Ballooning student debt, taxpayer-backed loans lead to one question: Is college really worth it?
*First appeared in the June 20, 2013 edition of the Laurel Chronicle.
Start reading “Is College Worth It?” by David Wilezol and former U.S. Education Secretary Dr. William J. Bennett, and you’ll begin to wonder if attending college is the smart investment we’ve always assumed it is.
Consider the following: While college completion is considered an indicator of success, more than half of all college graduates in 2010-11 were unemployed or dramatically underemployed. Instead of a well-paying job, a college degree today is more likely to guarantee you a heavy debt load, as evidenced by the total student-loan debt in the U.S. recently surpassing $1 trillion (that's "trillion" with a capital T). The costs of college are skyrocketing at rates faster than inflation, thus increasing the gap between what the student or parent pays for college and their return on that investment.
The common thread among these issues is a long-held belief every child should attend college. I reject this theory since many students can learn skills that lead to good-paying jobs quicker and cheaper than getting a four-year degree.
"Is College Worth It?" details the struggles of many students who felt cheated after graduating college with massive amounts of debt. The Federal Reserve estimates the average debt load per student upon graduation is $23,300 – and it’s becoming problem for more than twenty-somethings. In fact, the same research shows the highest amount of per-borrower debt ($28,500) falls to individuals 30-39 years of age, followed closely by borrowers aged 40-49 ($26,000).
The price-tag to attend college has skyrocketed, with financial magazine Barron’s reporting last April that the cost of tuition at a four-year school had soared 300 percent – four times the rate of inflation – since 1990.
Twenty-five years ago, Dr. Bennett developed a theory that appears to hold true today: The “cost of college tuition will rise as long as the amount of money available in federal student-aid programs continues to increase with little or no accountability.”
As subsidies so often do, student aid has had the effect of shielding colleges from having to implement significant cost-cutting measures. Schools can raise tuition fees with a near assurance that federal financial aid will correspondingly increase. After all, the more students take out loans instead of paying out of their pocket, the less schools must be wary of rising costs. Under this model, there’s really no impetus for an institution to adopt transparency or accountability measures.
While the sluggish economy has necessarily resulted in state budget cuts to higher education, this reduction alone doesn’t account for the increased costs. Dr. Bennett would argue that states have realized colleges can afford to be less dependent on state funding, as they can capture student-loan dollars and become “self-funding entities.”
In Mississippi, we’ve seen tuition increases at both the community college and university level (even though state funding has been increased for both groups by nearly $54 million for the fiscal year beginning July 1). This week the Community and Junior College Board announced that 11 of its 15 institutions would raise tuition fees by an average of 6 percent, bringing tuition cost to roughly $2,377.
Supporting the Bennett hypothesis, the Associated Press reported the price of higher education tuition is rising faster than inflation - and people’s ability to pay. But most of the state’s community college students pay less than full price due to a combination of scholarships and, you guessed it, financial aid.
Dr. Bennett offers some innovative solutions to this growing problem. First, his mantra that “higher education is not underfunded; it is under-accountable” must factor into reforms. Colleges should have more skin in the game, an approach embraced by President Obama who “put colleges on notice” in a 2012 speech: “If [colleges] can’t stop tuition from going up, then the funding you get from taxpayers each year will go down.”
Dr. Bennett offers a sensible solution of tying more lending to academic persistence – meaning we’d recalibrate lending to students who are more likely to excel in the classroom and less likely to default on taxpayer-funded loans. He suggests making each college pay a fee for every one of its students who defaults on a student loan and limiting loans for living expenses.
His boldest idea is the development of private equity relationships between students and investors, in which an investor would receive a portion of the student’s future income in return for financing a portion of the student’s education. (I like this idea because it minimizes risks to taxpayers while incentivizing students to work hard.)
The co-authors cover countless other issues related to higher education in their work, and my column is a poor substitute for the book. I’ll close with this: If provoking serious thought on higher education was the goal of writing “Is College Worth It?,” I’d say the Bennett-Wilezol duo has accomplished what they set out to do.
