Source: Michael Mitchell and Michael Leachman, Center on Budget and Policy Priorities, May 13, 2015
From the press release:
Higher education funding remains well below pre-recession levels in almost all states, a new CBPP report shows. Although the majority of states have begun restoring funding to their higher education systems, 47 states are spending less per student today than they did before the recession. As a result, public colleges and universities have had to raise tuition and make spending cuts that may diminish the quality of education available to students at a time when a highly educated workforce is more crucial than ever for economic growth and vitality. …. To make up for this declining state investment, public colleges and universities across the country have increased tuition considerably. Annual published tuition at four-year public colleges has risen by $2,068, or 29 percent, since the 2007-08 school year, after adjusting for inflation. In Arizona, published tuition at four-year schools is up more than 80 percent, while in five other states — California, Florida, Georgia, Hawaii, and Louisiana — it’s up more than 60 percent. These sharp increases in tuition have accelerated longer-term trends that have made college less affordable and shifted costs from states to students and their families. Federal student aid and tax credits have risen, but on average they have fallen short of covering the tuition increases. As a result, student debt levels have swelled since the start of the recession. Students now hold $1.16 trillion in student debt. ….
Source: Mark Huelsman, Dēmos, May 2015
From the summary:
Today, taking out loans is the primary way individuals pay for college—a major shift in how our nation provides access to higher education. While concerns about the growth in college costs and student debt are nearly universal, much of this concern focuses on how college debt is impacting the economic well-being of college graduates and our overall economy. What has been less understood, or examined, is how this shift to a debt-based system impacts our nation’s historical commitment to ensuring everyone—regardless of race or class—can afford to go to college. We need to understand whether or not the “new normal” of debt-financed college is having an impact on our ability to make good on that fundamental promise.
This report, The Debt Divide, provides a comprehensive look at how the “new normal” of debt-financed college impacts the whole pipeline of decision-making related to college. This includes, whether to attend college at all, what type college to attend and whether to complete a degree, all the way to a host of choices about what to do for a living, and whether to save for retirement or buy a home. In an America where Black and Latino households have just a fraction of the wealth of white households, where communities of color have for decades been shut out of traditional ladders of economic opportunity, a system based entirely on acquiring debt to get ahead may have very different impacts on some communities over others.
Our analysis, using data from three U.S. Department of Education surveys, the Federal Reserve’s 2013 Survey of Consumer Finances, and existing academic literature, reveals a system that is deeply biased along class and racial lines. Our debt-financed system not only results in higher loan balances for low-income, Black and Latino students, but also results in high numbers of low-income students and students of color dropping out without receiving a credential. In addition, our debt-based system may be fundamentally impacting the post-college lives of those who are forced to take on debt to attend and complete college. Our findings include:
● Black and low-income students borrow more, and more often, to receive a bachelor’s degree, even at public institutions. ….
● Associate’s degree borrowing has spiked particularly among Black students over the past decade. ….
● Students at for-profit institutions face the highest debt burdens. ….
● Black and Latino students are dropping out with debt at higher rates than white students. ….
● Graduates with student loan debt report lower levels of job satisfaction when initially entering the workforce. ….
● Average debt levels are beyond borrowing thresholds that are deemed by research to be “positive.” ….
● While those with a college degree are more likely to save or buy a home, student debt could be acting as a barrier. ….
Source: Dylan Conger, Lesley J. Turner, National Bureau of Economic Research (NBER), NBER Working Paper No. w21135, April 2015
From the abstract:
We examine the impact of a temporary price shock on the attainment of undocumented college students enrolled in a large urban college system. In spring 2002, the City University of New York reversed its policy of charging in-state tuition to undocumented students. By fall 2002, the state legislature restored in-state rates. Using a differences-in-differences identification strategy, we estimate impacts on reenrollment, credits, grades, and degree completion. The price shock led to an immediate 8 percent decrease in senior college students’ enrollment. Senior college students who entered college the semester prior to the price shock experienced lasting reductions in attainment, including a 22 percent decrease in degree receipt. Conversely, among senior college students who been enrolled for at least a year, the price shock only affected the timing of exit.
