Washington's New College-Cost Crusader

A freshman Democrat takes center stage in the cost debate

By Pail Fain
September 29, 2008
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Rep. Peter F. Welch, a Vermont Democrat, has emerged as an outspoken critic of the rising college costs. The first-term congressman has discussed legislation that would require wealthy colleges to spend 5 percent of their endowments, and this month joined Sen. Charles E. Grassley, the powerful Iowa Republican, in playing host to a roundtable of college leaders.

A lawyer and former state lawmaker, Mr. Welch, says he is a supporter of higher education. His wife, Joan M. Smith, was dean of the College of Arts and Sciences at the University of Vermont until her death from cancer in 2004. But Mr. Welch appears committed to his role as a reformer of higher-education finances.
The Chronicle recently interviewed Mr. Welch in his congressional office.

A transcript follows:

Q. What piqued your interest in college costs?
A. As a legislator who in the State House, and now down here in Washington, has been an avid and unrestrained supporter of increasing aid to students and funding research and providing taxpayer dollars to colleges and universities, it became apparent that the price rises were just keeping ahead of the ability of families, students, and parents to pay the tuition, and getting ahead of taxpayer ability to keep putting more money in student aid. And many of us here started noticing that every time we raised a dollar in student aid it would be burned up with a dollar increase in tuition.
So you look at some of the statistics: In the last 10 years, tuition and fees have gone up about 70 percent — median household income has only gone up 30 percent. You just can't have that disconnect. And it's almost in a way like health care ... when you have healthcare rising at twice the rate of inflation, it's not sustainable. And frankly, I got involved largely because I started hearing from many of my constituents about their absolute apprehension about their ability to pay for college.
I'll give you one story. This mother from Brattleboro called, and she and her husband both work. They have three kids. And they figured out every way to try to pay for the education of three kids, and that's mortgaging their house, getting student loans, getting grants, everything that was available. And they only had the ability for two out of the three. And they literally were making a Sophie's choice — which of their kids was not going to go to school. The point here is that if we're going to maintain access, it has to be affordable. It has to be somewhere in the range of what taxpayers can support and what families can support. So since I've been a strong supporter of student aid and funding for our universities and colleges, it's a fair question, I think, ... to ask the university administrators to see and sense the urgency of addressing the cost issue.
Q. Is it true that you received a hostile response from higher-education leaders?
A. I did. And it was, in a lot of ways, very disappointing. I proposed this, as an amendment, the 5-percent -on-endowment-expenditure requirement, which is, after all, what private foundations are required to do. The Gates Foundation does great work and sustains its endowment. The Ford Foundation, Rockefeller Foundation, same thing.
Well, there was an uproar. Within 20 minutes of me proposing this I was getting calls from members of Congress all across the country who were hearing from their local universities about this great threat. And frankly, I thought that was overly defensive and unwise on the part of the higher-education community. They more than anyone understand how important higher education is. But in order to make it accessible, it's got to be affordable. So I would think the higher-education administrators would want to take the lead in providing practical steps to try to control the cost. And they're the ones who would know how to do it. They know what the problems are. But they've got to take the lead and work with us, and demonstrate to Congress, which has just increased student aid by the largest amount in the history of the student aid program, that they're going to do their share on the cost side.
Q. Do you see colleges responding in constructive ways?
A. Yes, I do. Senator Grassley and I convened a roundtable. And Senator Grassley's point on a roundtable is that it allows for a conversation, as opposed to a confrontation. And I believe in that. A couple of things happened in that roundtable. No. 1, the colleges' and universities' presidents, led by President Tilghman, indicated a total willingness to make transparent and public their endowment earnings and endowment expenditures — what are they putting into educational functions? And that's overdue. We've got to follow through and make sure it happens, but that was progress. Second, I think Senator Grassley and I conveyed to them how urgent it is that they start getting aggressive on the cost side. Senator Grassley is a senior member of the Senate, a Republican. And I'm a very junior member of Congress, a Democrat. But I think it reflects a real bipartisan emerging concern on Congress's part about, hey, let's get some control on the costs.
There were very practical comments that were made by the various folks about how a 5-percent requirement could adversely affect them, or what some issues are that we should take into consideration if we're intending to pursue it. Senator Grassley hopes, and I do, too, that the higher-education community's getting the message that there is concern in Congress about the cost will lead our educational administrators to take the lead. I certainly hope that happens. But I'd be still inclined to pursue my 5-percent requirement, because I think that's a very modest requirement, and to give the flexibility to the institutions to figure how best to spend that money to meet the objective of educational opportunity.
Q. So you are still considering the spending requirement?
A. I am. Self-correction is the best. And the cost issues are tough. Universities and colleges have immense budget pressures. My wife at UVM, I saw how she had to struggle mightily to keep a budget tight. You've got personnel costs, energy costs, health-care costs, and those are things that all businesses and families contend with. Higher-education institutions also have to spend money on the maintenance and the creation of knowledge. And those are investments that will pay off down the line. So those are pretty compelling arguments that I fully appreciate.
But on the other hand, are there some structural redesigns that the colleges and universities can do? They can answer that question better than us in Congress. And they've got to start asking those questions about, What's the design? What's the proper student-professor ratio? How do you allocate resources between instruction and research and extracurriculars? A lot of these issues that go into a budget are best answered by the people administering the budget. But the bottom line is that you can't have cost rising two times the rate of inflation or two times the rate of people's income. It just isn't sustainable. And it's an issue that we see in other areas, like in health care. So the fact that we need health care doesn't justify spending more money than we can afford. You've got to have a health-care system that provides us health care and is affordable given the incomes that the country and most people have. That's true in education as well.
Q. Do you believe colleges are doing enough to control costs?
A. I don't want to get pejorative about this because in fact, the colleges do a great thing. And again, my close association with my wife, when she was a dean — I saw how hard people work, and what the real issues are. But the bottom line: It's simply not sustainable. So if you come to that conclusion, that you can't continue going to the taxpayer well, where we're overextended. You can't keep going to the families whose budgets are completely out of whack before they remortgage their house to try to pay for tuition. Then you know some changes have to be made. And that requires some cooperation.
For instance I do believe that on energy and on health care, the federal government should be doing much more to help bring down those costs with a sensible energy plan and a sensible health-care plan. The colleges and universities are stuck with the same ever-rising burden that families are, that every business is. So we here have to make public policy that's helpful. But there are things at the institutional level that need the leadership and the tough-minded decisions of our college presidents and boards of trustees. We should not in Congress be micromanaging what's going on at a university, at all. But the universities should be vigorous and energetic in trying to do what they can do, even when it requires some hard decisions, to keep those costs down so that access to education is strengthened.
Q. How will the crisis on Wall Street affect the debate on endowment spending?
A. It would adversely affect it. In our roundtable there were a couple of good comments. One, you want a rolling average. You don't want it to be just year by year. OK, so there might be a three or five-year frame, so that you allow some flexibility for maximum return. That made sense to me. Second comment that I thought was quite good, interestingly enough, was from the president of Berea, who says you don't want to make people spend just because they have the money, and then spend on things that are unnecessary. That's a good, practical suggestion. So I think there were very good points made about how best to manage something.
But bottom line, obviously, when universities and colleges are getting the benefit of a $54-billion deduction — that's essentially what it amounts to each year, from the treasury — then that's in exchange for them meeting the educational purposes of that endowment. Now, they have to spend some. And what's the right amount to have a fair quid pro quo between the taxpayer who's deducting $54-billion and the universities that are benefiting from that? And the reason I settled on 5 percent is, that's what works with the private foundations that all go through the same cycle of ups and downs in the stock market.