College takes a whole lot of the other type of green.

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Making College Cheaper Is Easy. Open More Colleges.

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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Something is wrong with U.S. universities. Not catastrophically wrong, but wrong enough to warrant a push for reform. 

The problem is cost versus benefit. Although net tuition has only risen for students from higher-income families during the last two decades (because students with wealthier parents receive less financial aid), costs for textbooks and room and board have soared for all students. 

And parents, perhaps struck by the recession, or perhaps skeptical of whether college is worth the price tag, have been shouldering less of the cost, leaving students more deeply in debt than ever. Although defaults are much higher among students of for-profit colleges, debt levels have risen at all types of schools. Even if students pay back their loans, the presence of those liabilities on their household balance sheets will constrain their life choices. Here is a graph of total student loans outstanding per capita in the U.S.:

When education becomes more of a financial burden, it makes sense to ask whether students are getting their money's worth. Graduation rates have risen a bit since 2000, but are still fairly low -- for example, of students starting at four-year public universities in 2007, only 33.5 percent graduated in four years, and only 57.2 percent within six years. 

What's more, there's the question of how much benefit students derive from college. Sociologists Richard Arum and Josipa Roksa have found that more than a third of students at four-year universities showed no improvement on measures of critical thinking. 

Given these concerns, it's natural that people are thinking about how college could be reformed. Steven Pearlstein, writing in the Washington Post, suggests four measures that could be taken to rein in costs. His first two ideas -- capping the recent rise in administrative costs, and encouraging students to take more summer classes -- would be good, though their impacts would probably only be marginal

But Pearlstein's other suggestions are not as useful. He recommends having professors teach more and do less research, thus reducing the need to hire lecturers and adjuncts. But if most scholarly research is really as useless as Pearlstein suggests, an even better alternative would be to simply hire far fewer professors and far more lecturers. Lecturers, after all, are specialists in teaching, meaning they are probably better at it than profs (there is evidence to support this). They also cost much less to hire. 

There is a reason we have professors do research. In science and engineering, university professors are one of the main forces behind the U.S.'s innovative edge. They produce important basic research and pioneering technologies, and attract top talent from all over the world. If you replace research professors with lecturers in science and engineering -- or force professors to forgo research for teaching, which is the same thing -- you remove a long-term driver of America's competitive advantage and productivity growth. 

In the humanities, Pearlstein may have a point. Since humanities research doesn't produce technological advances, it's an open question whether humanities professors should be subject to the same high-output "publish or perish" culture that prevails in the sciences. Scholarship is still important, of course, but the relatively low citation counts for humanities papers suggests that professors in these fields might do better to revert to the old method of writing books over many years. Still, doing so would do very little to defray college costs. 

Regarding Pearlstein's final suggestion -- using new technology to improve education -- it sounds great, but isn't something that universities have yet figured out how to do. 

So something needs to be done about college costs, but all of the ideas on the table are marginal solutions at best. So here are two of my own. 

Idea No. 1: Increase supply. For some reason, for-profit college isn't really working out for American students. Student performance is very poor, and the price has soared. Unsurprisingly, that has led to large and rising numbers of for-profit college graduates who can't pay back their mountains of debt. 

Students need an alternative to failing for-profit colleges. Research shows that for-profit schools exploded in popularity because rising demand for college wasn't met by an increase in supply at public and nonprofit schools. The solution is to increase the supply of public universities. That means building new branches of existing universities, increasing enrollment at existing branches, and/or creating entirely new public universities. More supply of high-quality public schools will mean more college graduates, but also lower prices for everyone. 

Idea No. 2: Protect students from taking on too much debt. Students who borrow tens of thousands of dollars at age 18 are not sophisticated consumers. They often cannot foresee the consequences of graduating in debt, since they have no experience with either debt repayment or the job market. Many entering college students would therefore benefit from mandatory counseling before they are allowed to borrow money. Of course, that would require the federal government to reduce one of its revenue sources

But if students are protected from taking on more debt than they should, it will reduce demand for university spots. That will bring prices down while also preventing ill-prepared 18-year-olds from making decisions that they will later regret. 

If supply of good public universities is increased, and financial counseling is made mandatory, I predict we will see the college cost problem mostly disappear from our radar screens within a decade.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net