knows best. 

In fact, Dr. Gardner’s formula for success is based upon the fact that in higher education policy, at least, Washington has done a pretty good job of keeping in mind that it does not know best.  As a result, we don’t tell Harvard and Nashville’s auto diesel college what its curriculum should be, or what it should pay its faculty, or what its tuition should be, or exactly what its researchers should study. 

And ever since the days of the GI Bill began in 1944, billions in grants and loans have followed students to the institutions of their choice, creating a true marketplace in which competition breeds excellence.

So as we move through this series of hearings and look toward solutions for today’s problems, we should keep all of this in mind:

  • That means no price controls for tuition.
  • That means no mandates about ways to cut college costs. 
  • That means no prescriptive Washington definitions of “quality”.
  • That means no Washington micro-management of research priorities at the finest research universities and national laboratories in the world.

Just because the President of the United States notices that the University of Tennessee has a good idea—or is encouraging its campuses to create good ideas—to graduate more students more rapidly, does not mean that we should insist that all 6,000 institutions do exactly that.

That means allowing campus boards of trustees and state regulatory institutions to grapple with online universities and tuition levels rather than imposing even more rules from Washington.

The American automobile industry was fat and happy and very reluctant to change—until competition nearly brought it to its knees.

The American higher education system will be even slower to change. Many of the oldest surviving institutions in the world are universities.

Let’s face it: one of the greatest obstacles to innovation has become— us, the federal government.

I voted against the last Higher Education Act authorization in 2008 because it would add a stack of regulations as high as I am tall—and that would have come on top of a stack already that tall. This stack of regulations is not the result of evil doers. It is simply the piling up of well-intentioned laws and regulations carrying them out without anyone spending an equal amount of time weeding the garden first.

I have asked my staff to consider drafting a new Higher Education Act from scratch. Start all over. Include everything that needs to be included and consider new regulations that needed to be written. 

This is not an ideological exercise. Just one way to allow campuses to spend their money on students instead of regulations. I would welcome volunteers to help me do this, from both sides of the aisle.

So I look forward to these hearings.    

Our goal should be to address how the federal government can create an environment in which 20 years from now, 6,000 American colleges and universities can still offer the best higher education in the world with the greatest number of choices at a reasonable cost to students.

As with the auto industry in the 70’s, there are clear signs of trouble: We are no longer the leading nation in postsecondary completion—in the latest data we rank fourteenth.  Fewer of the brightest international students are attending U.S. colleges and staying here after they graduate. The Governor of Tennessee and other governors tell us that the biggest problem they face is the lack of a properly trained workforce. Colleges and universities continue to operate inefficiently, shutting down for the summer and leaving their expensive buildings unused. In too many institutions, there is disturbing political correctness in the name of diversity.

And, of course, there is the burden from government, as highlighted by a former Stanford University President who once told me that seven cents out of every tuition dollar went to complying with federal regulations – and that was before the passage of the 2008 Higher Education Act which doubled the stack of existing regulations.

The stakes are high – just as the decline in the auto industry sent jobs and profits overseas, a similar failure in U.S. higher education would damage our economy and send the best minds overseas.  In a highly competitive world, there is no guarantee that we will continue to produce 25% of the world’s wealth.

The best way to avoid that fate as we proceed through these hearings is to keep in mind Dr. Gardner’s words:  Autonomy. Competition, Choice. Excellence. And, I would add one more – Deregulation.

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