More Than Credits Needed for Colleges

An institution central to the American dream is getting a tax break, but it may not be enough to prevent a financial crisis.

And it certainly won’t be enough to stave off the coming restructuring of the American college and university system.

Tax credits for higher education are a focus of the Taxpayer Relief Act of 1997, which President Clinton signed at the beginning of August.

Starting in 1998, many parents will receive a tax credit of $1,500 for each child’s tuition and fees during the first two years of college. There is also a Lifetime Learning tax credit equal to $1,000 a year--rising to $2,000 after 2003--to help working people re-educate themselves for changing job markets.

“Lifetime learning could be the most significant long-term feature of this tax act,” says David Warren, president of the National Assn. of Independent Colleges and Universities, a Washington organization that represents 1,500 private schools.

All told, the credits, deductions and allowances for education “IRAs” add up to $40 billion of tax relief in the next five years for parents, students and savers for higher education.

Direct tax credits add up to $6 billion a year, which is why Clinton and other politicians, along with many education experts, liken this year’s legislation to the 1944 GI Bill of Rights and the 1965 Higher Education Act.

Those earlier landmarks drew millions of new students into university systems and had a powerful long-term effect on the national economy.

Yet in the troubled context of higher education today, the new tax act seems more like a Band-Aid than a bold initiative. Its $6 billion a year in tax relief won’t even offset the cuts in higher-education aid that the 50 states have made over the last decade. State cutbacks have been greatest in California.

Nor is the new tax act as openhanded as the earlier laws. Its benefits often cancel out existing forms of aid. In fact, one of the new tax credit’s main purposes may be to reduce the amounts of financial aid colleges give to help students pay mounting tuition charges.

Tuition and fees have quadrupled since 1980 even though student enrollments have increased only 16% and faculty numbers are up little more than 20%.

The blizzard of contradictory statistics points up the great paradox of higher education at this time: It is a mighty economic engine, taking in and spending roughly $200 billion a year through more than 11,000 campuses with 14 million students. And it is predicted to grow by more than 4 million students a year for the next five years.

It is a system charged with great missions of bringing more people into the fullness of American life, educating for work in new industries and doing some of the very research that brings those new industries into being.

Parents clamor to get youngsters into college because higher education promises incomes of $25,000 a year to start and a lifetime of rewarding possibilities after that.

And yet the system is a financial mess. There is overcapacity, duplication of effort and little accounting as to the true cost of instruction or services, charges a report, “The Fiscal Crisis in Higher Education,” published recently by a commission of business and academic leaders who studied the system for two years with the assistance of Rand Corp., the Santa Monica think tank.

The system needs wholesale reform, says Peter F. Drucker, the management authority who is a professor of social sciences at Claremont Graduate University.

Drucker has seen a form of the future that works. “In China, 1 million students are being taught at long-distance through satellite broadcasts,” he says. “Britain has used long-distance learning for decades through its Open University; Germany is doing it.

“At Claremont five years from now, we’ll have twice as many students off campus as on,” says Drucker, the author of some 40 books on industrial change and history.

The effect will be to deliver education at 10% to 30% of today’s on-campus cost. But it won’t be done by replacing teachers.

The work of professors will intensify. “Greater preparation is needed for long-distance teaching. Personal contact through visits two to three times a year with small groups is essential,” Drucker says.

A main problem today is that colleges cannot meet student demands for choice of courses and for services of all kinds, he says. Off-campus teaching will reach more people at lower cost.

The Rand-assisted Commission on Higher Education recommends specialization. “Community colleges should stress work force preparation, state undergraduate universities should lead in teacher training and regional development, and major universities should focus on research and graduate education,” its report says.

Examples of change are already evident in the U.S. system. Thousands of courses are available on the World Wide Web; physicians use Internet courses for continuing education; corporations use computer networks to train personnel.

One of the nation’s largest private colleges is the University of Phoenix, a subsidiary of Apollo Group, a $250-million-revenue company. Phoenix has 18,000 students but no campus. Students meet in leased office space and motels and at military bases; teachers earn $1,000 a course. “It has awarded 60,000 undergraduate and master’s of business administration degrees since 1980,” reports Anne Mathews in her book “Bright College Years,” a sympathetic but critical look at higher education.

As the system evolves, there will be increasing varieties of education. The new tax credits will help families and individuals--especially those with $20,000 to $50,000 annual income--to send kids to college or pay for their own lifetime learning, says Kal Chany, author of “Paying for College Without Going Broke.”

But more public resources will have to be devoted to higher education, says Roger Benjamin, a leader of the Rand study.

Yet a question arises even as a new academic year approaches: Why should more public resources be devoted to colleges and universities, which educate only 35% to 40% of the college-age population?

The answer is that colleges educate the nation’s leadership, further its knowledge and advance its society. That’s the way it has been from the Land Grant Colleges of the 19th century to the GI Bill in the 20th.

In the dawning new century, skills training for the rapidly changing world economy will be one of the great growth industries. And the traditional college system will have to transform itself to keep up.