College costs are out of control. Since 1985, college tuition and fees have risen more than 400 percent, far outpacing inflation. Families have dealt with skyrocketing college costs by relying on student loans. Two thirds of last year's college graduates accrued an average of more than $25,000 to complete their undergraduate degrees.
In order to understand a key but hidden reason why college costs are unbridled, we invite you to try the following thought experiment.
Imagine that over a generation ago, because of legitimate concerns about food safety, lawmakers made the following rule: To obtain and keep a restaurant license, a regional council of reputable chefs and existing restaurant owners would have to approve a restaurant's menus, chefs, wait staff, facilities and financing.
Although a system of expert peer review might indeed improve food safety, how would it affect your dining options? Would it generate a surplus of affordable and diverse options fitted to your taste and budget? Or would this system first meet the needs of established chefs and restaurants?
For those who love a variety of dining choices, a restaurant licensing system that focuses on health outcomes alone — instead of the wisdom of a guild of chefs — allows a wide variety of affordable restaurants to flourish based on how well an otherwise safe institution satisfies the wants and budgets of diners.
This thought experiment is not actually about restaurants. Rather, it is meant to shine a light on the workings of an obscure form of regulation in higher education known as accreditation, a system of entrenched peer review. Accreditation preserves time-honored methods but it also tends to shield colleges and universities from cost-saving innovation and competition.
In the United States, both the regulation of educational quality and access to federal funding at colleges and universities are effectively handled through putatively private but federally approved accreditation agencies.
Until the 1950s, accreditation was entirely private – a kind of "Good Housekeeping" seal of approval within higher education. But the federal government enlisted private accreditation agencies to ensure the quality of colleges and universities using G.I. Bill funds after learning that some veterans had squandered funds at fly-by-night "degree mills." And these now federally approved accreditation agencies became even more important when federal funding for higher education expanded with the Higher Education Act of 1965.
The amounts involved today are staggering. Last year, new federal loans to students at schools accredited by federally recognized accreditors totaled more than $124.8 billion and federal grants totaled more than $38 billion.
For reasons now largely forgotten, the six oldest and largest accreditors enjoy geographic monopolies in their oversight of colleges and universities and are known as regional accreditors.
The largely unquestioned power of the regional accreditors to certify colleges and universities for access to federal funds and transfer of student credit, coupled with their self-serving methods used to verify quality, means that most of American higher education operates like a guild —not a competitive market.
Guilds were those medieval institutions whereby government granted monopoly authority to a body of self-confirmed expert craftsmen to limit entry into the craft through long apprenticeships and peer review. And regional accreditors are effectively university guilds. They are governed by and for educational experts to sparingly dole out memberships. Only after rigorous self-study, peer review and lengthy periods of "pre-accreditation" can a college hope for membership. The practices that accreditors deem appropriate for higher education are determined by academic tradition, custom and practice.
In the U.S. there are nearly 4,500 institutions of higher learning serving more than 20 million students. However the regulatory dominance of six regional accreditors, each exclusively lording over one geographic region, stifles innovation. Because their stamp of approval carries so much power, the regional accreditor can effectively call the shots regarding such mission-critical issues as faculty credentials, the sufficiency of curriculum, the size of a library or the adequacy of student services.
What began as a system to protect consumers of higher education through private, decentralized quality control and assurance has unwittingly become a federally supported cartel with little transparency or accountability.
If policymakers truly wish to help the next generation enjoy the benefits of excellent higher education at an affordable cost, they need to bust up this regional accreditation cartel that serves a professional guild rather than the needs of students.
Two simple adjustments to existing regulations could make a major difference. First: abandon any geographic distinction for private accreditors. Require all federally approved accreditors to compete nationwide against one another on the basis of the value their approval adds to student learning outcomes. This would prevent them from simply enjoying rents from their regional monopoly. Second: allow the agencies that govern higher education within each state to qualify as accreditors for federal funding purposes. These two minor tweaks could foster vibrant competition within accreditation and therefore within higher education. Others might wish to consider more radical reforms. We simply hope the obscurity and complexity of the issue doesn't overshadow its importance for America's educational future.