Paying for College Forever… The New School of Hard Knocks
The show is called Paid Off and it follows in the tradition of such television classics as Queen for a Day and Family Feud. That is to say, it makes the woes of other people into popular entertainment for a live audience and, of course, those “millions watching at home.” An essential element of these shows is that the people on stage are real and they suffer from real problems.
In the case of Paid Off, that problem is student debt.
Three contestants compete to answer questions of the Trivial Pursuit sort. But before the questioning begins, they identify themselves and tell the audience where they went to school, what they studied, and how much they owe in student debt. The numbers range from impressive to breathtaking – up into the six figures.
The people who come onto the show do so in the hope that they will get some relief from those debts. But only one of the three will. Perhaps even enough to cover the entire balance. The other two will leave with not much more than cab fare home.
You can’t help but feel for them. Each came on the show thinking they had a shot. And then they blew it. If they could have just remembered the name of Elvis Presley’s mansion in Memphis, Tennessee in time to hit the buzzer before the other contestant…
It would have meant a clean start.
Graceland. Damn, I knew that.
Still, there is a consolation prize. The host brings out a dyspeptic-looking dude in funny clothes and introduces him as the person responsible for the judicial ruling that student debt cannot be discharged through bankruptcy.
The defeated contestant gets to throw a pie in his face.
College at Any Cost?
There are a lot of people like the contestants on Paid Off. And they owe a lot of money. But it wasn’t always this way.
In the 1950s and ‘60s, a man could graduate high school in Detroit and start working on the line at the Ford plant. He could marry, have children, buy a house in the city, and, eventually, a little cabin up north to vacation and hunt deer. He would work into his 50s and retire with a pension and health care. And his wife may not have worked at all.
And on top of all that, if he had kids who had the right stuff for college, they could attend the state university at a price he could afford. And his kid, perhaps, would even be able to pay for it by kicking in what he earned at a summer job or part-time work in school.
The numbers are startling.
In 1965, college tuition, fees, and room and board ran on average $1,375 a year. That man working at the Ford plant would need to come up with just $155 to pay tuition if his kid attended the University of Michigan’s Dearborn campus and lived at home.
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When he was running for president in 2016, Martin O’Malley liked to tell voters that, “Fifty years ago, the average GM employee could pay for a year of a son or daughter’s college tuition on just two weeks wages.”
These days, it would be more like 10 weeks.
You see, in the ‘70s, something changed.
Colleges and universities had expanded after World War II to meet the rising demand as the GI Bill enabled veterans to get a college education.
Then, in the ‘70s, Baby Boomers – many of them children of those vets – were graduating from high school and eager to get into college where they could earn those degrees that would lead to “careers” rather than “jobs.” For men graduating high school in the mid- and late-’60s, attending college was the alternative to Vietnam. This was an undeniable incentive. And, as before, the government helped with the money with Pell Grants and other subsidies. Higher education was now paid for with borrowed money for which the students, not the colleges, would be on the hook.
College prices starting climbing. From 1978 to 2018, college tuition and fees increased by 1,300%. That is almost twice the 700% growth in the cost of health care, which is usually considered the chief offender in the burdening of the middle class. Consumer prices overall rose just 300%.
States that had once supported public universities began shifting costs from taxpayers to students and their parents. We stopped thinking of paying for college as the equivalent of buying a new car. We now think of paying for college as equivalent to buying a new house. A nice new house.
Schools realized they had a product that people wanted, no matter the cost.
And the divide between those who had only a high school education and those who were college graduates became, increasingly, the central fact of American economic life.
If you were on the wrong side of that divide, you would likely be left behind to live a life of struggle and worry, ending in frustration and despair.
If you were on the wrong side of that divide, you would likely be left behind to live a life of struggle and worry, ending in frustration and despair.
The alternative path was open only to those with a college degree.
People responded to this kind of “binary” choice in the predictable way: In 1950, slightly more than 7% of American men and 5% of women had completed four or more years of college. In 2018, those numbers had risen to 34.6% and 35.3%, respectively.
All these new students were eager – even desperate – to get a college degree… But they had choices. Some schools were “better” than others. Some were even “elite.” A degree could guarantee entry into a world of stimulating work, lavish pay, and social status.
Admission to these schools was based, notionally, on “merit” – as determined by a calculus that only the institutions themselves seemed to fathom.
Inevitably, the system was gamed.
