American Students Need More Than Loan Forgiveness

News of President Biden's Student Loan Forgiveness Program, in the amount of $10,000-$20,000 per borrower, is a welcome fulfillment of one of the President's most well known and oft-cited campaign promises. With over $1.7 trillion dollars collectively owed in student loan debt across the nation, our higher education system has produced an unstable debt bubble slowly eating away at the economic progress and upward mobility of the American people. From holding off on having children to being unable to afford mortgages on their first home, student loan debt is saddling entire generations with a burden that's only getting worse. While the positive personal and economic effects of this debt forgiveness program will likely be felt for years to come, the program's very existence reveals a much deeper and wider problem with how higher education is structured in the modern United States.

Back in the early 1960's, one could attend a community college full-time for an average of $820 per year. To reiterate, that's $820 in 2021-adjusted dollars, and it was the average across the nation. Today in California, home of the least-expensive community college system currently around, one can expect to pay around $1,310 per year as an in-state resident. $1,310 isn't the current average in the nation today, it's the lowest cost around, outside of Governor's Waivers or 'College Promise' programs which often cover tuition, room and board, books etc. in full for a specific amount of time. Four-year universities have seen an even more dramatic rise in cost. Back in the 60s, one year of tuition towards a bachelor's degree cost an average of $2,078 when adjusted to 2021 dollar value. By the 80s that amount had risen $2,546, yet today the average cost of tuition for a full-time student at a public college is $9,580. The cost to attend private universities has risen even more dramatically.

Over the last 20 years, the cost of tuition at public universities has risen by an average of 9.0% per year. Yet during that same time, annual inflation in the US has been between 0.1% and 7.0% (7.0 being an unusually high outlier in 2021 as a result of the post-pandemic supply chain disruptions). Even at its highest, annual inflation in the US has never touched the average rate of increases to tuition at public universities, to say nothing of private non-profit schools which have proliferated since the Subprime Mortgage Crisis and Great Recession in the late 2000s.

This has led to the average American student of higher education exiting school with $28,950 in student loan debt. Even more debilitating, the same average student will also pay over $26,000 in interest on this debt over the 20 years or so it takes most students to pay the loans off. Thus, the true cost of higher education today is usually $50,000 or more, for a college degree our parents could achieve for $10k or less, and our grandparents could walk away with for a handful of thousands of dollars.

So, is it even worth getting a degree any longer? Well, statistically, getting a college degree is still a very good idea for the average person. The median wage of individuals between the ages of 25 and 34 with bachelor's degrees is just shy of $60k per year, compared to just over $44k for those with associate degrees and $36,600 for workers with a high school diploma in the same age group. This annual difference more than makes up for the $50k or-so average total cost of getting a bachelor's degree over the course of an average person's multi-decade career. That said, the annual tuition increases we've been seeing over the last several decades isn't sustainable long term. Something needs to be done to rein these costs in.

The next obvious questions are, how did we get here and what can we do to improve the cost of higher education? First off, any higher education plan put into place needs to recognize that college education should never be required to earn a decent standard of living. Empowering workers through pro-labor legislation and increased participation in unions and workers associations, as well as increased federal and state funding for jobs training and apprenticeship programs through high schools and community colleges would go a long way towards ensuring all Americans are able to earn solid incomes for themselves and their families without needing to take on the burdens involved in attaining a collegiate degree.

Additionally, it must be acknowledged that modern universities offer much more robust student services, from medical and mental health services to activity centers to sports programs, many colleges and universities invest far more of their funds into these extracurricular endeavors than was common decades ago. Now many, including this publication would argue services like medical and mental health care should be covered for all Americans anyway, while other facets should be divested from university's primary budgets (such as sports programs), it's nonetheless true that the cost of a college education would likely be rising due to these added services even if everything else had remained equal.

The real problem here is, not everything else remained equal. Starting in the 1970s and really picking up into and after the 1980s, direct federal and state funding for public colleges and universities was either truly cut or didn't keep up with inflation over time. This was particularly true in the aftermath of the 2008 recession, when state funding to public college and university systems fell off a cliff nationwide to avoid debt default and bankruptcy. Then, politicians seemed to realize the increases to tuition caused by these cuts were mostly being temporarily absorbed by student loans, and thus many states haven't fully restored higher education funding to this day.

Also in the 1980s, the rise of a Neoliberal way of thinking which was truly ushered in during the Reagan administration, led to a federal government policy shift away from directly subsidizing higher education and towards using that money to distribute loans to students with the expectation the money be repaid with interest. These two changes to the higher education system, lower funding from federal and state governments in combination with easily-accessible student loans which were to be repaid and could not be gotten rid of even through bankruptcy, have led straight to the ever-increasing student loan debt bubble we face now.

To top it off, many private universities have raised tuition higher simply because they could. With student loans covering the costs anyway, students were coaxed into believing the exorbitant tuition fees would be worth it for them in the long run. For some students, even the artificially-high costs of private higher education has proven worthwhile, allowing them to more quickly and flexibly enter the workforce via a higher paying job. For millions of others, however, this promise has never been fulfilled, and they've been stuck with loads of student debt with little to show for it.

Now that we've discussed the primary issues with our current higher education system, perhaps it's become evident what a few solutions might be. First off, the federal government needs to pivot back to higher amounts of direct funding to universities and colleges. For example, one workable system might be one wherein the federal government offers to provide up to 50% funding for operational costs of a given state's public university and college system so long as the state and local municipalities provide coverage of an additional 40%, leaving only 10% to student-based tuition fees. This way states are motivated to keep their university systems running effectively and efficiently, the federal government more or less guarantees the state's cooperation and student's still have some proverbial skin in the game of higher education.

Also, Pell Grants and student loans should still be offered to low-income students and families who need help putting their children through college. Yet, interest rates should be lower than they are today, cut in half or more, and capped at levels set by the Treasury based on economic conditions at the time. These loans should be eligible to be wiped out or thoroughly renegotiated during bankruptcy proceedings, and Pell Grant amounts should be higher and available to a wider range of American students.

Finally, community college and public technical schools should be free to everyone, with far higher investment into creating and maintaining job programs which lead into entry level internships, apprenticeships and full-time positions. While the specific offerings at each school will need to be flexible based on time and place, everything from electrician programs to coding boot-camps to nursing degrees should be free and widely available to American students throughout the country.

We can do this, we can reform our higher education system and make it work for all of us. America is the wealthiest nation in the history of the human species, and over a dozen other nations in the world today offer universally free or heavily subsidized higher education. If we want to deflate this student loan debt bubble, empower the American workforce and create a new, vibrant and dynamic middle and working class in this nation again, these steps will help us get there. Our children and their children after them will remember us fondly for the effort.

References:

1) https://educationdata.org/average-cost-of-college-by-year#1960

2) https://www.valuepenguin.com/student-loans/average-cost-of-college

3) https://www.usinflationcalculator.com/inflation/current-inflation-rates/

4) https://www.forbes.com/advisor/student-loans/average-salary-college-graduates/#:~:text=Among%20all%20workers%20aged%2025,median%2C%20or%20%2448%2C776%20per%20year.

5) https://www.nerdwallet.com/article/loans/student-loans/student-loan-debt

6) https://studentaid.gov/debt-relief-announcement/

7) https://www.theedadvocate.org/which-countries-provide-free-education-at-a-university-level/