Three Crises in Higher Ed Affordability

So much of our higher education system is in crisis. The Federal Reserve Bank of New York just found that 25 percent of student debt holders are delinquent in payments. Thomas Edsall finds that college education is reproducing privilege, with access and success tightly linked to parental income. Student loans were the number one concern of those on the ?We Are the 99 Percent? Tumblr. Occupy students at the University California at Berkeley and Davis have been beaten and pepper-sprayed by police for protesting the privatization of their schools.

With so many problems, it’s helpful to reformulate our current crisis as three separate crises. There’s a short-term crisis with young people graduating into the worst labor market since the Great Depression. There’s a medium-term crisis about what we want student debt to look like and how we want it to function in society. And there’s a longer-term crisis about how to deal with college affordability, and what kind of public universities and education we want to have.

Right now youth unemployment is over 13 percent, the highest of any age group. Recent college graduates have an unemployment rate of over 9 percent, compared to the very low rates for college graduates overall. The economy shut down in 2008, and it hasn?t picked up enough steam to absorb new, younger workers alongside the millions of workers thrown out of the labor force during the initial stages of the recession.

Any level of debt is going to be unmanageable for a person who can?t find a job. The census department found a sudden 25 percent increase in the number of twenty-five to thirty-four year olds living with their parents. Half of them would be living in poverty if their income was counted on its own, rather than lumped in with total household income.

Anything that boosts employment will help address this crisis. Meanwhile, the ability to properly forebear student loans due to the economic hardships of this deep recession will prevent debt traps from overwhelming unemployed young people. There have been successful campaigns to reduce the ways lenders sweat student loan debtors in a period of mass unemployment, for instance Stef Gray?s campaign to get Sallie Mae to drop its forbearance fee.

For the second crisis, student loan affordability, it is useful to contrast student loan debt with all other kinds of debt. For example, if airlines go into bankruptcy, as they often do, there are procedures in place to assign the losses. None of these safeguards exist for student debt. Actually, these safeguards have been removed over the course of twenty years. From prohibiting both public and private student loans from being written down in bankruptcy to allowing Social Security and disability checks to be garnished to make payments, student debt has turned into one of the most repressive and precarious forms of debt.

Restoring these safeguards is essential. Meanwhile, structuring student debt so that it doesn?t overwhelm people is key to keeping these dangerous instruments in check. Lower rates will reduce the payments for student debtors; bankruptcy protection and a statute of limitations will take care of those whose debts are still too high. An upper-limit on what portion of income can go to student loan debt, and a time limit after which student loans are exhausted, need to be determined to keep the indenture of student loans in check.

Student loans are not the type of instrument that the private market creates. Most private debt requires collateral or quickly profitable investments; long-term investment in human capabilities, by contrast, is one of the things government needs to do. To the extent that the private market for student debt exists, it is as a result of special bankruptcy provisioning and credit guarantees from the government. Right now, according to Department of Education estimates, the government makes a 20 percent return on student loans. The government has a responsibility not to act as a payday lender when it creates these loans.

The third crisis is the one surrounding college affordability. No matter what short-term fixes are put into place, the long-term trajectory of college costs stand to overwhelm the entire system. Higher education cost inflation has run significantly higher than wage gains, and rivals other runaway costs like healthcare. The Daily argues that four-year costs could be $422,320 for the class of 2034. The Delta Cost Project has found that ?tuitions were increasing almost exclusively to replace losses from state revenues or other private revenue sources.? Meanwhile there?s been large growth in executive administrative salaries and expenses outside teaching, spending that functions as an ?arms race? between universities.

While student activists and left-liberal policy wonks focus on the first two crises, neoliberal and conservative wonks are already looking toward the third, planning out a future battle over the relationship between the public and higher education. There are three separate approaches to this project. Though there is extensive overlap between these schools of thought, they each explain the problem of cost inflation and decreased access in their own terms and offer an agenda in response. One school wants to privatize the existing system, one would like to deregulate it, and the third wants to demolish it.

Privatization is an ongoing project in state-level school systems. Mark Yudof, the President of the University of California system, once described the evolution of the ?hybrid university?:

?[T]he extraordinary compact between state governments and their flagship universities appears to be dead ? or at least on life support?

