Our Student Debt Problem

Financial FAQs

College students and former students have amassed some $1.5 trillion in student debts, most of it (90 percent) held by the federal government or guaranteed by same. And this is holding back a whole generation of young adults who have to postpone almost everything—marrying, raising a family, buying a home, even finding a desirable job—in order to pay their debts.

Presidential candidates such as Senator Elizabeth Warren Senator are offering a solution to the student debt problem by offering some debt relief based on income. And there are various proposals to reduce student fees for higher education, as well as smaller institutions of higher education that charge little or no fees.

In 1993, the average debt of a bachelor’s degree graduate was approximately $9,000; five years later, it was about $15,000. By 2003, it had jumped to approximately $17,500, according to the Wall Street Journal.

Today, the average outstanding student loan balance per debtor is roughly $30,000, though one recent study by Fidelity Investments put the figure as high as $35,200. Approximately 20 percent of U.S. households currently owe student loan debt, as do 40% of people younger than 35. This means an increase of nearly 200 percent of overall student loan debt (public and private) over the last 20 years.

This is while the wages of middle-class workers have grown just 6 percent since 1979 and low-wage workers’ wages actually dropped 5 percent during that period, according to the Economic Policy Institute, a progressive think tank.

Marketwatch.com

It is why Senator Elizabeth’s proposal to cancel most public college or university student debts is so important. In the latest Hill-HarrisX survey, 67 percent of respondents between 18 and 64 said they backed Warren's idea compared to 53 percent of voters who were older. The proposal was also supported across all age groupings although voters who are 65 years old and up were somewhat less likely to support it.

What happened to put so much of the burden on students and their families to have what was once affordable to children of a middle-class family? Declining state investment in higher education over the past decades has pushed costs up, making it more difficult for students to afford school on shrinking household incomes, while many more students enrolled in higher education, so that almost 50 percent of the student-age population now attends some college or university.

Something had to give. In the late 1980s, public colleges typically got about one-quarter of their revenue from tuition, now that’s up to about 50 percent, according to Michael Mitchell, a senior policy analyst at the Center on Budget and Policy Priorities who studies state funding trends.

But there’s an even deeper reason college and university costs have risen with state-chartered public institutions like the University of California and California’s State College systems.

It began just after I left UC Berkeley in 1964, and the protests against American involvement in the Vietnam War began. President Johnson declared war on Vietnam on August 10, 1964 after the Gulf of Tonkin incident, and the Selective Service then made every able-bodied American male 18 year old eligible for the draft. That is when Berkeley’s campus anti-war protests began in earnest.

A coincidence?  I don't think so.  My only ‘tuition’ during my six years from 1958-64 was a $150 administration fee for every semester I attended UC Berkeley, and that was the case until Ronald Reagan became California’s Governor in 1966 when he and fellow conservatives on his Board of Regents, which was mostly made up of successful businessmen, decided that Berkeley students were spending too much time on the streets protesting the war, and not enough time in the classroom.

In 1969, Reagan convinced the Regents to begin to charge “education fees” to students for the privilege of attending such a prestigious institution, even though the UC system was a state-funded institution under the federal land grant act; rather than privately-funded Stanford University.

Its University of California system was created in 1868 with the decree that “admission and tuition shall be free to all residents of the state,” and the California State and community-college systems followed suit.

Governor Reagan at his inauguration famously said in reaction to the growing student protests: “Get them out of there, he said. “Throw them out. They are spoiled and don't deserve the education they are getting. They don't have a right to take advantage of our system of education.”

All UC students in the 2019 school year who are residents of California now pay $13,500 per year in tuition fees, while non-residents pay $42,500 per year, according to the UC Admissions Office.

U.S. News and World Reports publishes college rankings as well as those institutions of higher learning with little or no tuition fees. These low or tuition-free colleges are in lesser known states and regions, such as the Dakotas, New Hampshire, Arkansas, Illinois, Kentucky and Texas that give the same quality education without ‘name’ professors; that is, if the student seeks an education that will prepare him or her for meaningful work, rather than a degree from a prestigious and expensive institution (such as UC Berkeley) that that will put him or her on a career track that may turn into a well-worn rut. Even Ivy League Cornell University charges no tuition fee to New York state residents with family incomes of less than $100,000 per year.

Senator Warren’s proposal includes cancelling up to $50,000 in student debt for those that make less than $100,000 a year, with the amount of relief getting gradually smaller as income level goes up, and households that make more than $250,000 not eligible for any debt relief.

Altogether, it would wipe out all student debt — including both federal and private loans — for more than 75 percent of Americans with outstanding loans, according to analysis provided by Warren’s campaign.

