The higher education debt crisis is a boondoggle as institutional spending continues to rise while contributing little to graduation rates.
The Biden administration recently announced a $5.8 billion federal student loan cancellation through the Total and Permanent Disability program and extended the halt on student loan payments and fees until early 2022. Despite the Covid-19 relief bills that have landed even more federal money in higher education coffers, colleges and universities are pressing Congress to double the Pell grant.
The notion that student loans function as “good debt” by helping graduates build successful and happy lives is now untenable, with surveys showing that borrowers are forced to postpone marriage, purchasing a house, and retirement. The public is told that lawmakers are to blame for skyrocketing tuition costs, but blaming federal divestment for the rapid rise in tuition costs is a smokescreen: The student debt crisis is the result of more than a decade-long spending spree by colleges and universities that institutions chose.
The American Council of Trustees and Alumni’s (ACTA) recent report, The Cost of Excess: Why Colleges and Universities Must Control Runaway Spending, found that when state legislatures cut funding to higher education during the Great Recession, colleges and universities embarked on a course of increasing tuition and inflating spending instead of cutting costs, to the detriment of students, taxpayers, and families. In a fatal pattern, colleges across the country hiked tuition costs to fund surges in spending.
No wonder student loan debt stands at $1.7 trillion. The cost of a four-year degree at a public institution has risen 178 percent since 1990. U.S. colleges and universities spent a staggering $604 billion in 2017-2018 alone, including “$385 billion at public institutions, $207 billion at private nonprofit institutions, and $12 billion at private for-profit institutions.” Between 2010 and 2018, spending on student services, administration, and instruction grew by 29 percent, 19 percent, and 17 percent, respectively.
These costs are passed directly to students in the form of higher tuition, which they take out loans to cover. At public institutions, a 1 percent increase in instruction, administration, and student services spending categories resulted in a 0.32 percent, 0.13 percent, and 0.10 percent increase in the tuition rate. In other words, “increases in spending on instruction, administration, and student services were statistically correlated with a rise in the following year’s tuition.”
Worse, higher costs correlate minimally with higher graduation rates. A 1 percent increase in instructional or administrative spending was associated with 0.10 percent and 0.05 percent increases in graduation rates. The Cost of Excess illustrates the point: “The average four-year public university charged $9,885 in tuition and had an undergraduate enrollment of 10,201 . . . to graduate an additional 72 students, it would need to spend an additional $10.2 million and charge students an additional $224 in tuition.”
Colleges are failing to direct all this spending to what actually improves academic outcomes. While the number of full-time professors has increased by just 5 percent since 2012, the number of other full-time instructional staff—including instructors, lecturers, and staff with no academic rank—has increased by 20 percent. “This pattern is consistent with the oft-cited phenomenon of the ‘adjunctification’ of higher education, where part-time, often less-credentialed (and often less-experienced) contingent positions replace full-time tenured or tenure-track instructions.” When it comes to administrative staff, ACTA’s research found that from 2012 to 2018, the number of managers increased by 9 percent and business and financial operations staff increased by 25 percent, while office and administrative support staff fell 10 percent. The report explains, “Here we see a complete reversal of the instructional staff trends. Instead of prioritizing less expensive general support staff, who are often the student-facing members of the administrative team, institutions are radically cutting the number of lower-level staffers in favor of hiring more expensive and specialized administrators.”
It is time for colleges to accept their share of responsibility for the student debt crisis by reevaluating misplaced spending priorities. ACTA provides several recommendations to help:
- Governing boards and college administrators must prioritize controlling costs.
- Combine tuition cuts or freezes with cost reductions.
- School boards and state legislatures need to make smart, data-driven decisions rather than rely solely on the information they receive from college administrators.
While lobbyists push for more funding and politicians urge radical student loan cancelation, the findings of the Cost of Excess reveal that ever-increasing Pell Grants, loan forgiveness proposals, and Covid-19 relief will not resolve the student debt crisis because they fail to address the root cause of rapid tuition increases. Lavish college spending, fueled by federal funding that comes with little to no oversight, has resulted in exorbitant tuition prices and an unmanageable debt burden for graduates. By finally reckoning with reality and implementing common-sense solutions, this problem can be fixed. America’s students and taxpayers deserve a high return on investment for the time, money, and energy they devote to earning a college degree.
Zachary Rogers is a program manager for educator outreach at the American Council of Trustees and Alumni, and a former Constitutional fellow at The American Conservative.