As the Democrats’ budget bill takes shape, higher education policy is once more a point of contention. It’s a good time to rethink the country’s approach to higher ed, which has become increasingly contradictory and unsustainable in recent decades. Most importantly, policymakers should ponder how to make U.S. colleges both an engine of upward mobility and a support system for key industries.

Many people who focus on the problems in the U.S. university system consider only rising tuition and student debt. Others are preoccupied with inequities at elite universities like the Ivy League. Both concerns are legitimate, but the challenges extend far beyond these issues. Start with the fact that the university system has grown increasingly inequitable. As of right now, students from lower-income backgrounds with high test scores are less likely to graduate than high-income students with low scores:

Fiddling with admissions at Ivy League schools isn’t likely to solve the problem. When organizations like the Equality of Opportunity Project, U.S. News and World Report, and CollegeNET have tried to calculate the degree to which various schools give their students an economic boost, schools in the California State system, the City University of New York system, and other cheap state schools do the best. Furthermore, top private schools like Harvard and Yale have small student bodies — perhaps 100,000 in total, compared to almost half a million for the Cal State system alone. 

U.S. higher education policy should aim to increase the number of people who graduate from these institutions — and without coming away with big debt burdens. Subsidizing tuition is a part of this, but for lower-income students, room and board are a much bigger factor.

Offering cheap housing to students at working-class schools is essential.

Nor is money the only issue keeping working-class kids from completing college. Policies like unified applications can save kids the money, effort and confusion of applying to many schools. Investment in mentoring and guidance counseling in high school can encourage students from modest backgrounds to set their sights higher, and help them prepare for the challenges of college.

Yet it’s also important to recognize that not every American should graduate from a four-year university. Because the debate over higher education tends to be dominated by people who themselves graduated from four-year colleges, there’s a natural tendency to imagine a world where everyone is a well-rounded professional with a liberal arts degree from a good school. But this is nothing like the reality that working-class Americans face — not only are many not prepared for the coursework at a four-year school, but many simply want to get out in the working world as fast as possible and earn a good salary for their families. Research shows that community colleges are important and powerful engines of upward mobility, so these institutions need more support.

Fortunately, President Joe Biden is trying to do exactly the right thing on these fronts. His education plans, which will be part of the Democrats’ budget bill in some form, include free community college and more support to states to make state universities cheaper and more accessible. He’s also expanding Pell grants, which are a much better form of financial aid than cheap loans.

Biden should supplement these excellent initiatives by following through on another of his long-time priorities — vocational education. Research shows that vocational training increases the share of a country’s income that goes to the working class. Germany has used it to build both a world-class export manufacturing sector and an economy that’s more equal than America’s.

Which brings me to another important point: Higher education isn’t just about opportunity, it’s also about restructuring the American economy. Americans on both sides of the political aisle are beginning to realize that manufacturing and exports play too small a role in the U.S. economy. Both Biden and former President Donald Trump have talked about giving industry a boost, not just to provide more good jobs but also to compete with China.

Higher education is an extremely important part of that transformation. Scholars who study industrial policy have found that access to job training and higher ed are among the most important policies in terms of building a workforce that can support local manufacturing industries.

In other words, in terms of equality, opportunity and industrial policy, there’s simply no substitute for a broad-based technically competent working class. Biden’s education plan is a step in the right direction, but leaders of both parties should be pressing for more and sparing no expense.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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