Jimmy’s Denver Gazette Column | The promise of college has fallen flat
Written by Jimmy at the Crossroads on July 23, 2021
Couathored with University of Colorado Regent-at-Large Heidi Ganahl.
If you live and work in Colorado, America’s eighth-most expensive state to live in, you typically need a college degree to get by. Seventy-four percent of all jobs here require it.
Colorado is also one of the most expensive to get that degree. Tuition and fees have far outpaced inflation. Since 2002, the cost for in-state students has risen over 240%. Inflation has grown only 40%. Meanwhile, student loan debt has grown from $345 billion in 2004 to $1.7 trillion today — a roughly 500% spike.
Higher education is in crisis. Countless Coloradans are in a precarious position.
So, why has the cost of college skyrocketed? Our state has chosen to spend fewer and fewer taxpayer dollars on postsecondary schools. Meanwhile, a lot more is spent outside the classroom on things like administrators and fancy, expensive buildings. Consider: as of February, University of Northern Colorado has a $260 million deferred maintenance backlog for which UNC plans to push the cost to students using student capital fees. CU-Boulder has seen administrative costs grow by over $2,700 per student since 2010, ranking a mediocre 28th out of 50 state flagships in terms of spending least-per-student on administration. Tuition and required fees at Boulder represent 17.3% of state median household income as of 2018-19.
Then there’s the upward tuition pressure of federal student loans, a whopping one-third of the feds’ total balance sheet. Thanks to how the student loan system is structured, government has incentivized young people to take out loans, lots and lots of loans, leading to easy money for universities — and consequently, massive tuition hikes.
Many people assume student debt is high because tuition is on a tear, but it’s much deeper. Many schools — Colorado’s included — are spending excessively and expect to put that on the backs of students. Tuition is especially high because loans and grants are so easy to get.
Colleges and universities have positioned themselves nicely to benefit: one analysis showed four-year institutions received $1,977 more in tuition revenue per FTE student in 2018 compared to 2010. In fact, the Federal Reserve Bank of New York found that for every dollar a college gets in subsidized federal loans, tuition goes up 65 cents. Talk about a shameful, vicious cycle.
What’s the impact on graduates? With an average $40,000 in debt owed upon graduation, young people struggle to afford a home or start a business. Often their degrees don’t give them the job-market advantage they anticipated. Even worse, it can take years for deeply-indebted borrowers to repay their loans, meaning they’ll lose out on discretionary income for a long time.
Truthfully, the promise of college has fallen flat. Student debt holds back millions. Something can and must be done to help current and future borrowers haunted by the Walking Debt.
President Biden would like to forgive $10,000 in student debt. Sen. Elizabeth Warren wants $50,000. The sky’s the limit! But aside from being astronomically expensive, it is disproportionately unlikely to help the poorest Americans if the Biden or the Warren plan proceeds.
Many students of limited means don’t have student debt because they didn’t go to college.
Critically, canceling student loans will actually make matters worse. If current borrowers have their debt forgiven, incoming and future students will expect theirs to be canceled, too.
There will be even more reason for students to take out loans and for colleges to endlessly jack up tuition — worsening a decades-long trend.
When it comes to student debt, Congress should pursue other ideas. They can restore bankruptcy protection for deeply indebted borrowers who have no way out. This will also restore risk to the lender, who will use some prudence and caution before writing unreasonable loans. Congress should make individual postsecondary schools responsible for a percentage of the losses when a borrower defaults or discharges a student loan in bankruptcy — ideas supported by a bipartisan range of figures from Democrat Sen. Warren to Fox News’ Tucker Carlson.
Next, Congress can pass bills empowering employers to help pay back employees’ loans more quickly on a tax-free basis. Former Sen. Gardner introduced legislation along these lines; Sens. Bennet and Hickenlooper should take his ball and run with it.
Finally, for future student loan borrowers, we must dramatically reform how higher education is funded by revamping student loans. For example, Parent PLUS loans should be replaced with market-based financing instruments like Income Share Agreements.
Unlike student loans, ISAs offer private investors the opportunity to fund students in return for a share of their future income over a fixed period. CU-Boulder’s College of Engineering and Applied Sciences offers ISAs through the Back a Buff ISA Support Fund.
Alongside federal fixes, there are many steps that should be undertaken at the state and college levels to help future students and current student debtors. At its core, we must change the paradigm of how we think about paying for higher education. The real solution is to fund students, not systems. On Friday, our second and final joint column will explore concrete actions both the state of Colorado and colleges themselves can take.