Source: Ralph Gerstein, Lois Gerstein, Campus Safety & Student Development, Vol. 16 no. 2, Winter 2015
From the abstract:
Universities are a marketplace for ideas, and teachers, student affairs professionals, and other university personnel often deal with controversial subjects. Sometimes, their expression of views antagonizes administrations, boards, or state office holders who have decision-making authority regarding tenure or promotion. Do staff and faculty have protection against adverse personnel actions if their viewpoints clash with university administrators or governing bodies? This article explores several relevant speech cases that have important implications for faculty and staff.
Source: New York Times, Room for Debate, May 7, 2015
The for-profit Corinthian Colleges filed for bankruptcy after investigations into possible recruiting fraud led the Department of Education to suspend its access to federal student aid. Thousands of former students are asking the government to forgive their loans, arguing that the school used predatory practices to persuade them to borrow money. Other for-profit colleges have been accused of similar practices.
Loan relief for students could cost taxpayers millions of dollars, and establish a precedent for other students unhappy with their college degree. Who deserves debt forgiveness when for-profit colleges close or are accused of fraud?
Insufficient Protections at the Department of Education
Ben Miller, New America Foundation
Students who borrow loans from the federal government have a reasonable expectation of protection.
Forgiving Loans Would Be a Mistake
Richard Vedder, Center for College Affordability and Productivity
Loan forgiveness would set a precedent and encourage excessive borrowing.
For-Profit College Student Debt Should Be Forgiven
Osamudia R. James, law professor
We cannot expect these students — who are mostly veterans, minority and low-income — to carry their debt burden back to already economically destabilized communities.
Align the Incentives of Students and Schools
Andrew Kelly, American Enterprise Institute
If an institution’s students cannot pay back their loans, the school should be on the hook to pay back a portion of the loan balance.
The Government Should Actively Notify Borrowers
Robyn Smith, National Consumer Law Center
Thousands of low-income borrowers whose debts should be forgiven instead struggle financially because of the government’s draconian powers to collect student loan debts.
Source: Robert Hiltonsmith, Dēmos, May 2015
From the summary:
In today’s competitive economy, nothing is more important than getting a college education. Yet college tuition costs in the U.S. have been increasing at a breakneck pace, making college unaffordable for millions of Americans. In the last decade alone, the average tuition at public 4-year universities has risen by nearly $3,000. There is a broad consensus that out-of-control tuition is a serious problem for the nation, making it much more difficult for young people, particularly those from low-income families and communities of color, to complete a college degree. However, there is no such agreement on why tuition is increasing. Experts have blamed rising tuition on everything from administrative bloat, to increased availability of grants and loans, to campus construction booms. Demos and others, in contrast, have focused on declining state funding as the culprit, as we demonstrate in our Great Cost Shift series. Although academics and media alike have tried to put the question to rest, public confusion on this issue is one reason why effective solutions remain illusory in almost every state.
This brief attempts to pinpoint the cause(s) of spiraling tuition by taking a deep dive into public university revenue and spending data from the National Center for Education Statistics’ Delta Cost Project Database. In the brief, we split public 4-year universities into two categories: research institutions—schools that have a high level of research activity and award a significant number of doctorates—and master’s and bachelor’s universities—schools that primarily award master’s and/or bachelor’s degrees. Research institutions consistently enrolled about 60 percent of all undergraduates at public 4-year institutions in the decade covered by the brief, while master’s and bachelor’s universities accounted for the remaining 40 percent. We find that declining state appropriations for higher education is indeed the primary driver of rising tuition, responsible for 79 percent of tuition hikes at public research universities between 2001 and 201112 and 78 percent of tuition hikes at public master’s and bachelor’s universities over the same decade. Increased spending on administration accounts for another 6 percent and 5 percent, respectively, at the two categories of institutions, and increased grant and loan aid has had a negligible effect, at most. Finally, the purported construction boom’s impact on tuition has been minimal as well, as we estimate spending on construction has accounted for 6 percent of tuition increases at both research and master’s/bachelor’s universities.
