Student Debt

November 18, 2016 – Volume 26, Issue 41
Should college tuition be free? By Tom Price


City University of New York students demonstrate for free tuition and cancellation of student debt (Getty Images/Corbis/Andrew Lichtenstein)  
City University of New York students demonstrate on Nov. 12, 2015, for free tuition and cancellation of student debt. Total student debt is up almost 350 percent since 2005, which experts blame on such factors as growth in enrollment, expanded eligibility for federal loans, predatory lending and skyrocketing tuition. (Getty Images/Corbis/Andrew Lichtenstein)

A majority of college graduates are leaving school owing more than $25,000, and nearly 7 million have defaulted on their student loans. Student debt nationwide totals almost $1.3 trillion — up 350 percent since 2005. Many experts say the rise is due partly to growth in enrollment, expanded eligibility for federal loans and predatory lending. But others say student debt is growing mainly because of skyrocketing tuition. Officials at public colleges blame tuition hikes on declining state support, which fell by about 20 percent between 2001 and 2015. But critics say colleges are spending too much on administration, expensive intercollegiate athletic programs and academic programs with weak demand. Others say the easy availability of student loans encourages colleges to raise prices. Student debt became a major issue in the 2016 presidential campaign, with Democratic candidates promoting free college tuition and Republican candidate Donald Trump — now president-elect — proposing an income-based repayment plan and debt forgiveness after 15 years.

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In seven years and stops at three campuses, Jasmin Johnson has racked up more than $65,000 in student debt, and she's still a year or more away from earning her degree.

She enrolled first at Pine Manor College, a small liberal arts school in Brookline, Mass. Halfway to a degree, she dropped out because she couldn't afford the cost. Next, she entered the University of Massachusetts at Boston but couldn't keep up her studies while working full time to pay her bills. She returned to class this year at Bridgewater State University in Massachusetts while working both a full-time and a part-time job.1

There are thousands of working students like Johnson — piling up debt but no degree, despite taking longer than four years to do so. Student debt in the United States has soared to an average of $35,000 for borrowers in the class of 2015. Total student debt this year hit nearly $1.3 trillion — up 350 percent since 2005 — and the ramifications are widespread.2

Sixteen percent of student borrowers are more than 361 days late in their loan repayments. Falling behind can leave debtors owing more than they borrowed due to late penalties and accrued interest. Student debt has caused some borrowers to delay buying a house or car or starting a business, and nearly 30 percent of families report feeling stressed by college debt.3

Kristina Michaud (Getty Images/Portland Press Herald/Gregory Rec)  
Kristina Michaud, a student at the University of New England College of Osteopathic Medicine, will owe about $150,000 when she finishes her studies. Students with big loan balances usually are seeking graduate degrees, which often lead to high earnings, so they normally can repay their loans. But many undergraduates with lower debt drop out and end up unemployed or in low-paying jobs that make it difficult to pay back their loans. (Getty Images/Portland Press Herald/Gregory Rec)

Deep concern about student debt — particularly among Millennial voters — thrust the issue into the 2016 presidential campaign. It played a major role in the debate between Democratic hopefuls Hillary Clinton and Bernie Sanders, who both eventually championed free tuition at public colleges. But Republican Donald Trump's victory in the general election gave more importance to his plan for easing the burden of debt without eliminating tuition, although Trump's proposal runs counter to past GOP positions and may face significant opposition in Congress.

Experts say total student debt has risen in part because more students have attended college in this decade than ever before. In addition, the federal government has expanded eligibility for student loans. While originally loans went only to low-income students and those studying subjects important to national security, now anyone can borrow from the federal government. Many also borrow from private lenders.

Greater numbers of older students, who tend to borrow more than younger students, also are attending college. And students like Johnson who attend college for longer than four years run up more debt. Experts also blame debt-related problems on predatory lenders, unscrupulous debt-collectors and the rapid rise of for-profit colleges, whose students incur more individual debt than those at other types of schools.

But many experts say the biggest cause of rising debt is the steady increase in tuition and fees, which critics variously blame on falling state support for public universities, light faculty workloads and excessive spending on facilities, athletics and administration.