Though we believers in the civic value of education may lament it greatly, with the wage premium widening, education today is increasingly seen as a private, rather than a public, good. Consequently, many legislators appear more comfortable with students? paying higher tuition than they did in the past, tacitly encouraging students to borrow today and pay back later?Paradoxically, to continue the long tradition of broad access for students to public research universities, these institutions will have to become more like their private peers; to ensure the access for low-income and historically disadvantaged students that low-cost tuition once allowed, I believe that public research universities will have to work hard to augment funds for student aid and scholarships.?

This is an active project, reformulating state schools so they mimic their private peers. This involves reducing state funding for students and having students pick up the slack. The privatization school doesn?t view accessible higher education as a social good, a necessary component to equality of opportunity, a means of creating alternate hierarchies of education, or part of the basic process of how a civilization functions with its citizens. It focuses on the private economic gains of a university education and finds ways to shift costs to private citizens, with debt to make up the shortfall. Finding ways to get students to pay higher tuition, like choosing out-of-state applicants, becomes a priority. This creates a cycle: the more public universities are defunded and reconceived as a private good, the less civic interest there is in defending them as a public good.

The second approach we?ll call the deregulation school. It accounts for cost inflation by claiming that there isn?t enough competition among education providers. By expanding the number of institutions that can call themselves colleges and universities, and thus expanding the supply of education, you can decrease the costs. Between expanding for-profit schools, online education, and do-it-yourself alternative accreditations, this approach has many different flavors.

The first entrants into alternative, deregulated schooling haven?t had a terribly great track record. According to recent studies, students in for-profit schools graduate with significantly more debt, are more likely to be unemployed, make less money, and are less satisfied than comparable community college students. Online courses have drop-out rates similar to for-profit schools.

The third approach should be called the dismantling school, and it puts the blame squarely on the government. Conservative intellectuals find that the rise in tuition is the result of government efforts to increase affordability and access. The more Pell Grants there are, the easier it is to raise tuition; the more student loans are available, the more students will bid up rationed spots. The dismantling school often finds that public universities do too much as well; better to scrap the research mission of the public university and slim it to a reduced set of functions.

These three approaches have significant overlap. One can imagine a conservative intellectual wanting complete privatization, total deregulation, and maximum dismantling of government support, shifting between justifications as the battles arise. One could imagine a neoliberal wanting maximum deregulation and maximum grants and loans and vouchers to allow the poor to purchase higher education in the ?free? market.

What vision should we advance in response? Rebuilding what used to exist?something we should call the social democratic vision. This is the vision in the California Master Plan for Higher Education: one were college is free and grants and loans cover supplemental expenses for the poor. Higher ed would be broadly accessible, with a variety of options ranging from elite schools to community colleges.

Beyond ensuring equality of opportunity, another advantage of this approach is that it would help stop cost inflation. Free public universities would function like the proposed ?public option? of healthcare reform. If increased demand for higher education is causing cost inflation, then spending money to reduce tuition at public universities will reduce tuition at private universities by causing them to hold down tuition to compete. This public option would reduce informational problems by creating a baseline of quality that new institutions have to compete with, allowing for a smoother transition to new competitors. And it allows for democratic control over one of the basic elements of human existence?how we gather information and share it among ourselves.

This isn?t to romanticize the past. As always, this egalitarian vision of education is an incomplete project. The past set-up privileged certain groups over others. Its socioeconomic shape piggybacks off the dysfunctional K-12 education system. It doesn?t address the collapsing wages and bargaining power of labor more broadly. And much of the past justification for college accessibility had less to do with the normative claims of social democracy and more with the practical, militarized needs of Cold War infrastructure.

But this shouldn?t stop us from reclaiming the good from the bad, and calling for a reinvestment in public education in an era of mass privatization. Reclaiming this project of broadly accessible and public higher education is as essential a part of rebuilding education as reducing the harsh legal regime associated with student loans. True public education builds the future, contains costs, and provides access in a way that the new privatized regime is failing to do.

Mike Konczal is a fellow at the Roosevelt Institute and blogs at Rortybomb.

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