Why do we give people student loans and grants?  Is it to help them get knowledge, or just credentials?  That question is subject to much debate in Washington right now.  At issue is whether student assistance helps or hinders innovation in higher education; at stake are potentially billions of dollars in public funding.

Let’s rewind a bit here: student aid in the US is governed by something that goes by the name of “Title IV” (meaning, essentially, chapter IV of the Higher Education Act, as amended from time-to-time).  The very first section of title IV states that student loans can only be given to students at “eligible institutions”, which means (among other things) that the institution has to be post-secondary, has to award degrees, has to be accredited, etc.  All sensible things to protect both consumers and the public purse.

The problem is, what if a new form of education pops up that is valuable, but doesn’t meet these tests?

There’s been a lot of focus recently on a variety of different types of programs called “just-in-time” education, the buzzword du jour that refers to code academies/bootcamps, and the like.  These academies – private educational establishments that often skirt the legal edges of provision of vocational education – are seen in many quarters as being incredibly valuable.  Coders are in short supply, and these bootcamps provide short (usually 8-12 weeks) courses that allow students to get the basics, and apply for jobs.  Some of them also provide training in entrepreneurship, and have mentors on-site to help with start-ups.  Stories about graduates quickly getting well-paying jobs abound, and given the long-standing worries about the youth labour market, a lot of people want to see these things expand further.

But these organizations aren’t charities.  A 12-week course in New York or San Francisco will run a student five figures, and not everyone has that kind of scratch on hand.  Hence, the desire in some quarters to see student loans extended to this sector.

Now you can see the argument here: why are we prevented from giving public support to institutions that provide skills rather than credentials?  Why are we stifling potentially beneficial innovation?  On the other hand, you can also see the opposite argument: who runs these schools, who regulates them, what are their credentials as educators, and what kinds of cranks and shysters will flood into the sector if you start letting students pay for this education using public money rather than their own?

The cranks and shysters problem is a perennial one in American higher education.  Even the vaunted GI Bill attracted them.  Though it’s more famous for putting ex-servicemen though college, the Bill also dealt with vocational training, leading to some rather dubious circumstances; Glenn Altschuler and Stuart Blumin, in their excellent account of the Bill, have a hilarious anecdote about veterans signing up at a school that offered three-month courses in chicken sexing, because they could get their living expenses covered while doing a (sorry, can’t resist) bird course.

Quite simply, when you hand over a lot of your education system to the private sector, *and* you choose to allow students to use public money, you either have to have some very good regulators, or you have to tolerate the fact that there are going to be some dubious folks trying to make a fast buck out of the situation.  As the Harkin Report on for-profit education, and Suzanne Metzler’s excellent book Degrees of Inequality have made clear, that’s exactly what happened in the 00’s when he Department of Education’s rules were too lax.

At the moment, the Obama administration’s preferred solution seems to be to try to get these academies to nestle themselves within existing universities and colleges.  There are some advantages here: universities would love to have these kinds of spaces to help students gain tech/entrepreneurial skills, the academies would gain access to more secure revenue, and the government would be assured of some oversight on quality.  From the perspective of people worried about cost-inflation in higher education, though, this might be a disaster.  Universities would undoubtedly pay for this by charging even higher fees to all students; instead of academies being a force outside the system, competing with universities, and forcing them to get better at producing better employment incomes, they’d be joining the Beast instead.

Complicated stuff.  Personally, I’m glad the Americans go through these debates, so the rest of us can learn from them without actually having to do the difficult and politically dangerous work of experimentation ourselves.