Since the 2007–08 academic year, the average tuition at four-year public universities has risen 28 percent faster than inflation.4 And during the decade starting in 2004, state per-student support fell by more than 30 percent adjusted for inflation — from $9,529 to $6,505 — according to Sandy Baum, a senior fellow at the Urban Institute think tank in Washington who prepares the College Board's annual study of higher education prices.5

College Costs Doubled Since '70s  

“The states are gradually disinvesting from public higher education, and that disinvestment is being shifted to students in the form of larger tuition,” says Barmak Nassirian, federal policy director at the American Association of State Colleges and Universities, which represents more than 400 public colleges, universities and higher-education systems.

“State funds that used to be spent on higher education have been gobbled up by tax cuts and spending on health care, for the most part,” says Jane Wellman, a policy analyst at the College Futures Foundation, a San Francisco organization that helps low-income Californians go to college, and the founder of the Delta Cost Project, which studies higher education spending.

In 2012, tuition for the first time surpassed state spending in covering public college expenses, according to the U.S. Government Accountability Office.6 In the 1970s, states paid three-quarters of state colleges' bills; by 2014 states were paying only half, according to the Federal Reserve Bank of Cleveland.7

Some analysts say excessive university spending on facilities, athletics and administration is putting upward pressure on tuition rates. For instance, colleges more than doubled the number of administrators between 1987 and 2012, adding 517,636 positions, according to the New England Center for Investigative Reporting and the American Institutes for Research.8 Administrative salaries also have grown over the years, Baum said.9 Five public university chief executives earned more than $1 million in 2015, according to a study by The Chronicle of Higher Education. 10

In contrast, full-time faculty members' inflation-adjusted pay has been essentially flat since 1971 — and actually dropped in 14 of those years — according to the American Association of University Professors (AAUP).11 Overall faculty pay has declined because universities increasingly are hiring lower-paid, part-time teachers, according to Paul Campos a law professor at the University of Colorado, Boulder, who writes a column for the Scripps Howard News Service about political, social and legal issues.12

However, all is not doom and gloom. More than 30 percent of recent graduates have no college debt, and most borrowers make their payments on time. “For the vast majority of students, there is no crisis,” says Nassirian.

Perhaps counterintuitively, those with the most debt are not the problem. Research shows that big borrowers usually are those obtaining graduate and professional degrees, which tend to lead to high earnings, so they normally can pay off their debt. But many undergraduates with low debt drop out and end up unemployed or in low-paying jobs that make it difficult to pay back their loans.13

“The people who get the most education have the lowest levels of default and other measures of financial hardship,” says Beth Akers, an economist at the Center on Children and Families at the centrist Brookings Institution think tank in Washington. “That's because education pays off.”

And most borrowers manage to repay their loans, Akers says. The median monthly payment is just $193, or 4 percent of borrowers' median monthly income, she says. Jason Delisle, a resident fellow at the conservative American Enterprise Institute think tank in Washington, points out that borrowers with higher debt can cap their payments at 10 percent of their earnings by entering an income-based repayment program.

Scholarships and grants can ease the burden. While tuition and fees at private nonprofit colleges averaged $32,400 in the 2014–15 academic year, students there actually paid less than $15,000 out of pocket after receiving scholarships or grants, said Baum.14

Students attending for-profit colleges have the most difficulty managing their debt. Enrollments at such colleges jumped from 111,000 in 1980 to nearly 2 million in 2010 before beginning to decline. And while only 10 to 12 percent of post-secondary students attend such colleges, those students receive a quarter of federal student aid and account for 44 percent of loan defaults, according to A.J. Angulo, an education professor at Winthrop University in Rock Hill, S.C.15

Courts and regulatory agencies in recent years have taken action against certain lenders and debt collectors serving student borrowers. In August, for example, Wells Fargo & Co. agreed to pay $3.6 million to settle a Consumer Financial Protection Bureau allegation that the bank illegally processed loan payments in ways that maximized late fees.16 Collection agencies have paid millions of dollars in fines for harassing student debtors. And last year the federal government said it was canceling contracts with five of 22 collection agencies for “materially inaccurate representations” to borrowers.17

Looking at student debt overall, Nassirian says, “If present trends continue, we will get to the crisis point.” That's partly because as college costs have risen, average family incomes and the wages working students can earn while enrolled have been relatively stagnant.18

And student debt can place a heavier burden on borrowers than other debt. College loans cannot be canceled in bankruptcy except for “undue hardship.”19 Moreover, Social Security payments can be garnished for student loan payments, and debt can follow borrowers to the grave: Lenders can seek reimbursement from a debtor's estate.20

As many borrowers struggle to pay off their loans, here are some questions students, graduates, university administrators and government officials are debating:

Should college tuition be free?

