Government Makes Higher Education Unaffordable
A college degree won’t guarantee success but it helps. Even when good jobs await, the benefits of a degree drop when tuition rises. In a bad job market, many graduates only find work that won’t cover school debt. Half of recent college graduates are unemployed or in low-wage jobs like bartenders, waiters and store clerks.
While consumer prices were rising 3.8% a year, tuition rose 7.4%, faster even than health care. At one time, states took pride in low, affordable tuition and fees for public colleges. But federal mandates and incentives to expand health benefits have shifted funds from colleges to Medicaid, which is now the largest component of state budgets. As noted by Sen. Lamar Alexander (R-TN), a former Secretary of Education and former university president, “30 years ago state budgets were 8 percent for Medicaid; today they’re 25 percent. As long as the federal government requires states to continue to fund Medicaid in a preferential way, public higher education is going to be seriously damaged.”
Sen. Tom Harkin (D, IA) described it this way, “[Only higher education] has paying customers. And so . . . that’s the only thing you can go to . . . where you can get somebody else to pay for it.”
The dramatic damage done by Medicaid to higher education funding has been confirmed in recent Congressional testimony on behalf of state budget offices.
And as costs rose at public schools, private colleges and universities were relieved of competitive pressure to hold down their own costs.
Had families been unable to pay these rising costs, supply and demand would have caused resistance to these huge tuition and fee increases. But federal incentives again distorted the economics. Rising costs were met by rising availability of federal grants and subsidized loans. Federal aid to students went up 164% (after adjusting for inflation) in the last decade. Private lenders and their underwriting standards were removed from the picture by changes in federal guarantees of student loans. Cheap and easy credit removed normal market forces and deferred the impact of higher costs. Students and families accepted higher debt burdens, expecting a solid job market would let them repay huge debts. The result? Student debt now tops $1-trillion, more than credit card or auto loan debt.
Meantime, other federal dictates have generated additional regulatory costs, yet these have only been partially studied: Title IX, civil rights dictates, privacy, campus safety, and also ever-larger federal dictates relating to disciplinary policies and speech codes.
Meantime, the value of degrees has been cheapened by hollowing-out and dumbing-down course content while inflating grades. These have been pushed by political correctness and federal civil rights expectations that presumed bias if minorities perform disproportionately. A 1,000+ school survey by the American Council of Trustees and Alumni found too many courses have virtually no requirements. 63%of employers believe that too many recent college graduates do not have the skills they need to succeed in the global economy.
The ever-expanding federal funding for loans delays the impact of higher college costs until years after studies are completed (or should be). This reduces price pushback by those currently in college, but heightens the regret of those who find themselves buried by debt while good work is hard to get.
*In a series of papers from Ernest Istook, former Congressman and now Distinguished Fellow at The Heritage Foundation, the Steamboat Institute will help outline how big government is destroying the purchasing power of today’s families, which is often more destructive than raising their taxes.