Higher education doesn’t work like a normal business. It’s much harder to get the results you want out of the investments you make. In my book with Andrew Kelly, Reinventing Financial Aid, I have a chapter where I go back to the inception of the financial aid system and I work through the set of decisions that were made and put in place at the beginning. (There was the question) “Should you send aid directly to students or to schools?” The thinking at the time was – led by economists, including Milton Friedman — we should not send the money to schools, but to students. They argued that doing this would exert control over schools the way we think vouchers do today.
But the thing is (it doesn’t) end up working in the way vouchers were intended. The customers (college students) have a very hard time extracting accountability. Institutions don’t seem constrained at all. I argued in that chapter that we made a critical mistake. By not sending money to the schools we (state and government agencies) gave up the ability to hold schools accountable. But I don’t think we can back our way into that now by attaching a bunch of new rules to existing programs. I think we have to create financial aid version 2.0.