Free college tuition — a major point of contention during the Democratic presidential primaries — is unlikely to become federal policy now that Republican Donald Trump has won the presidency and Republicans will continue to control both chambers of Congress. But some advocates will undoubtedly continue the push for free tuition, and Trump has offered a plan designed to ease the burden of student debt.

During their long contest for the Democratic presidential nomination, former Secretary of State Hillary Clinton called the idea of free tuition at public colleges — promoted by her primary opponent, U.S. Sen. Bernie Sanders of Vermont — impractical. But in July, having wrapped up the nomination and won Sanders' endorsement, Clinton released her own plan that would move toward free tuition for in-state students at public colleges.

The aid would have been available immediately for families earning no more than $85,000 a year, a cap that would increase to $125,000 in four years, covering 80 percent of American families.

The federal government would not provide all of the funding. States would help, and students would have been required to contribute by working 10 hours a week. Federal Pell Grants for low-income students would remain available to pay other costs, such as books, fees and room and board. The grants would have been available year-round to help students graduate faster.

Most Student Loans Under $50,000  

Clinton also would have allowed borrowers to save money by refinancing their federal loans at lower interest rates and by cutting interest rates so the government did not collect more from students than it spends administering the loans. Interest rates on new government loans, which have dropped in recent years, now range from 3.76 percent to 6.31 percent, depending on the type of loan. Additional benefits would be offered to borrowers who take public service jobs or otherwise work in the public interest. Repayment for all borrowers could be made as part of federal payroll tax deductions.

The cost of Clinton's plan — estimated at more than $35 billion a year — would be paid by limiting tax deductions for high-income taxpayers and closing Wall Street tax “loopholes,” she said.21

Sanders argued for free tuition because, he said, “a college degree is the new high school diploma…. If our economy is to be strong, we need the best-educated workforce in the world.” Some states, including California and New York, offered nearly free tuition in the past, he noted, and public colleges in numerous countries — including Germany, Finland, Denmark, Ireland, Iceland, Norway, Sweden and Mexico — charge no tuition. Germans even provide free tuition for international students, he added.22

Trump opposed free tuition. Instead, he proposed easing the burden of student debt by capping monthly repayments at 12.5 percent of a borrower's earnings and forgiving the unpaid balance after 15 years.

Free tuition still has supporters, especially on college campuses. Sara Goldrick-Rab, a professor of higher education policy and sociology at Temple University who studies college affordability, argued that free tuition for all would be better for low- and middle-income students than means-tested aid, which is based on a student's or the student's family's income and wealth. Means-tested aid involves a “massive bureaucracy” that “leaves out both the very poorest, who cannot navigate the system, and squeezes the middle class,” who would then be offered only loans, she said.23

Some critics challenge the push to get more students to go to college, disputing the notion that a college degree today is the equivalent of a high school degree in the past. “Most jobs — 69 percent in 2010, estimates the Labor Department — don't require a post-high-school degree,” wrote nationally syndicated economics columnist Robert Samuelson. “They're truck drivers, store clerks, some technicians.”24

Others question the practicality of free-tuition proposals. “I don't think the federal government can make college free,” says University of Pennsylvania education professor Joni Finney. The state-by-state differences in public-college tuition would require vastly different federal contributions to each state, which would be politically problematic, she says.

Even before Republicans gained control of the White House and retained their congressional majorities on Nov. 8, college-finance experts predicted that Republican leaders in the states would block the kind of federal-state partnership that free-tuition advocates propose. Kevin Carey, director of the education policy program at the centrist New America think tank in Washington, noted that most GOP-run states refused to implement provisions in the Affordable Care Act, a health insurance program that offers federal funding for states to expand Medicaid and establish insurance marketplaces.25

A spokesman for Wisconsin Gov. Scott Walker, for instance, said the Republican governor would not buy into Clinton's plan because it would be costly and ineffective.26 He said it would “put more money into the university system without addressing the very legitimate question about why is tuition going up so much?” Walker has called on the state's colleges to increase professors' teaching workload.27

Some criticized Clinton's plan for offering aid to families with six-digit incomes. “Every dollar used to keep tuition low for families who can afford to pay is a dollar that could be used to reduce the living costs or provide other support for students for whom free tuition is not enough,” Akers, of the Brookings Institution, says. “It creates large transfers of wealth to people who probably need it the least.”

