Avoiding Student Loan Debt, Cost of Degree, Understanding the Market

How We Used to Fund College

A number of presidential candidates are floating the idea of “tuition-free college.” I’d like to put that into historical context.

My father, who is in his 80s, only had to pay $9.00 a term to attend college at CCNY back in his day. He could easily pay that out of pocket with his part time job. In today’s dollars, that would be equivalent to paying about $90 for a full semester of coursework, or four or five classes. Not $90 per class, but $90 per semester, or about $18-$22 per class.

Do you really think that $9.00/term tuition covered the cost of running the college? Of course not. It was that cheap because the City of New York was funding it.

So when Bernie Sanders says he wants “tuition free” college, he’s just trying to set up the same system his generation had when it went to college. The same system that existed through the 40s, 50s, 60s, and the 70s most places. It’s not about getting free stuff, or not pulling your weight, but about setting up a system that actually works, like the system we had back in the 50s.

Why did the City of New York end tuition free college? Not because it couldn’t afford it. It was a political move. According to The University Against Itself (Temple UP, 2008), New York University, an expensive private institution in New York City, lobbied with city government to end state tuition so that it could be more competitive for students. The issue wasn’t financial, or that the system wasn’t working, or that New York City residents didn’t like it. It was purely political, and the politicians working now to reverse this situation are sensibly trying to work a political fix for a problem that was political to begin with.

If you graduated before college in 2008, you had a lower debt to income ratio than any college student afterwards did. If you graduated college before 1990, it was much, much lower. It’s not just about “individual responsibility” when a predatory system has been set up to trap people doing something they need to live.

Avoiding Student Loan Debt, Cost of Degree, Educational Consulting, Graduation Rates

A Few Thoughts about Free College

With the upcoming election cycle, a number of candidates have been discussing a variety of plans for financing college education, some of them being called “free college for all.” I hope at a later date to provide a comprehensive overview of each of the major candidates on education, but at present I would like to take a look at what candidates have been calling “free college.”

First, we have a real problem with student loan debt. Forbes very recently described it as a $1.5 trillion crisis. I know that student loan debt has been around a long time, but it’s ballooning, and students graduating now have a much higher debt to income ratio than students who graduated before 2008. The Forbes link above provides very good historic data about how students have been increasingly taking on higher student loan debt.

Some colleges are better than others, though. As you’ll see in the Forbes data, students graduating from public colleges have the lowest rate of student loan debt (66%), followed by students graduating from private non-profit colleges (75%). The most debt-burdened students are those who graduate from private for-profit colleges (88%), and dangerously, these students also have the lowest graduation rates. The amount of debt held follows the same pattern: those who attended public colleges hold the least debt while those who attend private for-profit colleges hold the most.

Next, 2008 is an important year. It’s the year that the biggest economic crash since the Great Depression hit worldwide. Massive unemployment caused a drop in state revenues, and a drop in state revenues created almost immediate, and very large, cuts in state support for education across the boards. State colleges and universities could only survive by massively increasing tuition, with immediately increased the student loan burden held by students attending these schools.

We should also understand that no one is really promoting “free college.” Bernie Sanders has a plan for “tuition-free” college, which is really taxpayer supported college, but even “tuition-free” college isn’t free college. Students still have to bear the costs of room and board, books, fees, travel, and incidentals, and at many public colleges and universities room and board can be equal to or even twice the cost of tuition. For example, at UCF this year tuition is about $6,300, while room, board, and books is just over $11,500. Sanders’s plan is a great improvement over our current system, but by itself it won’t solve our student loan debt crisis.

We should next take into account state funding. If the Fed stepping in just means that states will cut their funding, that move will cause more damage. As it is, the massive state cuts to higher education funding following the 2008 crash have had ongoing and long term negative effects on higher education. So while we need Federal programs that fund tuition apart from debt, we also need commitments imposed on states to maintain their funding. If the federal government covers tuition, state financial aid should then be redirected toward room, board, and books.

But can we even afford to pay for this? Yes we can — we’re actually very close to paying for it all already. It’s more a matter of how we allocate our current spending and finding a few additional sources of revenue, but that will be the topic of a future post. Taxpayer supported college education is the only viable model going forward, but the details of this plan matter.

I would like to leave you with the thought that we do indeed need to fund college societally. A college education is not a luxury item; college educated citizens are needed for the workforce, and everyone benefits from their presence, even those who never attend college. Without college graduates we would have no roads, infrastructure, buildings, utilities, internet, medical professionals (doctors, nurses, and technicians) — the list could go on. A college education is not a personal luxury, but a societal necessity, and we need to come together to help cover it. Massive debts just mean an inevitable crisis, and right now there is more student loan debt than credit card debt.