These are just a few ideas on how to solve the student debt problem. We know the problem is becoming even more serious as a growing number of students want the advantages of a higher education; the question is how to fix it.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Happened to Tuition-Free College?

Popular Economics Weekly

Senator Bernie Sanders wants it. Until the Vietnam War, most public colleges and universities had it. So what happened to our tuition-free public universities and colleges?

UC Berkeley is perhaps the poster child to what has happened to the idea of tuition-free colleges and universities. It is something most other developed countries have for its citizens but no longer in the U.S. And tuition-free higher education—particularly for taxpayer funded public colleges and universities—was in the founding charters of most higher public educational institutions.

When I entered UC Berkeley as a freshman in the late 1950s my $300 scholarship covered the first year administration fees. There was no tuition. Today UC Berkeley charges a tuition fee of $13, 518 per academic year for California residents. Out-of-state residents have to add an additional $26,682 in tuition fees.

That is why students today have accumulated some $1.2 billion in student loan debt that averages up to $35,000 per the most recently graduate student in a recent Champlain College panel discussion convened on the subject.

· The total outstanding student loan debt in the U.S. is $1.2 trillion, that’s the second-highest level of consumer debt behind only mortgages. Most of that is loans held by the federal government.

· About 40 million Americans hold student loans and about 70 percent of bachelor’s degree recipients graduate with debt.
· The class of 2015 graduated with $35,051 in student debt on average, according to Edvisors, a financial aid website, the most in history.
· One in four student loan borrowers are either in delinquency or default on their student loans, according the Consumer Financial Protection Bureau.

As late as 1960 The California Master Plan developed under Chancellor Clark Kerr supported keeping the UC system tuition-free. How much has changed since then! It’s almost as if California has been made to pay for being the vanguard for anti-war and anti-establishment protests during the 1960s and 70s; when it was in wholesale rebellion against the policies of the Cold War, or any war.

Why the exorbitant costs for higher education today, and why is it so important to make higher education affordable to most Americans, something that the young people coming to Bernie’s rallies also want? The first answer is that it’s important to have a well-educated public for a functioning democracy.

And Senator Bernie Sanders has made it a central issue in his campaign. “In a highly competitive global economy, we need the best-educated workforce in the world, says Bernie on his website. “It is insane and counter-productive to the best interests of our country and our future, that hundreds of thousands of bright young people cannot afford to go to college, and that millions of others leave school with a mountain of debt that burdens them for decades. That shortsighted path to the future must end.”

There is also the skills’ shortage employers lament about today. College graduates have the highest employment rate and incomes (blue line in graph)—and the lowest unemployment rate; actually below today’s 5 percent unemployment rate. Whereas high school grads have something like a 7 percent unemployment rate, and comparably lower incomes.

It is easiest to blame then California Governor Ronald Reagan, who once inaugurated in 1966 began his attack on higher education. It was the beginning of the Vietnam anti-war protests, and he considered UC Berkeley a hotbed of socialism, and inimical to winning the Cold War.

It was also the beginning of his government-is-the-problem campaign by shifting state resources away from educating California’s students.—firstly, by cutting state funding for higher education, and calling in the National Guard to put down student protests.

But there were other reasons for abandoning The California Master Plan to educate all Californians tuition-free than the growing political polarization from the Vietnam War. Proposition 13 was passed in 1978 that limited property taxes, the main source of state and local education revenues.

Even then annual tuition and fees for Californians was just $630. The big fee increases began in the 1980s, when California enacted the three strikes law to fight the War on Drugs and began to build a record number of prisons. California’s prison population increased 500 percent between 1982 and 2000, according to historian Ruth Wilson Gilmore in her book, Golden Gulag.

The monies went elsewhere, in other words. The expansion of educational institutions stopped, despite the surging student population of baby boomers reaching college age. The result has been that state revenues now pay less than 16 percent of the UC University systems’ costs, and student tuition fees (and debt) now pay for the majority of education costs.

The UC system no longer educates the majority of Californians. This is when a recent McKinsey & Co. report predicts the U.S. workforce will need an additional one million well-educated workers by 2020, when most of the 80 million millennials, children of the baby boomers, have reached college age.

Then where will they be educated? From so-called for-profit colleges, which now make up some 25 percent of post-secondary institutions in the U.S. And they provide a much inferior education, as profit is their bottom line rather than a rounded education.

Bernie is right in this case. That cannot be, if we are to stay competitive with the developed world. It turns out government has to become the solution, the equalizer of opportunity as it once was, if we are to reduce the soaring inequalities of income and opportunity.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen