Yesterday in Austin, Texas, President Obama called for new efforts to improve college graduation rates. Eleven countries, he noted, have higher graduation rates than the United States, and he wants to see us return to the top of the rankings in this area.
Philanthropists will certainly be called anew to participate in the effort to expand “access” to higher education in order to “have the workers that will compete in the 21st Century,” as Cecelia Rouse, of the President’s Council of Economic Advisors put it. Expanding access usually translates into increasing the supply of outside funding for colleges and universities, and donors will not be left out of the equation.
But philanthropists interested in helping out students need to be careful how they go about it. Scholarship funds are very popular targets of donations, for instance, and they do help individual students, but higher education’s main problem is not lack of money, even in these difficult financial times. Rather, the shameless rise in the cost of higher education, I am convinced, is due to the nefarious effects of a third party payer system, just as the third party payer system in health care has dramatically distorted the cost structure of health care. Giving money can simply add fuel to the inflationary fire so that one student benefits and everyone else is worse off. Donors must avoid being used as simply another third party.
Philanthropists who want their dollars to do real good might consider very targeted giving in this area. For instance, there are many poor students whose ability to attend college rests on a razor’s edge. One donor I know has set up an emergency scholarship fund at his alma mater. For some students, a small change in their circumstances – a single mother losing a baby sitter, a commuter student broken-down car – can lead them to have to drop out. Carefully monitored discretionary funds to help out with such expenses can change a life. But broadly giving to provide tuition support when the price of tuition is already as arbitrary as that of a used car is a bad philanthropic deal. This principle, needless to say, can be applied more broadly for college giving. Giving well requires giving carefully.