Tag Archives: higher education

Why higher-ed budget cuts are so devastating

Co-written with Demos Senior Policy Analyst Robbie Hiltonsmith.

Over the last decade, states have made massive cuts to higher education, with average state support falling from $9,729 per student in 2001 to $6,815 in 2011. While a large share of the blame for these cuts can be pinned on the financial crisis and subsequent recession, some of the decline is due to a deliberate effort to eviscerate public higher education. For instance, Bobby Jindal plans to savage higher education spending in Louisiana to the tune of $141.3 million, or about 12 percent of the state’s higher education budget, to pay for tax cuts. In Wisconsin, Scott Walker is cutting $300 million over two years, again to pay for reckless tax cuts. Kansas is an even sadder story. Though the state had a large reserve fund in 2012, Governor Sam Brownback quickly depleted it with a massive tax giveaway to the rich. Now he’s cutting K-12 and university funding to the tune of $44.5 million. There’s a good reason our list of governors seeking deep cuts is shaded a uniform red: Both research and history shows that Republican-controlled states are more likely to cut higher education. One study found that when Republicans take over governors mansions they reduce spending on higher education by $0.23 per $1,000 in personal income (a measure of the state’s total tax base). Each 1 percent increase in the number of Republicans in the legislature leads to a $0.05 decrease. Given that theaverage spending on higher education across all states in 2014 was $5.47 per $1,000, the effect is large.

Nationwide, the total impact of these cutbacks is breathtaking. Between 2008 and 2013, states cut a total of $16 billion, adjusted for inflation, from their higher education budgets, even as enrollments rose more than 11 percent. Funding per student dropped even more dramatically, falling by more than 27 percent, or about $2,500 per student. These cutbacks, in turn, have translated nearly 1-to-1 into tuition increases, which averaged nearly $3,000 over the past decade. But the question is not simply deficits, but priorities: Just seven months of funding for the F-35 Fighterwould be enough to fully restore higher education spending across the nation.

A new Demos study estimates that 78 percent of tuition increases at public universities in the past decade can be explained by decreased state spending on higher education (see chart). Commonly cited factors like “administrative bloat,” are far less important, accounting for only 5 percent of the increase in higher education costs.

These state cuts and resulting skyrocketing tuition prices are incredibly worrying for upward mobility in America, because they’ve forced young people seeking a college education to borrow unprecedented amounts just to earn a degree. Low-income students and students of color leave college with more debt than wealthy white students (see chart), and they bear the brunt of austerity.

Public universities and community colleges are important, because the top tier of private universities are very exclusionary, and few poor and middle class students are admitted. Further state cuts to higher education will create a world where only some, mostly wealthy Americans have a shot to better their life by completing higher education.

It’s not just progressives making this point; recently, Standard & Poor’s argued that inequality was slowing growth by reducing college graduation rates among low-income people, likely in part due to the effects of the debt necessary to finance low-income students’ educations. The analysts suggested that a way to bolster upward mobility and reduce inequality would be increased college attainment. Yet in recent years, many conservatives, who claim to support economic growth and business, have made savage cuts to education.

These cuts are particularly shortsighted because the benefits of higher education, both for individuals and society at large, pay for the cost of investment many times over. The body of research on the impacts of higher education is massive, but their consensus is that increased higher education impacts nearly every corner of society, from increased economic growth to lower crime, better health, greater civic participation, and even childhood development. A few highlights: One study foundthat 8.7 percent of all economic growth between 1959 and 1998 could be attributed to increased education. Other studies have found that increased higher education leads greater rates of voter participation, to the tune of 22 percent; a 15 percent reduction in crime, and better cognitive development among children of parents with college degrees.

On the flip side, the costs of state disinvestment in higher education are similarly staggering. Further state cuts will lead to even higher levels of student debt, which then leads to lower homeownership rates, less retirement savings, and fewer vehicle purchases, among other effects. Previous Demos work suggests that $53,000 in student debt will lead to lifetime wealth loss of $208,000, largely through lower retirement savings and home equity.

Although public investment in higher education is broadly popular, the wealthy tend to be the least supportive. In their recent study of the wealthiest Americans, Benjamin Page, Larry Bartels and Jason Seawright find that 78 percent of the general public agree that “[t]he federal government should make sure that everyone who wants to go to college can do so,” compared to only 28 percent of the richest Americans.

There are bright spots in this sad story: President Obama’s plan for free community college is a welcome opportunity for the government to step in and fill this gap. Two weeks ago Senate and House Democrats introduced a resolution to create debt-free higher education. Hillary Clinton says she’ll be rolling out a comprehensive plan to tackle student debt. On the other side of the aisle, the House Republican budget would eliminate guaranteed funding for Pell Grants, which helped 9 million low income students attend college in 2013-2014 school year. One analysis suggests that some students using the Pay As You Earn (PAYE) program would end up with twice the debt under the Republican budget proposal. They would also As the national discussion about higher education proceeds it’s important to remember the government has an important role to play in supporting debt free higher education.

Robbie Hiltonsmith is a Senior Policy Analyst at Demos and author of “Pulling Up the Higher-Ed Ladder: Myth and Reality In The Crisis of College Affordability.”

This piece originally appeared on Salon. 

You can blame America’s inequality and shrinking middle class for rising student debt

Co-Written with Mark Huelsman.

There is a tendency among elite opinion makers to believe that debt accrued while gaining a college degree is “good debt” that isn’t problematic because, as the thought goes, those with college degrees tend to make enough money to recoup their debt over a lifetime. Student debt is supposedly an equalizer—a way for students to gain access to credit in order to get a degree that will give them an equal chance to enter the middle class and achieve the American Dream. Sadly, like many pundit platitudes, this assertion is grounded in fantasy, not fact.

