December 17, 2018

HIGHER EDUCATION BUBBLE UPDATE: College Bloat Meets ‘The Blade:’ Mitch Daniels, America’s most innovative university president, tells how he’s kept tuition from rising and how acquiring Kaplan University will expand educational access.

Mr. Daniels, 69, is the most innovative university president in America. Like his counterparts at other schools, he believes higher education has been “a competitive advantage” for the U.S.—“a nice little export industry, if you add up all the dollars that come here to purchase the education of students from other places.” He regards the rumbling in Washington about curbing visas for foreign students to be “very shortsighted.” But he also thinks American higher education has grown fat and complacent. He’s making inventive, even radical changes in the way his institution finances itself and imparts an education.

Mr. Daniels kicks off our conversation with a morality tale: “I’ll speak to an audience of businesspeople and say: Here’s the racket that you should have gone into. You’re selling something, a college diploma, that’s deemed a necessity. And you have total pricing power.” Better than that: “When you raise your prices, you not only don’t lose customers, you may actually attract new ones.”

For lack of objective measures, “people associate the sticker price with quality: ‘If school A costs more than B, I guess it’s a better school.’ ” A third-party payer, the government, funds it all, so that “the customer—that is, the student and the family—feels insulated against the cost. A perfect formula for complacency.” The parallels with health care, he observes, are “smack on.”

Mr. Daniels takes a different approach. In 2001-03, he ran the White House budget office for President George W. Bush, who dubbed him “The Blade” for his cost-cutting skills. Mr. Daniels brought his paring knife to Purdue. Examples of his efficiencies include replacing full-time dining-hall employees with student workers, scrapping the vast fleet of university-owned buses in favor of a private contractor, and saving $61 million on capital projects through what the university calls “innovative construction management.”

His most eye-catching achievement has been to keep costs down for students. By graduation day in 2020, tuition won’t have risen in eight years. “We’re able to say,” he says, “that the total cost in nominal dollars of going to Purdue will be less in 2020 than it was in 2012.”

Mr. Daniels says widespread adoption of Purdue’s “affordability campaign” would improve higher education. “Everybody is worried,” he says, furrowing his brow. “What are we at? A trillion and a half of student debt, twice as much as the total credit-card debt. It’s a social and economic problem.” He offers up a list of life’s milestones that people delay because of college debt: “marriage, household formation, child raising, homeownership, business-start formation—all of these things are being pressed down by college debt.” The “obvious first step,” Mr. Daniels replies, “is don’t charge so darn much in the first place.”

I dunno, if that kind of thinking catches on, it could threaten the whole feedlot.

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