The Affordable College Compact: A Federal-State Partnership to Increase State Investment and Return to Debt-Free Public Higher Education

Source: Mark Huelsman, Dēmos, September 2014

From the summary:
As a postsecondary degree has become more important than ever in the labor market, and the primary means by which one enters the middle class, the U.S. has simultaneously made it more difficult and more expensive to attain. Over the course of three decades, the cost of public colleges and universities—which educated nearly 3 in 4 students—has risen dramatically. The obvious result of increased cost during a period of stagnant incomes for low-income and middle-class families has been an increased reliance on debt as a way to finance a college education. Just 25 years ago, if a student wanted to attain a bachelor’s degree, it was more likely than not that he or she would be able to do so without borrowing. Now, borrowing is nearly required to graduate with a four-year degree, particularly for low- and middle-income students.

A bachelor’s recipient has a 7-in-10 chance of taking on loans in order to graduate, and 9-in-10 Pell Grant recipients graduate with debt. Average debt at graduation is approaching $30,000 (and is over $30,000 for Pell Grant recipients). Even average borrowing for graduates at public schools—which educate three in four students—is up by nearly a third over the past decade. 64% of bachelor’s degree recipients at public colleges graduate with debt, and even 42% of associate’s degree holders from public schools leave with debt. Black and Hispanic graduates also incur more debt than their white counterparts.

What’s worse, these students may be the best off. Those with credentials are likely to be the best suited to handle student debt, but almost a third—29%—of student borrowers drop out of school, and non-graduates are more likely to face serious trouble repaying loans, becoming delinquent, or defaulting4 Students who choose not to take on debt are faced with the choice of working longer hours or enrolling part-time, both of which may decrease the likelihood of graduating.

Reversing these trends matters not just for our economy, but for notions of equity as well. The specter of student debt has the ability to fundamentally change student aspirations, and also raises the stakes of failure with regard to college completion—the rates of which have barely increased just as college costs and debt levels have increased….