Second, our current system of student loans, grants, tax credits, and private funding isn’t working. For-profit schools engage in widespread deception and fraud. Students take out huge loans and frequently end up drowning in debt. On-time completion rates are abysmal.34 High levels of debt have negative social and personal consequences for graduates—they are unable to spend money on purchasing a new house or saving for retirement.
Reform is possible, of course. Regulation might increase transparency regarding job outcomes and crack down on fraud by for-profits. We favor these fixes, but they are minor tweaks to a system that is complex and irrationally designed. No one designing a system from the start would advocate layers upon layers of tax credits, grants, loans, scholarships, and private dollars that differ based on school type, veteran status, subject area, future jobs, and a variety of other factors. No one would design a system from the start that forces students and parents to spend huge amounts of time and effort navigating a complex patchwork of financial aid forms, tax documents, scholarship applications, and everything else just to pay for a program that everyone deems necessary or at least strongly desirable.
Third, we are skeptical of the “skin in the game” argument. Our society does not require poor families to pay for their kids to get a K–12 education, because many of them could not manage it, and society views K–12 education as critically important. It is possible that some children would work harder and some parents would be more attentive if they were paying for basic education, but the benefits of free education far outweigh the costs. We believe that the same is now true in higher education.
That said, we are not opposed to a reasonable fee for higher education. Public options don’t always have to be free. If you want to send a letter, you have to buy a stamp. Public beaches sometimes charge a small daily parking fee. But the prices are low enough and sufficiently regulated to ensure that access is effectively universal. We would be comfortable with that in the context of higher education, too.
The third argument that opponents might raise is a practical one. Because our existing system is so complicated and has so many stakeholders, it will be hard to transition to a public option. To address that objection, we need to spell out in more detail how a range of public options in American higher education might actually work.
Public Options for American Higher Education
Given the strong case for universal access to debt-free higher education, it isn’t surprising that political leaders on both sides of the aisle have tried to expand the public option in higher education. There are a number of options out there, some that have been tried and tested, and some that are more speculative.
Tennessee has one approach. The former Republican governor in that state, Bill Haslam, created Tennessee Promise and Tennessee Reconnect, programs that make community colleges tuition-free for his state’s students. Under the Tennessee Promise scholarship, students who maintain a minimum GPA, participate in some community service activity, and attend mentoring meetings are eligible for a “last dollar” scholarship: after taking into account Pell Grants and state scholarship funds, if the student still has tuition and fees to pay, the Tennessee Promise scholarship will cover the remaining amount. The scholarship applies to two-year programs at all of Tennessee’s community colleges, technical schools, and schools offering associate’s degrees.35 Tennessee Reconnect operates the same way, but it is a scholarship for adults.36 Eleven other states have proposed or adopted versions of Promise scholarships.37 Tennessee’s Promise operates as a way to adapt our complicated financing system to what is, in effect, a public option for two-year higher education programs.
Inspired by the success of Tennessee Promise, President Barack Obama proposed a nationwide program for free community college. America’s College Promise differs from Tennessee Promise in a few important ways. While it applies to students pursuing two-year degrees, it would also cover the first two years of school for those in four-year degree programs at community colleges. Under the program, the federal government would cover three-fourths of the cost of community college, and states that wanted to participate in the program would cover the rest.
The key difference is that President Obama’s plan was a “first dollar” scholarship, not a “last dollar” scholarship like the Tennessee program. Under a “last dollar” scholarship, state funding will go primarily to slightly higher-income students who don’t qualify for Pell Grants or other need-based scholarships. (Lower-income students’ tuition and fees are largely covered by those other grants, so most of the Promise scholarship money doesn’t need to go to them.) Under the “first dollar” approach, the federal and state governments would cover tuition for everyone. That’s important because it means that working-class students could still use Pell and other grants to cover room and board, books, and other expenses.38 As a result, the “first dollar” approach should expand access to higher education to working-class students who couldn’t afford it otherwise.
During the 2016 presidential primaries, Senator Bernie Sanders took another approach to creating a public option for higher education, arguing that all Americans should have the ability to go to college debt-free. Some critics, including then-presidential candidate and former secretary of state Hillary Clinton, attacked Sanders’s plan, arguing that taxpayers should not be subsidizing free college for the children of the wealthy. This argument was misguided, because most taxpayers would not be subsidizing the wealthy; the wealthy would end up paying for college through higher tax rates. Indeed, Sanders proposed to fund his plan through a financial transactions tax that would hit upper-income people more than middle- and lower-income people. In fact, K–12 education already works this way: public schools are free for everyone, but the wealthy end up subsidizing the educations of everyone else because they pay higher tax rates.