In fact, this is only true for some students—those who were fairly wealthy in the first place. College is certainly worth the cost, but that at present it is saddling poor and middle-class students with student debt is actually preventing them from participating in the wealth-building processes that previous generations have enjoyed.

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The debate over student debt usually focuses on those right out of school, but that masks that a substantial portion of those with student debt struggle mightily to pay off their loans in a timely manner, delaying (sometimes in perpetuity) their entry into the middle class. Research by the US Federal Reserve Bank of New York finds that many borrowers still haven’t paid off their student loans by their 40s and 50s.

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For students just out of school, upward of 15% of their federal student loans are in default within three years of students leaving school, and delinquency rates for student loans have continued to rise during and after the recession, even as delinquencies in every other form of loan—including mortgages, home equity loans, credit cards, and auto loans—have declined.

The inability to pay off debt is a really big deal, because these students are more likely to take any job that comes their way to pay off their loans than invest in themselves. Research from Demos finds that if “current borrowing patterns continue, student debt levels will reach $2 trillion sometime around 2022. Another report concludes that, “an average student debt burden for a dual-headed household with bachelors leads to a lifetime wealth loss of nearly $208,000.” Given that wealth inequality has returned to Gilded Era heights, this finding should be disturbing.

The problem is that, rather than being seen as a social investment, college education is increasingly seen as a commodity—something that is accessible for the wealthy, but out of reach for the poor, and increasingly, the middle class. Sure enough, student debt is highly correlated to income level with the wealthiest having the lowest amount of debt as a portion of their income (see table).

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Poor and middle class students are much more likely to take on student loans—in fact, nearly 9 in 10 graduates who receive Pell Grants also needed to borrow to finance their degree, compared to 53% of graduates who did not receive Pell Grants. These students will spend more time paying off their debt and less time saving for retirement or other needs, creating a vicious cycle of deepening wealth inequality.

There is a more tenuous, but equally important way in which rising inequality has increased student debt among the poor and middle class – through the political system. Recently, Martin Gilens and Benjamin Page sent the internet alight with their assertion that “economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.” This finding is corroborated by Larry BartelsDorian WarrenJacob HackerPaul Pierson and Kay Lehman Schlozman who have all recorded similar findings.

Although this elite and corporate control of the political system is bad a priori, it has particular importance in the case of education. In their study of the political attitudes of the wealthiest 1%, Larry Bartels, Benjamin Page and Jason Seawright find that the wealthiest 1% have different policy priorities than average voters. For instance, while 78% of the general public agree with the statement, “The federal government should make sure that everyone who wants to go to college can do so,” only 28% of the wealthy agree. Elites are also far less likely to agree that, “The federal government should spend whatever is necessary to ensure that all children have really good public schools they can go to,” by a margin of 35% to 87%. They also believe that cutting deficits is a more important priority than funding education, and believe that education is a lower spending priority than the middle class.

This helps explain why states have slashed spending for education while also cutting taxes—those with the most influence over policy have little to gain from public education, but much to gain from cutting taxes. It also explains why there is very little national attention paid to community colleges, which educate 4 in 10 college students, and who are disproportionately impacted by state budget cuts.  Research by Greg Duncan and Richard Murnane shows that wealthy spend far more supplementing their children’s incomes than the poor, which means that state level cuts have a devastating impact on the poor (see chart).

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Robert Hiltonsmith and Tamara Draut find that in the aftermath of the Great Recession, 49 states (all but North Dakota) cut spending on higher education and that state spending on higher education hit an all-time low in the wake of the recession (see chart). This, essentially, results in higher tuition. Draut and Hiltonsmith find that, “Nationally, average tuition at 4-year public universities increased by 20% in the four years since 2008 after rising 14% in the four years prior.” Tuition continues to grow as a share of the median income, which means all families but the very rich have to take out large debts to pay for their education. This, in turn, means that recent graduates are paying off loans, rather than building wealth.

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College is an important pathway to the middle class and one of the most effective ways to fight inequality. As it becomes increasingly difficult for students to gain an education, it closes gateways to upward mobility. The effect is particularly potent for blacks. A recent study by Bhashkar Mazumder finds that, “blacks have experienced substantially less upward intergenerational mobility and substantially more downward intergenerational mobility than whites.” He finds that this gap shrinks among those with 16 years of schooling.

One simple way to move away from the debt-for-diploma system is for the government to shift from a policy of loans to a policy of grants. There is no reason why college education should primarily be funded by expensive, high interest loans. In the past, Pell Grants helped the poor and middle class attend college, but Pell Grants make up an increasingly low percentage of the cost for college (see chart).

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At a bare minimum the government could allow students to refinance their debts at a lower level; most other countries have policies that allow students to pay off debts as a portion of their income and eventually allow the debts to be forgiven. In Britain, students don’t begin paying off their loans until they find stable employment, and then they pay in proportion to their earnings. Australia similarly ties the cost of paying off the loan to the income of the graduate, and loans themselves come with no interest attached. In Denmark, education is considered a right by the people and an investment by the government, and is therefore free. Some students are even offered a stipend by the government to defray costs. Norway and Sweden have  similar systems of higher education. The US has attempted to implement loan repayment schemes that allow students to pay in accordance with their income, but the default repayment plan on federal student loans is still an arbitrary 10-year time period—a time when borrowers tend to make less, and when saving for retirement could benefit them the most. But enrollment in these plans have been slow, likely due to the fact that our system is needlessly complex and opaque (to wit, there are upwards of 9 different repayment plans one can choose on student loans).

Education, and especially college education is a pathway to the middle class, and most Americans think it is more important than ever. But as society becomes more unequal, access to debt-free education becomes harder and harder.

Originally published on Quartz.