From Education to ‘Experience’
As we recently learned, wealthy hedge funders and second-tier Hollywood actresses paid bribes to get their otherwise unqualified darlings into schools that would bestow a degree and, supposedly, set them up for life. The bribes were reported as charitable contributions when it came time to do the taxes.
One of the parents worked for a Silicon Valley investment firm where, according to news reports, his responsibilities included, “promoting social good.” Knowing that an applicant’s athletic accomplishment would increase chances of acceptance, the man paid $250,000 for a photoshopped picture of his son punting a football. The kid didn’t even play the game.
Corruption inevitably infiltrates where there is a promise of big money.
But, then, corruption inevitably infiltrates where there is a promise of big money.
No reason to expect that the college admissions game should be immune. And no one is excusing the corrupt and illegal acts, rather the schools profess they are shocked, shocked by the whole thing. It is what is accepted – and expensive – about our system of higher education that is dangerous.
It is a system that incentives young people and their parents to shop for the “best” school that will accept them. That incentivizes the schools to do all they can to make themselves desirable to the most qualified students. This means new buildings and “amenities.” Expanding the curriculum. Hiring the best professors and paying them well even if they teach for only a few hours every week, guaranteeing lifetime employment (tenure), and giving frequent sabbaticals.
A big-name public university must also offer a full menu of athletic options – a football or basketball program that can “compete” and, likely, a coach who makes in the low seven figures. They need swimming pools, climbing walls, elaborate gyms. Student unions with coffee shops where students can stop for a latte between classes. And, then, someone must manage this infrastructure, so bring on the administrators.
Four years of college became, not a simple continuation of a student’s education – of learning at a more specialized and higher level – but an “experience.”
Choosing your college is no longer about finding the best place to learn. Rather, it’s about discovering the “right fit.”
Parents became accustomed to the ordeal known as the “college tour.” You and your kid drove to schools, were greeted by some bright young thing who told you about the joys and satisfactions of being a part of “the community,” and toured the wonderful facilities, one of which might even be the library. You got a look at the dormitory room where your kid would be living. Likely as not, it was nicer than their room at home.
But how to pay for it?
The sovereign answer to that question is always… borrow the money.
So everyone did. Total student debt outstanding is now around $1.5 trillion. It’s the second-highest debt burden carried by Americans. We owe more on housing ($8.8 trillion) but much less on credit cards (about $1 trillion) and other forms of consumer debt.
The biggest creditor is the U.S. government. In fact, student debt is the largest line asset in the government’s receivables accounts, climbing from $115 billion in the fourth quarter of 2007, when the Great Recession began, to $1.2 trillion in the second quarter of 2018 – an increase of more than 1,000%.
And once you owe the money, you have no choice but to pay it back.
The only other option is to try for loan forgiveness, for which there is (naturally) a federal program. To qualify, you must: be employed full-time in an eligible federal, state, or local public service job or 501(c)(3) non-profit job, and have made 120 eligible on-time payments on your loan.
And how is that working out?
There has been more than 41,000 applications for forgiveness of debt under this program. As of last fall, 206 of these had been accepted. The other 99% were denied.
Unintended Consequences
Those are the sort of numbers that lead one to think that there is probably no easy solution to the problem of student debt. And, of course, this stimulates the demagogues out there to call, as Bernie Sanders does, for free college educations for all, paid for by taxes on the “Wall Street speculators.” As for those who have already been to college and are now struggling with debt, he wants the government to lower interest rates and stop making a profit on student loans.
Meanwhile, those who dug themselves into five- and six-digit holes continue to struggle. They put off marriage. Or, if they are married, they defer buying a house or having children. These second-order consequences of the student debt crisis recall the famous “law of unintended consequences.”
We made a college education attainable to just about everyone, creating a large cohort of young people who can’t take risk.
In the process, we incentivized non-private sector work because it promises – but does not necessarily deliver on – debt forgiveness.
Student debt has, likewise, degraded the nature and character of higher education. University presidents are paid not to be educators but, rather, educational entrepreneurs responsible for building the endowment, infrastructure, and a winning football program.
The result is a glut of young people with degrees who cannot find work that pays enough to get out of debt. And the prospects for this new American debtor class are grim.
Geoffrey Norman is the author of 12 books of fiction and non-fiction, and many articles for periodicals including the Wall Street Journal, Sports Illustrated, National Geographic, Esquire, Men’s Journal, the Weekly Standard, and others.