A more technical problem with Sanders’s plan is that it was designed as a matching grant program, in which the federal government would pay two-thirds of costs as long as the states kicked in the other one-third. The virtue of this plan is that it recognizes the reality of our higher education system—it is a patchwork of state and federal programs, with public universities and community colleges operated by the states, not the federal government.39 The problem is that some states might refuse to expand access, as many Republican states did under the Affordable Care Act’s attempt to expand Medicaid. Under Sanders’s plan, if states refused to take the matching grants, their citizens wouldn’t benefit from a public option.
These are all solid possibilities, despite our caveats. We also want to offer another approach for a public option in higher education to all Americans. We call it Adams University.
Adams University: A National Public Option for Higher Education
On December 6, 1825, President John Quincy Adams declared in his annual message to Congress that “the first … instrument for the improvement of the condition of men is knowledge.” Adams therefore recommended creating a national university, and imagined it “unfolding its portals to the sons of science and holding up the torch of human improvement to eyes that seek the light.”40
John Quincy Adams wasn’t the first member of the founding generation to believe in the importance of a national university. John Adams, Ben Franklin, Thomas Jefferson, James Madison, Benjamin Rush, George Washington, and Noah Webster all advocated for the creation of a national university. Benjamin Rush said a national university was necessary to “prepare the principles, morals, and manners of our citizens” for republican government.41 The curriculum needed to ensure that Americans “imbibed federal and republican ideas”—history, law, and commerce, in addition to mathematics, agriculture, biology, botany, and foreign languages.42 In his Farewell Address, George Washington called for a national university that would educate not just those “who are entrusted with the public administration” but also “the people themselves to know and value their rights.”43 James Madison thought a national university would “enlighten” opinion, reduce “
sources of jealousy and prejudice,” improve “national character,” and increase “social harmony.”44
Despite the fact that a national university had the backing of some of the most extraordinary people in American history, it’s hard to imagine Congress establishing a single national university today, akin to West Point or the Naval Academy. Indeed, with a population of more than 300 million, America would need a lot more than one national university.
But with advances in technology, it is now possible that a national university could scale up and help educate millions of Americans—all for a free or nominal price. We propose calling it Adams University, after John Quincy Adams, the last great champion of a national university in early America.
Here’s how it would work. Adams University would be a national public option for basic higher education run entirely online. Many basic courses—Biology 101, Intro to American Government, Introductory Calculus, Fundamentals of Accounting, Econ 101—don’t require in-person instruction for lectures. Adams University would offer instruction in all of these areas, and others, to anyone who wants to take them, young or old. Two features of online education make this possible. First, the primary cost is putting together an online platform and producing video or audio alongside course materials. But once that is completed, there is no significant cost per additional student. Whether 1,000 or 10,000 students do the readings and watch the lectures, the cost to the government is the same. Second, basic courses in these areas often don’t require small-group instruction, and student performance can be evaluated through standardized tests. Indeed, at many big state schools, introductory courses often have hundreds of students attending large lectures and taking multiple-choice assessments.
To those of us educated in bricks-and-mortar institutions, online education may seem questionable. But, more and more, state schools have already adopted online instruction for large courses, and Adams University represents an extension of that approach. Many state schools offer large catalogs of online courses, and more and more, entire degrees can be earned online.45
But a public option would improve on this approach. Right now, many colleges and universities are developing online education—and the federal government is indirectly subsidizing these duplicative efforts through its tuition subsidies. Rather than paying for schools to develop hundreds of these programs, Adams University would develop, offer, and pay for a single online university.
And Adams University could also help transform the rest of the higher education system. Colleges and universities have discretion to accept credits from private online education providers, but the government would require that Adams University credits be transferrable to any public school in the country—four-year, two-year, state, or community colleges. As a result, schools wouldn’t need to offer big lecture classes in these areas; students would take basic lecture courses through AU. Public universities and community colleges could rethink their priorities, now allocating dollars to in-person instruction—writing classes, lab courses, and hands-on technical training. To help students who are struggling, schools could offer in-person remedial and supplementary support that operates in conjunction with AU’s curriculum. With a more intensive focus on teaching, research universities would not need to hire famous researchers to teach basic introductory courses. They would focus on hiring faculty who will teach full time and establish separate tracks for talented researchers.
Adams University could also provide useful competition for both nonprofits and for-profits. With a national program, a simple fee structure, and quality courses, Adams would offer a compelling alternative to high-pressure, high-cost private options. Low-income students, veterans, and others would quickly learn that AU provides an easily accessed path to a college degree. Middle-class students, too, could begin to see the advantages of earning the first two years of a college education for free.