Students at Washington University in St. Louis pull a mock ball and chain representing the nearly $1.3 trillion in outstanding U.S. student debt (AFP/Getty Images/Paul J. Richards)  
Students at Washington University in St. Louis pull a mock ball and chain representing the nearly $1.3 trillion in outstanding U.S. student debt. Free college tuition — endorsed by Democratic presidential nominee Hillary Clinton — is unlikely to become federal policy now that Republican Donald Trump has won the presidency and Republicans continue to control both chambers of Congress. But Trump has offered a plan designed to ease the burden of student debt. (AFP/Getty Images/Paul J. Richards)

Others warn of unintended consequences. The Georgetown University Center on Education and the Workforce projected that free tuition at public institutions would increase enrollment by between 9 percent and 22 percent. While some enrollees would not have attended college in the past, the center said, others would transfer from private nonprofit schools, cutting attendance at small colleges by between 7 percent and 15 percent. Prestigious private institutions such as the Ivy League schools would not be affected, the study concluded.28

Free tuition at public institutions would kill off the weaker, private, unendowed colleges, said Kent John Chabotar, former president of Guilford College, a small liberal-arts school in Greensboro, N.C.29

But some experts question how many additional students public colleges would be willing or able to accept. “We assume that selective public institutions will not increase capacity, or will increase it very little,” the Georgetown Center on Education's report said. Similarly, many midranked public schools might become more selective rather than expand enrollments significantly, added Anthony Carnevale, director of the Georgetown center.30

Donald Hossler, a senior scholar at the Center for Enrollment, Research, Policy, and Practice at the University of Southern California's School of Education, said states probably would not increase spending enough to enable much expansion.31 As a result, gaining admission to the best public colleges would be even harder, according to the Georgetown study. Less-prepared students, who often are less affluent, would be relegated to lower-tier schools, he said, which would increase inequality, the study concluded.32

Do government subsidies contribute to rising tuition?

Some critics contend that increasing government aid to both students and colleges encourages universities to raise their rates because students do not feel the financial pain of the higher tuition.

It's a theory called the “Bennett Hypothesis” after William Bennett, a former secretary of Education and a conservative leader on education issues. While serving as President Ronald Reagan's Education secretary, Bennett wrote in 1987 that federal aid enables colleges “blithely to raise their tuitions, confident that federal loan subsidies would help cushion the increase.”33

Likewise, free tuition “would encourage every state college to raise its tuition,” says the University of Pennsylvania's Finney. “Why not get as much from the federal government as you can?”

“As it did in the housing market,” said Veronique de Rugy, a senior research fellow at George Mason University's conservative-leaning Mercatus Center, “free or reduced-price money has artificially inflated the price of a college education.”34 The concurrent increases create “a classic upward price spiral,” she added. “Subsidies raise prices, leading to higher subsidies, which raise prices even more.”35

Government aid also contributes to tuition increases by reducing pressure for colleges to contain spending, some critics say. “If you make tuition free, it completely eliminates the incentive to look at the cost side of the equation,” says Rick Staisloff, an Annapolis, Md.,-based consultant to educational and other nonprofit institutions whose expertise includes cost containment. “Higher education has not shown a willingness on its own to change the model” of recurring price increases.

Funding Down for Higher Education  

Both colleges and students need to have “some skin in the game” or they won't care enough about the cost and quality of education, says Delisle of the American Enterprise Institute. Without economic pressures, “it really lets them off the hook,” he says.

Such critics found support in a New York Federal Reserve Bank study published last year and updated this year. Bank researchers compared institutions' price increases with their students' use of grants and loans. As the size of subsidized loans increased, colleges hiked tuition by about 60 percent of the loans' higher value, the bank reported. The researchers found smaller tuition hikes connected to the rising number of Pell Grants and unsubsidized loans. The effects were strongest at opposite ends of the college spectrum — at expensive schools, private schools, two-year colleges and vocational programs.36

Others, however, say the situation is more complex than these critics of federal aid believe. “I would concede that federal money has accommodated price increases,” says Nassirian of the American Association of State Colleges and Universities. “I just don't think causality is related to the federal money. It created a path of least resistance for some price increases but has not caused them.”

