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Writing for the New York Times (June 24, 2014), in a column titled “The Reality of Student Debt Is Different than the Cliches,” David Leonhardt reviews a recent study released by the Brookings Institute.
These are the main assertions:
(1) Student debt, on average, has actually not increased significantly.
(2) Because the earnings of college graduates have increased, student debt is not having an economic ill-effect on those who hold it or on the economy as a whole.
(3) The real problem is that many who take on student debt are not earning the degrees that will facilitate the repayment of the debt.
(4) So the solution to the “real” student-debt issue is greater accountability for colleges and universities.
I don’t think that Leonhardt is terribly distorting the findings of the Brookings researchers. But, for anyone who has been reading reports on this issue, each of these assertions should seem very dubious.
The Increase in Student Debt
I will grant two things: first, the outliers with very high debt do get the most media attention and not especially illustrative of the scope of the problem, and, second, the high debt incurred by students enrolled with online for-profit institutions has been somewhat distorting the overall averages.
But the assertion that average student debt has not been increasing dramatically is simply ridiculous. I don’t know what element of the study has obscured the issue and led to this conclusion, but student debt, which previous to the 2008 recession had totaled hundreds of billions of dollars, is now increasing annually by several hundred billion dollars. It is not simply that the debt has inexorably increased until it has surpassed a trillion dollars; rather, the total debt has suddenly leaped past that threshold.
And the reasons for this spike in student indebtedness are very well-documented. First, from 2009 to 2012, state support for public colleges and universities, which had been persistently declining, simply cratered. Second, in response to the sudden loss of state subsidy, colleges and universities significantly increased tuition. Third, the major cause of the recession was the bursting of the “housing” bubble, and since housing had been the major asset of most “middle-class” families, a much larger percentage of students had no other option but to rely on student loans to meet the increased out-of-pocket cost of higher education.
Moreover, it is worth emphasizing that although the bulk of these loans have been secured through federal programs, others are state-provided and there has been a big spike in loans from private lenders, some in the names of the students themselves but many in their parents’ names. No one has been able to track student debt of all kinds or to make more than broad estimates of the total debt. The “unseen” debt may not be proportionately the equivalent of the unseen portions of an iceberg, but it is almost more significant than what has been generally acknowledged.
The slow economic recovery, in combination with (and exacerbated by) the persistent reductions in many states’ tax rates for the most affluent, have made the low state subsidies seem like a permanent condition. Although there has been some rebound in state spending on higher education, especially in this past year, it has not come close to reversing the decreases of the previous half-decade.
Worse, there is little evidence that colleges and universities are themselves willing to address the major driver of costs—administrative bloat. The recession has not led to any broadly perceptible pause in the hiring of ever larger cadres of administrators and administrative support staff or in the rate at which administrative compensation has been rising.
Although I am certain that there are still more ways to squeeze savings out of the instructional side, the dramatic increase in reliance on contingent and especially part-time faculty, the pedagogical limits of technology, and the questions being raised about the erosion of the value of degrees delivered on the cheap, taken together, mean that we are fast approaching the point at which instructional costs, however expansively defined, will represent not just less than half of institutional spending but barely a quarter of institutional spending.
So, unless, administrative bloat is addressed in some determined way, the out-of-pocket cost of attending our institutions will not decline any time soon, and it will very likely continue to rise.
The Economic Impact of Student Debt
This conclusion of the Brookings researchers seems to me to be the most dubious, and on several fronts.
First, although the unemployment rate among college graduates has been much lower than that for workers with “some college,” a high school diploma, or less education, study after study has focused on the under-employment or mal-employment of those who have graduated since 2008. Indeed, the spike in student-loan default rates has been tied directly to the restricted employment opportunities that have been available to those graduates.
Second, to gauge the long-term economic impact of indebtedness by the monthly payments on that debt is ludicrous. If the total debt is increasing faster than the monthly payments on that debt, then the very obvious reason is that the length of the loans has increased significantly. Anyone who signs a long-term home mortgage or auto loan soon recognizes that although the purchase may be “affordable,” that affordability comes at a high cost in interest payments. Since the money devoted to paying all of that interest is not being spent on other things, the broader economic impact is fairly easy to calculate.
Indeed, many of the most recent studies of the value of a degree have not only been focusing on the increased earnings of college graduates but also factoring in the increasingly long-term costs of the degree.
The Real Problem Is Low Completion Rates
If the abuses of the online for-profits have skewed the overall statistics on debt, they have skewed the statistics on completion rates even more.
But, granting that completion rates at other colleges and universities are considerably lower than what would seem to be ideal, there are several issues that need to be addressed.
First, although the researchers are trying to track debt over the long term and are taking into account the increase in enrollments in that respect, they do not seem to be considering graduation rates in the same ways. If, despite higher enrollments and reduced state support, our institutions have even very marginally improved completion rates over their historic averages, that improvement would be quite remarkable.
Second, given the continual savings being squeezed out of the instructional side by an increasing reliance on part-time instructors and technological gimmicks, we are not just eroding the value of the degrees actually being earned but very directly decreasing the likelihood that those students whose backgrounds and circumstances make them least likely to complete a degree will actually do so.
Third, those students most “at risk” are the most likely to have difficulty in securing financing, the most likely to be employed full- or part-time while enrolled, the most likely to have family responsibilities that create additional financial burdens, and the least likely to find well-paying employment immediately after graduation. It is not just that their rising level of personal debt eventually overwhelms them and causes them to drop out. Rather, because lenders consider their assets and likely employability in continuing to provide them with financing, those loans that they are able to secure come at a higher cost that reflects the higher risk calculated by the lender.
It is no coincidence that the lowest completion rates are reported by community colleges and at universities with more open enrollment. In fact, it is a sort of dark irony that because “at risk” students typically take longer to complete degrees, their successes are typically not reflected in the standard statistics on completion rates. One of the ramifications of the push to expedite completion seems to be the narrowing of the windows in which degree completion is considered relevant.
The Need for Increased Accountability
No one will argue against the benefits of increased accountability—if it actually results in a meaningful and sensible reduction in student costs.
But given that the two main drivers of out-of-pocket and overall costs have been the decline of state support and the increases in administrative staffing and salaries, it is very unlikely that any call for such accountability will doing anything but make the current problems worse.
The state governments that have cut state support will look for ever cheaper gimmicks that will hasten the development of a two-tiered system of higher education in which the degrees earned at all but the upper-tier of institutions will not cost any less but will be worth considerably less.
Likewise, increased accountability will simply provide a rationalization for more administrators and administrative staff, which will siphon still more institutional resources away from instruction.
The “real” problems do not actually seem to be very ambiguous at all. But those who have no political interest or no self-interest in addressing those problems will use this sort of study, which is receiving attention precisely because it is an outlier, to pursue policies that are cumulatively destroying public higher education. For some, that eventuality may be an ideological goal. For others, it may simply be an unintended consequence of coming to believe their own self-serving talking points. But in the end, it won’t matter if what is best in American higher education has been sacrificed to malevolence or to incompetence.
If higher education is to maintain its value, the values that have fostered the successful development of our institutions must be sustained. As AAUP prepares to celebrate its centennial, the defense of academic freedom and shared governance, and the defense of tenure and the employment security that make academic freedom and shared governance possible, have become more essential than ever.