In the article Student Debt by Tom Price, he discusses how a majority of college graduates are leaving school owing more than $25,000, and nearly 7 million have defaulted on their student loans. Student debt nationwide since the 1970s has increased to almost $1.3 trillion. Price explains what experts say is responsible for the rise in College tuition, which some blame on declining state support, which fell by about 20 percent between 2001 and 2015. However, some policymakers say colleges are spending too much on administration, expensive intercollegiate athletic programs and academic programs with little demand. Student debt was a major issue in the 2016 presidential campaign, with Democratic candidates promoting free college tuition and President Donald Trump proposing an income-based repayment plan and debt forgiveness. Despite most experts agreeing on the cause of this massive debt problem disagreement is widespread on what should be the solution.
Most experts would agree that the leading cause of an increase in College debt would be the increase in the cost of attending University. The blame for this tends to fall on decreasing state support for public universities, light faculty workloads and excessive spending on facilities, athletics, and administration. Since 2008, the average tuition at four-year public universities has risen 28 percent faster than inflation. Starting in 2004, state support for public universities fell by more than 30 percent. Due to states investing less money into public universities, the loss of funds and the financial burden has been passed onto the tuition-paying students. Many policymakers blame the loss of public investment on massive tax cuts and an increase of healthcare cost that the state has to cover. For example in the ‘1970s, states paid for three-quarters of a state colleges’ expenses; by 2014 states were paying only half’, according to Price’s article.
Some experts say excessive university spending on facilities, athletics and administration are increasing the cost of tuition in America. For example, ‘colleges more than doubled the number of administrators between 1987 and 2012, adding 517,636 positions’, according to Prices article. Salaries have also increased over the past 30 years according to the data Tom Price has gathered. For example, Five public university chief executives earned more than $1 million in 2015, while full time factually wages have remained the same over the same period of time according to the American Association of University Professors in fact, Overall faculty pay has declined because universities are increasingly hiring lower-paid, part-time Faculty. Looking on the bright side 30 percent of graduates have no college debt, and a majority of borrowers make their payments on time according to Barmak Nassirian, the federal policy director at the American Association of State Colleges and Universities.
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Ironically, Research shows that big borrowers usually are those obtaining graduate and professional degrees, which tend to lead to high earnings, so they end up paying their debt sooner. But many undergraduates with low debt typically end up unemployed or in low-paying jobs that make it difficult to pay back their loans. Students who stay longer in school tend to gain a higher education and receive higher paying jobs which facilitate them in paying their debts. For many students Scholarships and grants ease the burden, While tuition and fees at private nonprofit colleges averaged $32,400 in 2015, students there actually paid less than $15,000 out of pocket after receiving scholarships or grants. The longer a student studies at a non-for profit school the less likely they are to have a serious problem with student debt later in life.
Students attending for-profit colleges, however, the story is very different. Students at for-profit Schools have the most difficulty managing their debt according to data collected by Price. Enrollments at such colleges jumped from a little over a hundred thousand in the 1980s to nearly 2 million in 2010. while only 10 to 12 percent of college students attend for-profit schools, those students receive a ‘quarter of federal student aid and account for 44 percent of loan defaults’, according to A.J. Angulo, an education professor at Winthrop University in Rock Hill, S.C. Government agencies in recent years have taken action and started regulating for-profit schools in order to ensure that students are receiving a quality education and ensuring these corporations aren’t taking advantage of the American loan system.
Government agencies have also started cracking down on American debt lenders and collectors for unethical practices. For example, Wells Fargo agreed to pay $3.6 million to settle a Consumer Financial Protection Bureau (CFPB) allegation that the bank illegally processed loan payments in ways that dramatically increased late fees. Collection agencies have paid millions of dollars in fines for harassing student debtors, which lead to the federal government last year canceling contracts with five of 22 collection agencies. Looking at the issue student debt overall, the cost of attending college has risen across the board, average family incomes and the wages working students can earn while enrolled in University have not risen over the past 30 years. Leading to a student having to take out larger loans with a dismissed ability to pay them off sooner rather than later.
One of the solutions presented in the previously mentioned article would be making public Colleges tuition-free. This proposed solution was a major point of contention during the 2016 presidential election. Democratic candidates most famously Bernie Sanders where strong supporters of free college tuition while Republican candidates where less supporting of the idea favoring a policy of debt forgiveness. According to members of the Republican party this aid would have been available immediately for families earning no more than $85,000 a year, a cap that would increase to $125,000 in four years, covering 80 percent of American families. The federal government would not provide all of the funding, some would have to be non-subsidized state funding. However, University Students would have been required to work 10 hours a week. Federal Pell Grants would still be available for low-income students and would remain available to pay other costs. On the other side, Clinton would have allowed borrowers to save money by refinancing their federal loans at lower interest rates and by cutting interest rates. Many countries like Mexico and Germany offer free university education, this is a core argument behind making higher education free in America.
Some critics, however, contend that increasing government aid to both students and colleges encourages universities to raise their rates because students would not feel the financial burden of higher tuition. It’s a theory called the ‘Bennett Hypothesis’ after William Bennett, a former secretary of Education and a conservative leader on education issues. While serving as Education secretary, Bennett wrote in 1987 that federal aid enables colleges ‘blithely to raise their tuitions, confident that federal loan subsidies would help cushion the increase.’ He would later go on to help another conservative advocate compare university aid to housing aid, in the fact that government assistance in the housing market led to the price of real estate dramatically increasing over the past 40 years.
Another argument that is presented is that universities are not doing enough to keep the cost tuition from increasing, and are misusing funds that are provided to them. For example, Robert Morin a former cataloger at the University of New Hampshire for 50 years, died last year with a fortune, $4 million, which he inherited to the former employer. The university announced that $100,000 would be invested in the library system. However $1 million would be used to install a video scoreboard in the school’s football stadium. This offers an example of what many critics cite as misplaced priorities that end up driving up college charges. Expensive athletics programs that receive a tremendous amount of university funds which are used in the construction of plush sports facilities, new sports stadiums, bloated administrative costs, and faculty who don’t teach academia. A solution to the student debt problem according to some critics was to simply ensure that universities are using funds for academia and not sports. According to some policymakers, better university use of funds would help reduce the tuition placed on students.
Tom Price discussed how a majority of college graduates are leaving school owing thousands of dollars in student debt and that millions have defaulted on their student loans. Price discussed what experts say is responsible for the rise in College tuition, which some blame on declining state support while others blame the increase on schools spending too much on administration, expensive intercollegiate athletic programs and academic programs with little demand. Student debt was a major issue in the 2016 presidential campaign, with Democratic candidates promoting free college tuition and President Donald Trump proposing an income-based repayment plan and debt forgiveness. Despite most experts agreeing on what caused this student debt crisis, there still remains all lot of disagreement on which is the next course of action.