The Urban Institute's Baum said empirical evidence shows that “federal grant aid does not explain much about rising prices,” except at for-profit schools.37 For the most part, increased federal aid and tuition simply replaced lower state support at public colleges, said Peter McPherson, president of the Association of Public and Land-Grant Universities.38

Gary Fethke, a professor of management science and economics at the University of Iowa, argued in The Chronicle of Higher Education in 2012 that with thousands of higher education institutions vying for students, competition helps to keep prices down. “If there were a monopoly provider of education services, it could respond to a government grant per student by increasing the sticker price,” he said. “Tuition revenue must rise in response to a reduction in taxpayer support to sustain base-level expenditures.” And, he added, because federal subsidies can mitigate state cuts somewhat, they actually “make possible more-modest tuition increases than would otherwise be the case.”39

Donald Heller, provost and an education professor at the University of San Francisco who reviewed research into the impact of federal aid on tuition, found the studies “ambiguous at best.” Some found correlation, while others — even within the same institution — did not.40 For example, while the recent study by the New York Fed tied aid to tuition increases, other researchers at the Fed in 2012 placed the blame on declining state and local government support.41

It's difficult to identify a single cause of price hikes because “higher education institutions are complex, often multibillion-dollar institutions, and numerous factors go into the setting of tuition prices,” according to Heller. Researchers cited factors other than declining state support, he wrote, including the fact that higher education is labor-intensive, with highly skilled and highly compensated employees. Colleges have “complex missions of teaching, research and service” that are difficult to measure and therefore resistant to cost controls.42

Are schools doing enough to hold down costs?

Robert Morin worked as a cataloger at the University of New Hampshire's Dimond Library for some 50 years, lived frugally, saved his earnings and died last year with a fortune, $4 million, which he willed to his employer. The university announced in September that $100,000 of the bequest would go to the library — but $1 million would be used to install a video scoreboard in the school's football stadium.43

The announcement offers an example of what many critics cite as misplaced priorities that help drive up college charges: expensive athletics programs that receive substantial university subsidies, construction of plush facilities, inefficient use of campus buildings, bloated administrative costs and faculty who don't teach enough.

These critics say schools are engaged in a sports-related “arms race” that drives college spending ever higher. For instance, among universities in the National Collegiate Athletic Association's (NCAA) Football Bowl Subdivision — the top level of football competition — inflation-adjusted football spending per scholarship player jumped 55 percent from 2005 to 2014, according to the Knight Commission on Intercollegiate Athletics. Per-athlete spending on all athletics rose 43 percent, adjusted for inflation, said the commission, which advocates for college sports reform. Meanwhile, academic spending per full-time student at those institutions rose by only 9 percent.44

“The Power Five conferences [the wealthiest college sports leagues] are renegotiating television deals, and most of them now have their own TV networks,” says Amy Perko, the Knight Commission's executive director. By selling the rights for networks to show their football games, these schools “are bringing in more revenues than ever before. They're also spending more than ever before” on such things as expensive athletic facilities and high salaries for coaches. (The highest-paid college football coach in 2016 is Jim Harbaugh of the University of Michigan, who makes $9 million in salary and bonuses.45)

Despite the huge revenues generated by football and basketball television contracts, just 24 athletics programs — all in Power Five conferences — are self-supporting. As a result — at the highest level of competition — university per athlete funds spent on athletics soared 98 percent from 2005 to 2014.46

Colleges that don't have access to the same media revenues as schools in the Power Five conferences “in some ways are still trying to keep up with those market leaders” on the playing field, Perko says, creating high institutional subsidies for athletics.

Eastern Michigan University accounting professor Howard Bunsis says that's the case in the Mid American Conference, where Eastern Michigan plays. “I'm a huge sports fan,” he says. “It does bring a certain energy to campus, but not at this cost.”

Athletic spending at his university increased by nearly two-thirds, from $20 million in 2005 to more than $33 million in 2015, according to a 2016 report Bunsis helped to prepare. But athletic income — from such sources as ticket sales and shared NCAA revenues — dropped from $10 million to $7 million. Increased university subsidies covered the difference.47

Critics of university spending also complain about expensive construction projects elsewhere on campus, such as luxury student residences, recreation centers and college presidents' homes.

