To maintain higher education opportunities, particular for low- and middle-income students, increased resources must be made available to students through financial aid programs to meet the higher tuitions. Proposed changes in federal support for financial aid programs will increase the financial burdens on low and middle-income students and will exacerbate the growing problem of inadequate access to post-secondary educational opportunities.These trends-declining per-student appropriations, rising tuition, and growth in the population of college age persons-have disturbing implications for the states. At the same time, the African American population as a percentage of the college-age population is rising rapidly. High school dropout rates are appalling. The African American students who are disproportionately poor and low-income, face significant financial barriers to attendance-another pressure for increased spending, not reduced. Once enrolled, these students are more likely to drop out for a wide variety of reasons, including financial reasons.The political economy of the higher education system points to ever rising costs of operation-cost creep, maybe even galloping cost creep. But the political economy of state and national governments points to static or falling public spending for higher education. Thus any list of “salami-tactic” cuts-close campuses, freeze salaries, or drop departments-would be nonstrategic and pointless. Instead, recommendations must seek structural change in the political economy of the higher education system. Reforms are needed to recast incentives, priorities and accountabilities to spur selfgenerated cost control and quality improvement.Five Principles For Better Value: Summary RecommendationsPrinciple 1. Target public subsidies directly to people who are financially needy. Under this proposal, need-based financial aid for low and middle-income students would be nearly tripled, thus providing access to higher education opportunities for more students.Principle 2. Use competition as a tool to align institutional self-interest with the public interest. The scheme proposed here would place most of the state education funds in the hands of students and would force the higher education institutions to compete by providing high quality education services that meet the needs of consumers. In addition, efficiency and innovation would be fostered through competition to meet performance objectives within the two systems.Principle 3. Allow prices of public services to reflect true costs, including the social costs of individual decisions. Tuitions would be allowed to rise to reflect instructional costs. These increases would be offset by the availability of increased state grants and lifetime learning grants appropriated to all students.Principle 4. Meet more public responsibilities through non-governmental communities in which people already have relationships with mutual obligation. The proposed system would include an extensive information, education and outreach effort, in partnership with communities that have the trust of low-income students and African American students.Principle 5. Consider long-term economic growth to be one of the objectives of state spending. The renewed commitment to producing well-educated post secondary graduates to lifetime learning, and to funding necessary research will maintain and vitalize the economy.Long-Term Recommendations1. Each state should establish incentives for students and their families to save more for higher education. For example, a Learning Savings Account could be established for each student, the earnings from which would be free from state tax. These savings accounts could match the Lifetime Learning Grants appropriated by the state. The existence of such a savings account for a student would not count against the student’s eligibility for financial aid. Since the objective of the learning savings accounts would be to provide educational opportunities for the students, the proceeds could be used at any higher education institution, inside or outside of the state.2. A substantial portion of the funds appropriated to institutions should be distributed on the basis of performance on state policy goals. By putting a percent of total funding into the hands of students, our proposal builds in a process for prodding institutions to provide the outcomes that individual students seek. Another form of accountability is needed to track performance on those outcomes that pertain to the interests of the state as a whole. Ultimately, Legislators and other policymakers must be able to answer the question: Is higher education delivering the outcomes that state seeks to “purchase” through its legislative appropriation? To answer the question, policymakers must define what outcomes they expect the higher education system to produce. Then, the state will need a robust set of outcome measures that gauge the effectiveness of institutions in delivering the outcomes. It is important that the focus be on outcomes (for example, skill levels of students completing programs) and no on inputs (qualifications of entering students) or process measures (student/faculty ratios). The sensitive task of composing and defining an initial set of outcome measures should be addressed soon. Such measures should be shaped by professional educators, but also by a broad spectrum of higher education users and anticipated users. Especially solicited for their views should be citizens from sectors with relatively few post-high school students in the past, but with increasing numbers expected in the future. Among such sections are communities of new immigrants, young adults from low-income families, older adults with needs and wants in “lifetime learning” and citizens without English as their native language or America as their mother culture.3. All of the principals in the higher education enterprise should be accountable for performing their respective responsibilities. The governing boards should be empowered to govern the systems; administrators should have the authority to effectively operate campuses; and faculty members should be free to provide quality learning opportunities for students. All faculty contracts should be related to the performance indicators and policy purposes identified by the Legislature making the appropriations. A system of merit increases should be reinstated to recognize individual and team excellence in delivering higher education services.ConclusionThese recommendations, while controversial, would ultimately lead to improved learning opportunities for students and improve efficiencies and cost-effectiveness for the higher education systems, which ultimately would enable each state to provide its residents with more and better higher education services at lower cost.