Source: Stephanie A. Pink-Harper, Economic Development Quarterly, Vol. 29 no. 2, May 2015
From the abstract:
In today’s globalized economy, universities serve as economic growth hubs and as facilitators of higher education. However, the perils of the most recent economic crisis have caused these institutions and their surrounding regional communities to experience an array of challenges. An abundance of the economic development literature consistently illustrates the vital role that human capital can have on a region’s economic prosperity. Thus, this research explores the role that human capital theoretical perspectives have in the production of the long-term stability of a region’s economic growth and development efforts. This research seeks to determine if the level of educational attainment affects the economic growth and development efforts of nonmetropolitan areas with or without a research university. The results of this research provide marginal empirical support for the human capital and institutional intellectual capital theoretical perspectives as promoting economic growth and development.
Source: Jonathan Glater, University of California – Irvine School of Law Research Paper No. 2015-46, April 21, 2015
From the abstract:
To borrow for college is to take a risk. Indebted students may not earn enough to repay their loans after they graduate or, worse, fail to graduate. For students who cannot pay for college without borrowing, this risk is both a disincentive and a penalty. Greater risk undermines the efficacy of federal financial aid policy that seeks to promote access to higher education. This Article situates education borrowing in the context of a larger, cultural and political trend toward placing risk on individuals, and criticizes this development for its failure to achieve any of the typical goals – such as particular public policy outcomes or prevention of moral hazard – of legislation that allocates risk.
The Article describes dramatic increases in student borrowing and explains the ill-effects of greater reliance on debt, which increases the riskiness of investing in higher education. The Article contends that recognizing that student debt is a mechanism that transfers risk bolsters criticisms of increased borrowing and suggests a consistent way to evaluate aid policy. The Article outlines an insurance regime, the logical response to undesirable or unmanageable risk, that could help preserve access to higher education while at the same time mitigating the downside risk of borrowing for college.
Source: Sandy Baum, Martha C. Johnson, Urban Institute, April 2015
From the abstract:
This report describes the levels of cumulative education debt among students with different levels of educational attainment and examines factors associated with high borrowing levels. Those with the most debt tend to be among those who have pursued graduate study. Among undergraduate borrowers, students enrolled in for-profit institutions, those who are independent of their parents, and those who stay in school longer are more likely than others to accumulate large debts. Students from low-income families are not more likely than others to borrow large amounts, at least in part because they tend to stay in school for fewer years.
Source: Dan white, Sarah Crane, Moody’s Analytics, April 21, 2015
In an effort to better understand the funding difficulties faced by public higher education institutions over the next decade, this study derives baseline state funding projections for higher education from underlying measures of economic growth. It does this by incorporating historical state government spending data with Moody’s Analytics proprietary models for state tax revenue and Medicaid spending. Over the past several decades, the growth in state funding for discretionary spending categories has declined at an alarming rate. Mandatory spending programs, specifically Medicaid, are requiring more and more state funds, which in the zero-sum world of state spending, has left fewer and fewer dollars for other programs. Medicaid spending, for example, was less than 10 percent of state sourced spending 30 years ago, but today accounts for nearly 16 percent. Taking all funding sources into account, Medicaid has grown to more than a quarter of total state spending. Higher education funding has borne the brunt of much of this crowding out, falling from around 14 percent of state sourced spending in the late 1980s to just over 12 percent today. Our baseline forecasts show that trend continuing throughout the next decade and beyond.
Crowded Out by Medicaid
Source: Paul Fain, Inside HigherEd, April 23, 2015
State tax revenues are up. But the next decade is looking rough, thanks largely to rising Medicaid costs. And public higher education will bear the brunt of tighter state budgets. That’s the central finding of a new study from the National Commission on Financing 21st Century Higher Education. The University of Virginia’s Miller Center created the nonpartisan commission last year with funding from Lumina Foundation….