Conservative commentator Charlie Sykes cited “Taj-Mahal-like facilities,” such as Purdue University's $98 million Cordova Recreational Sports Center, which is available for use by all students and features a climbing wall, a vortex pool and a 25-person spa.48 Experts say schools are responding to the demands of affluent students whose families can afford full tuition and who might become generous donors in the future.

Athletic trophies shimmer in the Hall of Champions at the University of Alabama (AP Photo/Alabama Media Group/Vasha Hunt)  
Athletic trophies shimmer in the Hall of Champions at the University of Alabama. Opulent facilities at big-time athletic programs are designed to attract recruits and entice alumni to generously support sports programs. Many experts say the biggest cause of rising student debt is the steady increase in tuition and fees, which critics variously blame on falling state support for public universities, light faculty workloads and excessive spending on facilities, athletics and administration. (AP Photo/Alabama Media Group/Vasha Hunt)

Yale University spent $17 million to upgrade its president's house, and Columbia spent $20 million.49 University officials say such expenditures are justified because college presidents use their homes for entertaining VIPs and for fundraising.50

Whatever their cost, critics say, college facilities tend to be used inefficiently, especially during evenings, weekends and summer. On average, says consultant Staisloff, university facilities sit idle about 70 percent of the time. About $1 billion in facilities at George Washington University go unused for at least a third of the year because of the traditional academic calendar, said university President Emeritus Stephen Trachtenberg. Thousands of additional students could be enrolled if the facilities were used year-round, he said.51

Many faculty — including Bunsis, who heads the school's American Association of University Professors chapter — say “administrative bloat” is a major cause of rising college costs. But others say that oversimplifies the situation.

Staisloff points out that nonfaculty employees work in many essential areas, such as information technology, financial aid and health services. And while some faculty complain about the high number of administrators, other critics say faculty don't work enough hours.

For instance, David Levy, a former chancellor of the New School in New York City, says that while professors at research universities often work long hours because of their research projects, professors at nonresearch schools often work just over one-third as much as other professionals, due to light teaching loads and long summer breaks.

But Michael S. Harris, an associate professor of higher education and director of the Center for Teaching Excellence at Southern Methodist University in Dallas, said faculty workloads are equivalent to other professionals' because “preparation, grading, meeting with students and student correspondence take far more time than the actual hours of instruction.”52

One report, based on a national survey of 687 faculty members, found that teachers were working 51.4 hours a week when classes were in session and 45.1 at other times.53 In addition, says Nassirian, of the American Association of State Colleges and Universities, “highly paid research faculty — and there aren't that many people like that — are actually pulling money into the university because they have grant funding from the outside.”

At Eastern Michigan University, Bunsis says, “we teach four classes a term, advise students and keep up a research agenda, and that is a 50- to 60-hour-a-week commitment.”

Schools are cutting faculty costs by hiring low-paid part-timers, many without benefits, who now teach more than half of all credit hours, says Wellman of the College Futures Foundation. Part-time teachers — called adjunct faculty — on average earn just $16,718 annually per employer and often cobble together several jobs to increase their earnings, according to a survey by the American Association of University Professors.54

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Federal Involvement

Until the mid-19th century, higher education in America was primarily a private affair, although a number of states had established public colleges. The first federal support came in the Morrill Act of 1862, which granted the states more than 100 million acres of federal land to be sold to establish and operate public “land-grant” colleges and universities.

Eight decades later, the federal government began providing financial support to higher-education students through the Servicemen's Readjustment Act, better known as the GI Bill, which offered educational grants and living-expense stipends to World War II veterans.55 And many jumped at the opportunity: From 1939, before the war, to 1947, two years after its end, college attendance soared by more than 50 percent, from 1.5 million to 2.3 million.56

In the 1950s, the Soviet Union launched Sputnik — the first satellite to orbit Earth — raising concern about U.S. science education and spurring establishment of the first federal student loans. Authorized by the National Defense Education Act of 1958, the subsidized loans were intended to make the United States more competitive scientifically with the Soviets and to enhance U.S. national defense and diplomacy. They were made available to undergraduate and graduate students who were studying science, engineering and some foreign languages.

