Federal Policy Might Encourage Innovation to Cut the Cost of College

RAND Corporation
Jun 5 · 4 min read

by Charles A. Goldman

Photo by jacoblund/Getty Images

This commentary is part of a series on issues relevant to congressional efforts to reauthorize the Higher Education Act.


As college-bound high school seniors and their families brace for that first tuition bill, many are certainly asking themselves: Why does college have to cost this much?

A big factor in the rise of college costs-which has outpaced household income gains for decades-is the traditional seat-time model. This requires undergraduate students to spend a specified amount of time in classrooms, frequently with doctorally qualified faculty. But there are alternative models that could enable colleges and universities to offer degrees more efficiently and affordably.

For example, in 2011, then-governor Rick Perry asked Texas’ public colleges and universities to offer students bachelor’s degrees for $10,000 or less. Several have accepted this challenge.

Central to these colleges’ plans are two approaches: competency-based education and recognition of prior learning. Competency-based programs give students materials and faculty resources to learn at their own pace. Students then demonstrate they’ve mastered the defined competencies through tests or other assessments. Some colleges even offer an “all-you-can-eat” price, in which students can earn as many credits as they can master for a flat rate per semester.

In other cases, students can earn credits for things they already know by taking an inexpensive test such as the College Board’s College Level Examination Program (CLEP). Students with military or workplace experience often can progress quickly through these competency-based programs to earn their degree at a modest cost.

These kind of programs could significantly reduce the costs of higher education-but there is one hitch. Such approaches may not be compatible with federal financial aid regulations. And if their students can’t qualify for financial aid, most colleges won’t invest in developing these innovative models.

Aid eligibility requires an institution to offer the majority of its courses-including online, distance and competency-based programs-in ways that entail “regular and substantive interaction” between faculty and students. To be sure, some educational quality standard is needed to prevent abuse of the federal financial aid system. Without it, there is a risk that colleges and universities might, for example, outsource their online education functions to companies that provide little interaction with qualified subject-matter experts and have low standards for assessing student mastery of the subject. As education policy expert Robert Shireman noted, too much deregulation could see online courses watered down into “glorified electronic textbooks” rather than real teaching and learning experiences.

So how could federal guardrails work without impeding innovation? They could empower accreditors and federal and state governments to gauge whether the essence of interaction between faculty and students is being maintained-even if that interaction takes place through online discussion groups or messaging rather than a traditional classroom setting. If a course is automated to the point where students are learning on their own, and not with the guidance of college faculty, it would be appropriate to cut eligibility for federal financial aid. As perhaps an extreme example, the State Council of Higher Education for Virginia is considering shutting down Virginia International University after an audit found seriously substandard online education practices including passing students who turned in low quality or plagiarized work.

The Department of Education recently convened a process that proposed more flexible rules on the “regular and substantive interaction” standard while continuing to guard against abuse. Accreditors also can play a critical role by closely examining these emerging higher education models during their periodic reviews.

An update of the Higher Education Act provides an opportunity for Congress to consider how to balance quality with innovation.

An update of the Higher Education Act, which gained momentum this spring, provides an opportunity for Congress to consider how to balance quality with innovation. The current law makes financial aid eligibility all-or-nothing, but technological advances might warrant reconsideration of that approach. If technology allows institutions to provide genuine college-level learning without much faculty involvement, perhaps such programs can be granted lower federal financial aid allowances. That flexibility might encourage innovation in educational delivery and save colleges and students money.


Charles A. Goldman is a senior economist at the nonprofit, nonpartisan RAND Corporation and a professor at the Pardee RAND Graduate School.

This originally appeared on The RAND Blog on June 5, 2019.

RAND Corporation

Curated content from the RAND Corporation, a nonprofit institution that helps improve policy and decisionmaking through research and analysis.

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The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis.

RAND Corporation

Curated content from the RAND Corporation, a nonprofit institution that helps improve policy and decisionmaking through research and analysis.

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