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An Alternative Version of Performance-Based Funding

Performance-based funding for community colleges doesn’t work. That makes sense if you think about it. If a college is underperforming because it’s underfunded, cutting its funding is a recipe for a death spiral. And since performance-based funding is almost always zero sum, community colleges are incentivized not to cooperate. That leaves economies of scale on the table.

But the myth of performance-based funding is powerful. It resonates with the culture so strongly that mere facts rarely get in the way. As Stephen Colbert used to say, it’s truthy. It feels so true that mere disproof isn’t enough to dislodge it.

So, since we can’t defeat it with mere truth, maybe we can harness it and use it for good. We just have to get the opponent right.

Pitting a community college in, say, Springfield against one in Boston makes literally no sense. Starving one to reward the other would leave the folks in one city without an option. They’re far enough apart physically that the student bodies don’t overlap in any meaningful way. And to the extent that they’re forced to compete for funding, they’re less likely to collaborate on grant proposals, fundraising and the sort of joint projects that can improve outcomes for everybody.

But what if “performance-based funding” were redefined to mean “performance against for-profits”?

That might actually serve the public interest. Instead of starving Springfield to feed Boston (or vice versa), we would deploy educational dollars where they do the most good. We could make a meaningful dent in the student loan crisis, prevent untold numbers of students from being taken advantage of and direct resources away from rentiers and toward families.

The idea hit me on Monday when I was in discussion with counterparts from a nearby community college to collaborate on a particular vocational program. It’s a capital-intensive program on which it’s impossible not to take a loss, at least when you charge what we do.

Some for-profits make money on it, though. Their secret — and I used to work for a for-profit, so I saw this up close — is that they charge much more than the cost of production. They spend a lot on marketing, which they cover through a combination of cheaping out on instruction and charging far too much. Every few years, we have to do massive bailouts of the entire sector. Meanwhile, community colleges endure round after round of austerity in order to pay for those bailouts.

Well-meaning people often argue that better regulation would fix the market failure of predatory for-profits, thereby ensuring a level playing field for competition. Many years ago, I was sympathetic to that argument. Even now, I’ll concede that smart regulation that’s actually enforced would help. But at the end of the day, a combination of ignorance, campaign contributions, ideology, political cycles and flat-out lying will conspire to hollow out much regulation. If we really want to force for-profits to compete on quality, we need to provide a strong, well-funded, high-quality public alternative. Community college funding is far cheaper than for-profit bailouts, and rather than creating badly indebted students, we would produce students who are better off for having attended. (Fun fact: the median student loan debt of a community college graduate is zero. I’d like to see a for-profit be able to say that.) In other words, rather than trying to pit lawyers against lawyers, let’s pit a well-funded public option against the proprietaries.

I’d like to see us reward an entire sector for providing strong alternatives to for-profits. The funding should more than pay for itself, by the time you count student loan defaults and investor bailouts. And the beneficiaries would be the people who actually need it.

I’m not enamored of the idea of performance-based funding. But if we must have it, let’s reward the right things. Encourage community colleges to collaborate, and force for-profits either to raise their game or to leave the field. Either way, the public wins.

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Monday, December 14, 2020
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Monday, December 14, 2020