For those students who wanted to pursue four-year degrees, the system might offer a range of options. Adams University could offer a limited number of degrees in areas in which personalized instruction isn’t necessary, just as some public colleges already do. In areas in which personalized instruction is necessary, Adams University credits would work in concert with public schools. We’re agnostic as to how funding could work: the Tennessee Promise last-dollar plan, the first-dollar America’s Promise program, Sanders’s debt-free college plan—all of these programs could work to help students cover the costs of college. The transformative part of Adams University is that it would allow public colleges and universities to save considerable sums on what are now duplicative courses that don’t require in-person instruction—and, in turn, lower tuition rates while investing in higher-quality instruction.
Adams University cannot solve every one of myriad problems with American higher education. But we think it should be part of the debate on how to make progress in higher education.
9
Banking
Tens of millions of Americans are “unbanked,” a clumsy but descriptive term for people who don’t have a checking or savings account. Millions more are underbanked; they have a checking or savings account, but they also use financial services within the fringe banking sector—services like payday loans, money orders, check cashing, pawnshop loans, and the like.1 According to a report from the Federal Deposit Insurance Corporation (FDIC), 7 percent of American households were unbanked in 2015, and another 20 percent, or nearly 51.1 million adults, were underbanked.2
The fringe banking sector wasn’t always so significant. In the early and mid-twentieth century, fringe banking was relatively minor. Poor and working-class people gained access to the financial system through a wide variety of cooperatives, community banks, credit unions, and other innovative, small-scale financial institutions.3 Between the Great Depression and the 1970s, for example, pawnbroking declined steadily, due to the growing economy and the increased availability of credit.4
But starting in the mid-1970s fringe banking began to grow, and it expanded massively as a sector in the 1980s.5 There are a lot of reasons. For one, the advent of the neoliberal era brought banking deregulation. As deregulation increased competitive pressure, banks jettisoned lower-profit services that were mostly used by poor and working-class people.6 The leading scholar of the rise of fringe banking estimates that between 1977 and 1991 the number of banks offering free accounts plummeted from 35 percent to only 5 percent.7 Banks also raised fees in order to make more money. The Government Accountability Office estimated that banking fees nearly doubled between 1977 and 1985, from a range of $22–$37 to $41–$55.8 When combined with increasing economic pressure on working-class Americans and rising economic inequality, more and more Americans migrated into the fringe banking sector.9 Between 1977 and 1989 the number of American households without a deposit account almost doubled.10
Unbanked Americans give a variety of reasons for not having accounts. More than a third say the primary factor is that they simply don’t have enough money. About a quarter say that high and unpredictable fees are partially responsible. More than 15 percent say they have a problem with their credit or identification. Another 10 percent find the locations inconvenient. Perceptions of banks are a part of the story as well, with a significant number—almost 30 percent—citing privacy and distrust of traditional banks as a contributing factor.11 And 55 percent of the unbanked think that banks aren’t interested in serving households like theirs.12
Many of these concerns are legitimate. Minimum balance requirements, for example, are now high enough to exclude low-earning workers.13 In addition, banks often screen customers through a service called ChexSystems, which operates like a credit report. In some cases, customers who have previously used fringe banking services, such as overdrafts (that have been repaid), have been denied bank accounts.14
So how do the unbanked participate in the economy? While most people (82 percent of the underbanked and almost 88 percent of the banked) receive their income through direct deposit into a bank account, the un
banked instead rely on check cashing and money orders simply to use their hard-earned wages.15 Some of the unbanked still manage to save money, but they don’t save it in banks. Sixty-eight percent save money at home. Another 12.6 percent save through prepaid cards.16 And while 70 percent of people with bank accounts pay their bills online, only 1.6 percent of the unbanked do. Instead, the unbanked pay their bills with cash, money orders, or prepaid cards.17
Lack of access to the banking system is extremely costly, both financially and personally. Take someone who uses a prepaid card to save, pay bills, or just make ordinary purchases. Some prepaid cards have an endless array of fees—activation fees, monthly maintenance fees, ATM fees, reloading fees, transaction (or “swipe”) fees. Some prepaid cards have yearly fees as high as $500.18 Or say you want to cash your paycheck. A check-cashing place might charge up to 5 percent of your paycheck just to give you the cash.19 Then, if your electric or gas company won’t take cash to pay your bills, you’d have to pay between $5 and $20 to get a money order.20 These fees add up—so much so that a Council of Economic Advisors report estimates that the average unbanked household, with an annual salary of $22,000, will pay more than $1,000 in financial fees in a year.21
The unbanked lose time as well as money. Using the fringe banking sector takes more time than banking online because you have to go in person to buy prepaid cards, get checks cashed, or purchase money orders. If you’re working two or three jobs and barely making ends meet (or, more likely, falling short), the last thing you need is to spend time waiting in line just to gain access to your income or pay your bills. That’s time not spent working and not spent with your family.
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