On Tuesday, President Obama announced that he would use the power of the executive office to aid college graduates in repaying their federal student loans. The president's new measures will make it easier for students to peg loan payments to their income and to consolidate their different federal loans to earn a slight break on interest rates. Some wonder if the announcement is a response to the ongoing Occupy Wall Street protests. Regardless of its intent or timing, both measures could save indebted graduates up to hundreds of dollars a month. These new initiatives will not affect private sector student loans, which are, of course, beyond the executive's purview.
These changes will amount to little more than a band-aid, however, if the cost of higher education continues to outstrip rising costs of living. Loan debt has been surging over the past two decades in an attempt to keep pace with advancing college tuition costs that consistently exceed rising incomes by a wide margin. According to the National Center for Education Statistics, from 1980-81 to 2009-10, tuition at both private and public four year institutions rose by a staggering 135%, even after adjusting for inflation. State funding for public institutions declined every year from 2001 to 2005, reaching a 25 year low in per student funding in the latter year. State appropriations increased the next two years, but those gains largely were wiped out by the recent recession. Not surprisingly, tuition rates typically surge to cover shortfalls in public funding for post-secondary education. Even when public funding is increased, however, statistical trends show that tuition rates generally continue to increase as well, albeit at a slower rate. The result is that the percentage of funding for public higher education derived from individual tuition has increased steadily over the last 25 years. In 1982, tuition represented 22.1% of total education revenue (monies appropriated for public post-secondary education). By 2007 tuition accounted for over 36% of total education revenue, according to a 2008 report compiled by the group, State Higher Education Executive Officers (see the table on page 21).
As college costs are shifted increasingly from the public to individual students, average student loan debt, predictably, has increased as well. Higher education is one of the soundest "investments" that an individual can make, well worth taking on debt in order to complete a degree. As a consequence, student loan debt is now the second largest single source of individual debt in America, surpassing credit cards and lagging behind only mortgages. Yet, while student loans are an integral part of the higher education system, advancing per capita debt levels might threaten future generations' opportunities to pursue higher education, potentially undermining the mission to make higher education (particularly public education) available for all Americans who wish to pursue it. Earlier this year, a survey of student loan debt revealed that increasing numbers of students are taking on debt that likely will take 20 years to repay, meaning that today's graduates who go on to become parents conceivably could still be paying off their own debt while preparing to send their children to college. And this long term debt might restrict parents' ability to send their children to the college of their choice or to send them to college at all.
Perhaps we need to re-assess whether or not we, as communities, should contribute more tax dollars to public post-secondary schools and thereby shift some of the burden of educational expenses back from individual students to the communities that benefit from having a well-educated public. After all, public education is an undeniable public good. We also might need to reassess the entire higher education system, however. Four-year institutions have gobbled up an increasing percentage of college students, at the expense of two-year institutions like community colleges and trade schools that offer equally valuable avenues to rewarding careers and future educational opportunities. We all are probably familiar with the well-known statistics showing that graduates of four-year institutions tend to make far more money over their lifetime than graduates of high school and two-year institutions, but it would be dangerous to interpret those statistics as proof that four-year institutions offer the only education of value. A more robust system of higher education would have mechanisms to keep costs under control, stop the "privatization" of public higher education, and better promote the variety of higher education choices beyond four-year institutions.
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