The Politics of Rising Tuition Costs

Obama blames the states, but the problem is more complicated.
by | July 2012

These past four years have been tough for a lot of people, but one demographic group that stands out, in part because it seems so unusual that we should worry about them, is the 18-to-24-year-old college students and graduates.

In the past, they have been the last people we would fret over because they were, after all, the future. But now many are "boomeranging" back home to live with their parents, scrapping for decent jobs and struggling to pay for those high-end educations that were supposed to propel them into bright futures.

The average student now is hobbled with more than $25,000 in debt, up 25 percent in the past decade. Most of it is government guaranteed or issued debt, and about a third of it is in some level of default. Unlike much delinquent debt, student loans usually cannot be forgiven or reduced in bankruptcy proceedings.

Debt is closely correlated with soaring tuitions and fees, which at public four-year institutions shot up $1,800 in the past five years and more than double that in private schools. Combined student loan debt now has surpassed $1 trillion, ranking it above both credit card and auto loan debt. Increasingly, it is viewed as a threat to the fragile economy. Student aid has increased as well, but perversely, the extra funding has largely been absorbed by the price increases.

The issue is politically charged. President Obama will need the 18-to-24-year-old demographic to win in November, so it was not surprising that he addressed the problem both in his State of the Union address in January and a week later at the University of Michigan. He put the blame squarely on the states for forcing tuition increases by cutting spending on higher education. "We are putting colleges on notice-you can't assume that you'll just jack up tuition every single year," he warned. "If you can't stop tuition from going up, then the funding you get from taxpayers each year will go down." He pledged to form a new fund that would reward those public institutions that held down tuition increases and graduated more low-income students.

The administration's goals for public higher education are daunting, basically following an "everyone should go to college" dictum. Three years ago, Obama set a goal for what would amount to a doubling of enrollments to about 40 million students by 2016.

Indeed, enrollments have been soaring for some time, particularly since the onset of the Great Recession.

But states have been cutting their support for their university systems for a while, and that has put pressure on tuitions. States such as Arizona, California, Florida and others have seen significant increases year after year, and though the pace seems to be slowing, other states that had tried valiantly to hold down increases, like Maryland, North Carolina and Texas, are finally succumbing to the financial pressure.

The new economics of public higher education are beginning to change the landscape. Many state flagship universities are relying more heavily on out-of-state or even out-of-country enrollees who pay two to three times the tuition of in-state students. More are experimenting with differential tuition rates that charge more for courses that are expensive to teach-the sciences, engineering, nursing and the like.

In a wide range of states, universities are being given more autonomy to set their own tuitions and administer their campuses as they see fit in exchange for accepting lower funding levels. In Ohio, Gov. John Kasich is calling it a transition from public universities to "charter universities." In other states, particularly those with prestigious flagship research universities like Virginia, Michigan and California, it is seen more as outright privatization.

Not surprisingly, soaring tuitions have spawned two noteworthy alternatives to the existing system: a significant expansion in the for-profit college sector and a sudden explosion of interest in the promise of online courses taught by elite professors from the nation's top universities. The forprofit boom has been marred by charges of misleading marketing and overselling, followed by disappointing results. The federal government has been investigating those charges and urging laggard states to do the same. Although virtual universities have the potential to reach a limitless student body and involve faculty from schools like Stanford, Harvard, MIT and Princeton, they are in their infancy, making it hard to determine how they will work, how students will be evaluated and what the different business models might be.

Political differences go well beyond the current debate over how to roll back a scheduled increase in interest rates on federal student loans. Predictably that has fallen into Washington's partisan sinkhole. More fundamentally, many conservatives think Obama's admonition to the states is, at best, ineffective, and that privatization is in fact desirable because universities will be forced to make changes to meet market conditions. Additionally, they argue that the feds ought to get out of the student loan business altogether because what it is doing is counterproductive.

For his part, Republican presidential candidate Mitt Romney has been relatively quiet on the subject, instead concentrating on shoring up the evangelical vote. He most recently went to Liberty University to do just that, but as he spoke a small plane chartered by the lefty group MoveOn.org flew a banner over the university stadium reading: GOP=Higher School Debt."

Peter Harkness
Peter Harkness  |  Founder, Publisher Emeritus
pharkness@governing.com

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