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Would this new idea help students manage the college affordability crisis?

BY   February 9, 2017 at 3:05 PM EDT
The new website is part of the Obama administration's effort to enroll an additional 2 million people into repayment programs. About one in seven borrowers default on their loans within three years of beginning to repay them. Illustration by enisaksoy/Getty Images

The idea of a tuition cooperative is based on a model of bulk purchasing to drive down costs. Illustration by enisaksoy/Getty Images

What if paying for college could be more like shopping at Costco?

The retail giant known for squeezing deep discounts out of the products it sells is one model for an audacious proposal by two higher-education experts to lower the cost of college.

In short, prospective students would band together as cooperatives, pooling their federal, state and personal financial aid to get colleges to enroll those students in bulk at discounted rates. Colleges that participate would get to enroll more students in one fell swoop – manna for institutions hurting for more enrollees. Students, in turn, would take advantage of the savings that come with entering a defined set of schools as one large group, driving down the price of attendance (though the number of students needed for the plan to work is still unclear).

“…We need something that allows students to manage the affordability crisis in a simpler, easier way.”

Sean Tierney, an associate commissioner at the Indiana Commission for Higher Education and one of the two analysts behind this idea, said a key motivation is using public financial aid dollars to compel colleges to be more affordable. “If we’re investing a lot of either federal or state funds into the higher education system,” he said, “can we use it not just to cover the cost, but also to leverage higher education providers to do other things as well?”

The model has its limitations. Top private and public colleges, such as the University of Virginia or Stanford University, wouldn’t have much incentive to participate in a cooperative model, because student demand for those schools far exceeds the number of seats available, explained Audrey Peek, a researcher at the American Institutes for Research and the other analyst behind the cooperative plan.

“This could be something that’s applied specifically to non-accredited, career-focused schools, like those coding boot camps that we see popping up all over California,” said Peek, “or to some for-profit institutions that wouldn’t necessarily be covered by a free college plan.”

READ MORE: When colleges slash tuition, some students actually pay more

The tuition cooperative, which Peek and Tierney envision as a nonprofit organization, would need to juggle multiple tasks. It would group prospective students with similar academic interests and goals – coding boot camps or vocational programs in auto mechanics, for example – and pool their taxpayer-based aid plus their personal savings.

The cooperative would then negotiate with a batch of academic institutions to both bring down the price of the degree program and pre-purchase the spots for a minimum number of students – a boon for institutions in need of guaranteed income. The cooperative would negotiate with multiple institutions per student group, thus giving the students a set of options from which to choose a college or set of colleges fitting their needs. Students whose needs aren’t reflected in the batch of schools the cooperative picks could opt out.

Tuition chart Hechinger

Credit: Audrey Peek and Sean Tierney

Outside of education, Peek and Tierney note, there are models for bulk purchasing to drive down costs. Large companies use their greater buying power to lower the price of health insurance for their employees. Through the federal General Services Administration, a program called the Cooperative Purchasing Program organizes state and local governments to purchase expensive technology in groups for deeper discounts.

The cooperative would also function as a repository for student records. Peek and Tierney say this would be particularly useful for students enrolled in multiple schools who’d like to go on to graduate school or transfer to another school and would otherwise need to collect all their transcripts from each school they attended – a nettling experience for some students.

Cooperatives could also exclude poor-performing colleges, pressuring certain colleges to improve their academics – a market-oriented admonishment similar to the federal government’s sanctions on some for-profit colleges. Peek and Tierney also foresee cooperatives functioning as mentoring services for low-income or first-generation students who lack the critical know-how of the college-going shuffle.

Their plan is still in its infancy. Rules on distributing federal aid would likely need to be rewritten and regulatory bodies would need to learn how to hold the cooperatives accountable, and those are some of the major changes needed for the model to get off the ground.

“Both Republicans and Democrats alike … would agree that we need something that allows students to manage the affordability crisis in a simpler, easier way,” said Peek. “We think cooperatives are a good solution to that problem.”

This story was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Read more about higher education.

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