One trillion dollars. We’ve heard the statistic and the conventional wisdom: Student loan debt, driven by recklessly out-of-control tuition, will stifle our economic future.
On the surface, it rings true. But as a scientist, I have a penchant for data, and have found that simplistic narratives are often, well, overly simplistic. This can become a real problem when we use those simplistic narratives to drive public policy decisions.
Multiple culprits have driven student loan debt to current levels: the recession, fewer families saving for college, rising graduate school expenses, the surge of for-profit education providers and rising enrollment. The debt has also been driven by tuition increases, but at public universities, these increases correlate — nearly dollar for dollar — with cuts in per-student state funding. In fact, at my university, if we adjust for inflation, we have held the cost of education per student steady for two decades.
While the level of national debt is real, the picture for the average student is less bleak. Seventy percent of students who borrow to fund their undergraduate education owe less than $25,000 at graduation — 40 percent owe less than $10,000. Two-thirds of Americans still enroll at state colleges and universities, and those students carry a smaller individual share of the $1 trillion debt than their peers at private for-profit colleges.
At Colorado State University, our students have lower average debt and among the lowest loan default rates in the nation. And while tuition certainly has gone up at our state schools, this doesn’t reflect skyrocketing cost increases but who’s paying. Twenty years ago, the state paid two-thirds of the cost to attend college, and students paid a third. Today, that’s reversed.
Our grandparents believed higher education was a public good, not an individual commodity, and invested in us. Over the last 20 years, we’ve backed off that notion and pushed the costs onto students, with almost no discussion about whether this was the public policy we wanted. The result: Students are paying more because we, as taxpayers, are paying less.
Still, those students who take out loans to attend our public schools are essentially borrowing capital to invest in a business plan with a wonderful track record and a bright prospectus. College graduates earn on average $1 million more over their working lives. The Brookings Institution calculates the return on investment on a student loan at 15 percent annually. Each successive increase in educational attainment cuts the rate of unemployment. In Colorado, the average college graduate pays back the public investment in their education in just over three years through their taxes on higher income.
Yet we feel we need to do something about the debt crisis, so we’re now seeing proposed solutions that involve regulating tuition at only public institutions — even when all evidence suggests they aren’t the problem. Nearly 60 percent of all federal loan debt is held by students who attended private and for-profit schools. Among the private schools, those that are also for-profit account for around 13 percent of all students but nearly 50 percent of loan defaults. More than half who enroll in two-year for-profit colleges never finish.
Regulation that only impacts public higher education places our state schools at a competitive disadvantage, with the risk of lowering quality and driving students to more costly options. It puts us in the position of regulating the one segment of higher education that has the most straightforward rationale for cost increases, lower average student debt and, from a social escalator and R&D impact perspective, the greatest benefit to the taxpaying public.
We know that the students who are harmed most by debt loads are those who borrow unreasonable amounts for educational programs that don’t end in a four-year degree. If we want a viable solution on the student debt crisis, we need to be honest about how we got to this point, and not risk treatments whose side effects may be worse than the disease.