Breaking up the college cartel: 'Dangerous' or necessary?

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  • .@andrewpkelly asks "is it 'dangerous' to break up the college cartel"?

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  • Conservative higher ed reformers want to reform higher ed regulation; can they do so?

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  • "There’s a fundamental problem of regulatory capture here that tinkering with the existing system won’t solve"

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A handful of leading Republican policymakers have put higher education accreditation—the peer-review approval process colleges must go through to receive financial aid—at the top of their education reform agenda. Conservative reformers (myself included) have identified the accreditation process as a barrier to entry that limits the kind of innovation and competition that can curb tuition costs and give rise to more flexible options. As I wrote last month, Paul Ryan cited accreditation reform as a key priority in his efforts to promote economic opportunity, piggybacking on Mike Lee’s proposal to devolve accrediting power to willing states. Marco Rubio has also cited the need to reform this “biased and broken system” by creating a new, independent accrediting board.

Earlier this month, Slate’s Jordan Weissmann raised some important questions about what he called conservatives’ “dangerous plan to make college cheaper by busting ‘the college cartel.’" It’s a bit of a dramatic headline for the fundamental point Weissmann is trying to make: that conservative reformers need to be mindful of both quality control and lowering barriers to entry. Higher education policy is bad at both, but solving the latter and doing nothing about the former could open the door to all manner of federally-funded monkeyshines.

The problem is, it’s easier to assert that new guarantors of academic quality will be worse at quality control than it is to explain why this is the case. Indeed, Weissmann readily admits “where accreditors truly drop the ball right now is in quality control.” From there the logic seems to be “accreditation agencies are already bad at this job, so creating more will only make it worse.” He uses Lee’s bill as the example, arguing that “[allowing] every single state to approve its own accreditors” could “make a troubled situation worse.” He quotes New America’s Ben Miller as saying “If you just lowered the barriers to entry and in no way lowered what it takes to kick people out, you’d have a disaster,” though it’s not clear what reform proposal Miller is referring to.

Actually, it’s not a fact that states, writ large, have done an even poorer job in licensing new providers than accreditation agencies. Many states have actually been far more aggressive in going after the for-profit colleges that Miller and his former colleagues at the Department dislike so much. If anything, I’d be worried (as I was here) that some states would be even more protectionist than accreditors under Lee’s plan.

Weissmann goes on to argue that a better course would be to just modify the existing accreditation system to allow for “tiers” of accreditation, where institutions on the lower rungs would have their aid eligibility restricted rather than cut off altogether. It’s certainly a worthwhile idea, because the binary nature of accreditation has created a massive barrier to exit—nobody wants to pull the trigger when a college’s life is on the line.

But in isolation, it’s not clear that it solves the fundamental problems that conservative reformers are trying to solve. First, just because accrediting agencies would have new power to develop tiered systems, who’s to say they’ll be any more likely to let new providers in? Weissmann argues that the innovation critique has been somewhat unfair to accreditation agencies, which have granted institutions like Western Governors University latitude to operate a very different model. But proof by existence is not sufficient; for every innovative provider, how many never even got started because the transaction costs of going through the regulatory process were too high? (Parenthetically, in negotiating regulatory hurdles, it helps to be the creation of 19 governors and to have a federal law on the books that was specifically designed to allow you to operate). Why would we expect that tiered eligibility would suddenly lead accreditors to deviate from decades of tradition and enthusiastically embrace new organizations that look nothing like a college? Maybe they would. But maybe not.

Second, would the introduction of tiers necessarily lower the barriers to exit? Accreditation will still be a process of peer review, run by faculty from the very colleges that the agencies are supposed to oversee. It’s a reasonable hypothesis that a tiered system will encourage more concerted quality control and perhaps lower the barriers to exit. But when it comes time to lower the guillotine, are faculty members from peer institutions going to be any more willing to do so?

The point is, there’s a fundamental problem of regulatory capture here that tinkering with the existing system—creating tiers, for instance—won’t solve. You can give regulators more and different powers to put firms out of business and let new ones in. But if they have a vested interest in the constellation of providers as it exists now, why would they? You can tell a cartel to be friendlier to market entry, competition, and innovation all you want. But cartels exist to do the exact opposite of those things. The notion that policymakers can simply reprogram them to turn 180 degrees is naïve.

Instead, the key is to import both ideas—new entities and tiered eligibility—into one system. For more on this, stay tuned for a forthcoming policy brief from the Center on Higher Education Reform.

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Andrew P.
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