A report in today’s Washington Post says that overall student loan debt has increased from $100 billion in 2001 to $867 billion in 2011, an increase of nearly 800% in a single decade. (The WaPo story says 2010-2011, but the chart from this New York Times article indicates that it was a misprint). In any event, this is unacceptable, and all the more so because the student loan system is rigged so that it is virtually impossible to escape student debt via bankruptcy. About a year ago, I wrote on this blog about how the government adopted the same predatory practices as private lenders when it assumed control of student loans under the Affordable Care Act in 2010. It appears that nothing has changed.
A few thoughts and questions related to these numbers:
1) How much of this additional debt is from more people going to university in order to ride out the recession since 2007?
2) How much of this additional debt is coming from fee hikes at public universities? Many state schools now cost as much as private school did when I started my undergrad program ten years ago. This is largely due to austerity-firsters gutting the public education budgets even as costs rise, which brings us to:
3) If there is an 800% increase in student debt, why have we not seen a similar increase in faculty hiring? What is all this additional debt paying for, and are the authorities auditing how the money is spent?
4) What has been the role of for-profit colleges, and what value have people gotten for the debt? Again, is there really enough federal auditing of these institutions?
As far as questions 1 and 2, my initial guess is: quite a bit. As you can see from this graph, the cost of attending a state university has actually risen faster than a private university over the past twenty years. As far as question 3, I suspect that this feature from the Chronicle of Higher Education has some answers, though be forewarned it is behind a paywall. For question 4, I am going to guess the same answer as 1 and 2: quite a bit.
The pricing out of state university education beyond the average citizen’s means is an astonishing failure of the social contract, all the more surprising because it has not been accompanied by the same kind of student protests that have rocked England, where tuition fee increases of 200% have been enough to send thousands of students to the streets at regular intervals for the past two years. Are American students simply more apolitical and less aware then their English peers, or is something else going on?
A final thought: as we all know, markets can never possibly do wrong, even when speculative bubbles pop and nearly destroy the world economy. The student loan bubble will not pop in the same way as the housing bubble, mainly because student loans are not used as equity the way mortgages are (as far as we know), but this looks like another example of how the pursuit of self-interest that naturally occurs in a market is actually exacerbating the trends that will cause that market to collapse. At the very least, the higher education market needs better regulation to forestall a collapse, but a better option would be adequate public funding for public universities so that such high levels of debt are not needed at all.