Guidance Counselor in Chief

Obama wants you to go to college, no matter what

Barack Obama isn't impressed with your high school degree. He made that quite clear in the early days of his presidency when he told Congress: "Whatever the training may be, every American will need to get more than a high school diploma. And dropping out of high school is no longer an option. It's not just quitting on yourself, it's quitting on your country."

Virtually every president in recent memory has made a big stink about higher education, usually without making fundamental changes to the system. However, on July 14 in Warren, Michigan, Obama put $12 billion where his mouth is, promising investments in community colleges around the country. The purpose, he said, was to drive reforms that would make it easier for people to get educated in the struggling economy.

But the more fundamental proposed change came the following day, when Rep. George Miller (D-CA) introduced a bill in Congress boosting the amount in Pell Grant scholarship funds given to low-income students. In order to pay for the expanded program, as well as the community college initiative, the legislation cancels subsidies to private lenders making college loans. Instead, the federal government will become the sole, direct lender. This is a big deal.

Obama isn't the first president to throw government money at America's higher education system and hope that it sticks. President George W. Bush fiddled around with his College Cost Reduction and Access Act in September 2007. The law implemented mandatory increases in Pell Grants, cut interest rates on student loans, and established a provision that would cancel any outstanding loans after 25 years.

Bush tried it again one year later with the Higher Education Act Reauthorization. Not only did it contain a wide array of federal student aid provisions, but it also mandated that the Department of Education publish a list of universities that have the highest tuition costs in 2011. Schools on the list would then be forced to justify and explain their tuition rates; a requirement that would be tantamount to a reprimand by the federal government for daring to charge high fees.

Despite (or perhaps because of) these half-measures, tuition rates at public universities continue to rise. According to a report issued by the College Board, the cost for going to college increased at an annual rate of 4.2 percent between 1999 and 2009, with tuition increasing 6.4 percent last year alone.

But after all those virtuous-sounding laws, paying for college just isn't getting any easier. Are greedy universities charging exorbitant amounts of tuition just because they can? Not exactly. Instead, government meddling has thrown the laws of supply and demand into overdrive.

This dilemma is not unlike what we saw in the housing market during the last few years. Someone decided homeownership was a good thing for almost everyone, so the government started pushing people to buy homes, using the tax code and other incentives. The same thing is happening with college. But instead of people getting loans for houses they could never pay off, 18-year-olds are getting excessive loans for college. And just as we saw before the collapse of the housing bubble, the price of going to college in America is skyrocketing.

The reason is simple. The increase in demand (artificial though it may be) means shorter supply, which ultimately means higher prices for everyone. But whether it's in the name of affordable housing or affordable education, the government continues to throw more money into the system, hustling to increase demand. The only difference with education is that instead of bailing out banks to force them to continue making loans, the government is now making the loans itself.

Traditionally, college has been discriminatory in the best possible sense. It was used to weed out those likely to be unsuccessful in the work force. Someone who did not make it through college did not make it to the high paying jobs, period. Furthermore, letting the market control tuition prices (even if they are high) means that many people who probably wouldn't thrive at college—or would do better at a blue-collar job—won't even apply in the first place. This weeding process would eventually decrease demand and in turn, prices would go down, especially at less competitive schools.

Instead, with government help and nudging, more and more people are entering college who wouldn't have made that decision if left to their own devices. We've seen the effects this kind of micro managing has on the housing market. If things don't change now, education will be headed down the same disastrous path and universities will soon become too big to fail.

Federal involvement in education is nothing new, but President Obama is taking it to an extreme level by taking the financing of college out of the private sector entirely. With the increase in and government administration of Pell Grants, Obama is aggressively funneling young people into college; a decision that just isn't right for everyone. Apparently it's not enough to be the country's head auto exec and commander in chief: Obama is eager to try out the role of guidance counselor in chief, too.

Amanda Carey is a summer intern at Reason magazine.