Obama's College Tour

The students and professors may be cheering on campus, but there are plenty of people in the private sector who are getting tired of paying for them.

Just as high school juniors and their parents are touring college campuses to decide where to apply, President Obama is embarking on a college tour of his own.

Taxpayers, alas, may experience the same trepidation that the parents of the high school juniors do: this is going to cost us.

Mr. Obama’s stated purpose is to get Congress to come up with $6 billion to prevent the interest rates on federal Stafford student loans from increasing to 6.8% from 3.4%.

But a closer look at the campuses Mr. Obama has chosen to visit this week—the University of North Carolina-Chapel Hill, the University of Colorado-Boulder, and the University of Iowa—has the potential to highlight just how much taxpayer money is already being poured into the higher-education industrial complex, and how those funds are being spent. It may not be quite the message Mr. Obama would like to focus on.

Take the University of North Carolina-Chapel Hill, where Mr. Obama will speak Tuesday, and where students reportedly camped out on line outside in the rain overnight for tickets to the president’s talk. U.N.C. Chapel Hill says it received $574.5 million in federal research funding in 2011, up from $353 million in federal research funding in 2007, the most recent year for which a full compilation is available. That includes funds from the federal departments of agriculture, energy, and defense, and from the National Aeronautics and Space Administration. In addition to that research funding, it gets another $14 million a year in Pell Grant funding toward tuition for needy students, according to the Pell Grant numbers for 2009-2010. It got another $534.7 million from the state of North Carolina, for total government-sourced revenues of more than $1.1 billion. And that’s not even counting the subsidies the university gets by being able to invest its endowment essentially tax-free, by being able to offer charitable tax deductions to its donors, by being able to raise capital with tax-exempt bonds, or by receiving Medicare and Medicaid payments at university-affiliated hospitals and medical offices.

All told, more government money is spent on the University of North Carolina-Chapel Hill than on the White House and all the officials in the executive office of the president of the United States. At $420,000 a year, UNC chancellor Holden Thorp makes more than President Obama, whose salary is $400,000. And Mr. Thorp also had his university-provided residence get a $165,627 upgrade. The U.N.C. basketball coach makes $1.6 million a year.

At the University of Colorado-Boulder, where Mr. Obama is also scheduled to appear Tuesday night, it is a similar story. The University of Colorado’s annual financial report discloses $46 million in federal Pell Grant revenue in 2011, along with $145 million in aid from the state government of Colorado, and $653 million in federal grants and contracts.

The University of Iowa, where Mr. Obama will visit Wednesday, in 2011 got $245 million from Iowa taxpayers, $16 million from the Federal Emergency Management Agency to pay for expenses related to a 2008 flood, and $394 million in federal research funding, according to its annual report. The University of Iowa’s president, Sally Mason, reportedly is paid $483,600 annually plus $150,000 per year in deferred pay — more than President Obama. The Iowa football coach, Kirk Ferentz, earns $3.675 million a year on an escalating contract that runs through 2020.

Mr. Obama wants to argue that in addition to the Pell Grants and the research funding and the charitable tax exemption for contributions and the tax exemption for education-related municipal bond offerings, taxpayers should also foot the bill for subsidized student loan interest.

The effect is to obscure the price signal sent by the tuitions. If it were private lenders rather than President Obama setting interest rates, one might begin to see competition in rates. Students entering fields likely to yield jobs might get loans at lower rates, while those entering fields with worse job prospects might be charged higher rates. Students with better grades might earn lower interest rates. Lenders might charge different rates to students at different schools, depending on the track records the students at the various schools have at repaying the loans. If the money were being offered at market rates rather than subsidized rates, there might be more pressure from the students to bring down the tuitions, and thus the salaries for the presidents and football and basketball coaches.

None of this is to say that all federal or state funding for higher education should be ended tomorrow. Some of the research money is surely better spent in institutions where federal and state money is combined with private tuition dollars and alumni donations than it would be in federal labs that are entirely government run. Plenty of important and valuable learning happens on these campuses, and interactions on them can spawn companies like Google. But in an America where the private sector is downsizing, economizing, outsourcing, and using technology to run more efficiently, President Obama’s tour of three state-run college campuses may just backfire. The students and professors may be cheering on campus, but there are plenty of people in the private sector who are getting tired of paying for them.

Ira Stoll is editor of FutureOfCapitalism.com and author of Samuel Adams: A Life.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • UCrawford||

    One flaw in your argument. I can't speak for every other state, but in my home state of Kansas (where our b-ball and football coaches make a hefty salary) the money is paid out of an athletic fund (The Williams Fund) that gets its money from donors, not money from taxes. I believe that Roy Williams at UNC may be in the same boat. Adding large coaches' salaries to the same pool with administrators' salaries in a claim that taxpayers are getting screwed would then be a flawed argument.

  • ||

    Maybe some schools do benefit from their sports programs but IIANM, there are studies which show that for the vast majority of schools athletics is a net financial drain.

  • UCrawford||

    It depends on which sports you're talking about. Football and basketball tend to be profitable...most of the others aren't. But then in the other sports, most of the coaches don't make the big salaries (except in women's basketball, which is a total revenue loser at all but about six schools).

  • UCrawford||

    For my original point, I was primarily arguing that the coaches' salaries are a bit misleading in Stoll's piece because they aren't paid for with tax money, they're paid for with donations from boosters.

  • Registration At Last!||

    "The students and professors may be cheering on campus, but there are plenty of people in the private sector who are getting tired of paying for them."

    If the private sector is weary of the college system, it can stop making a Bachelor's degree a resume requirement.

  • UCrawford||

    ^^ This.

  • ant1sthenes||

    Won't happen as long as the discrimination lawsuit industry is functional. College degrees are safe, since you're paying your dues to the church of PC.

  • Registration At Last!||

    epic blame-the-lawyers fail

  • shrike||

    So Obama is campaigning in front of beneficiaries of student loans?

    Its like when the Bushpig's spoke to Christo-Fascists for years - and bespoke of Fascist policy.

  • Peter L||

    Preaching to the choir?

    "Here, I'm going to give you this money. Isn't that a great idea?"

    Of course they will agree with him, everybody loves some free money.

  • ||

    Shreik, "their guy did it, so it's A-OK when our guy does", doesn't really cut it. Especially considering all the protest over "their guy" doing it.

    Ah yes, remember when it dissent was the highest form of patriotism. Now it just means you're a racist.

    :)

  • Jerryskids||

    Why do you hate children? (Especially the children who can vote.)

  • ZungyMomo||

    Never fear, Obama will throw a speech at it and make it all good! Watch and see!

    www.Planet-Anon.tk

  • Jake W||

    We'll take the private sector's money, educate you so you can get hired and make the private sector its money back... Even though we bankrupt the private sector killing its ability to one day hire you, ah screw it, stay for graduate school. I'll give a speech or two in the meantime and then it'll be all better and you can get hired then. Yea, that's what will happen this time...

  • ||

    Nice (although admittedly generic) piece about the taxpayers' monies revolving in-&-out of the Federal govt.:

    http://city-journal.org/2012/eon0423hm.html

  • joy||

    by being able to offer charitable tax deductions to its donors, by being able to raise capital with tax-exempt bonds, http://www.riemeninnl.com/riem-hermes-c-18.html or by receiving Medicare and Medicaid payments at university-affiliated

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