President Lyndon B. Johnson's Great Society initiatives greatly expanded federal support for college students. “This nation could never rest,” he said, “while the door to knowledge remained closed to any American.” The Higher Education Act of 1965 authorized private banks to make government-guaranteed loans available to low- and moderate-income students without regard to their field of study. The government paid the interest on the loans while the low-income students were enrolled in classes, but did not provide a subsidy for moderate-income students.57

Seven years later, the federal government began offering grants – named after the sponsor Democratic Sen. Claiborne Pell of Rhode Island — to students with financial need. Soon a majority of high school graduates were entering college, with the federal government providing grants to a third of full-time undergraduates and loans to nearly half.58 That same year, Congress established the Student Loan Marketing Association, known as Sallie Mae, a quasi-governmental organization that bought loans from banks so the banks could make more loans.59

In 1978, Congress made guaranteed loans available for students at all income levels, and in 1980 the government began guaranteeing loans to parents. The government guaranteed to repay lenders if borrowers defaulted. Government employees serviced and collected the student and parent loans until the 1980s. Then Republican Ronald Reagan's administration began transferring those tasks to private companies. Eventually, private contractors were doing all of that work.

In 1993, with Democrats controlling Congress and the White House, the government created direct federal loans to compete with private lending and allowed lower-income students to make repayments tied to their earnings. Democrats argued that the government saved money by cutting out the middleman and the need for profit.

Two years later Republicans took control of both congressional chambers, however, and moved to eliminate direct federal loans and to privatize Sallie Mae. Championing free enterprise, they argued that banks and other private lenders would do a better job than the government and that Sallie Mae would function more effectively as a private business.

Eventually, in a compromise, Republicans allowed the direct-loan program to continue, and Democrats agreed to privatize Sallie Mae and permit it to lend directly to students. Republican Rep. Howard “Buck” McKeon of California — who later became chairman of the House Education Committee, said privatization was “paving the way to the future of a smaller, less intrusive government.”60

Student Loan Scandals

Republicans and Democrats continued to battle over the proper balance between government and private lending after Clinton left office.

During Republican George W. Bush's administration, the federal direct loan program shrank, and the now-private Sallie Mae became the country's biggest lender of student loans. The company also came under investigation for alleged improprieties, such as placing its employees in university call centers to speak with students, who thought they were talking with college loan officers, and paying for trips by university financial aid officers.61

In 2007, college officials were charged with steering students to preferred private lenders in exchange for kickbacks to officials or their colleges. Several college financial aid officers resigned, and universities and lenders — including Citibank and Sallie Mae — paid financial penalties and agreed to alter their behavior. Sallie Mae agreed to keep its employees out of college financial aid offices and to stop paying the travel expenses of financial aid officers' or for the officers to serve on Sallie Mae advisory boards.62

The same year, the newly Democratic-controlled Congress established a loan-forgiveness program for graduates working in public service jobs, and forgave loans by all borrowers after 25 years. Congress also expanded availability of income-based repayment, which limited monthly payments to 15 percent of a borrower's earnings.

In 2010, with President Obama in the White House and his fellow Democrats still running Congress, lawmakers adopted (effective in 2014) legislation to lower income-based payments to 10 percent of earnings and offered debt forgiveness after 20 years. Arguing that removing the profit motive would produce loans more favorable to borrowers, Congress also replaced guaranteed private loans with direct federal lending. Lenders still can make private loans, but without government support.

In 2014, Obama bypassed the then-Republican Congress and issued an executive order to provide loan forgiveness after 10 years for borrowers doing public-service work.63

Congress had begun tightening repayment requirements in 1976 by decreeing that bankruptcy courts couldn't discharge education loans for five years after graduation. That period later was lengthened to seven years and then escaping student loans through bankruptcy was made almost impossible in 2005.

When Congress considered easing the requirements in 2009, J. Douglas Cuthbertson — then a lawyer for a trade association of lenders — testified that strict repayment provisions were essential for a healthy student loan program. Borrowers who could easily default on their loans would “enjoy the benefits of their education” and then go into bankruptcy “without ever attempting to repay,” he said. That would effectively change the loan into a scholarship and cause lenders to abandon the market, he said.

A scholar of student loans and bankruptcy disputed Cuthbertson's argument. Congress stiffened the requirements because of “perceived abuse of the bankruptcy system, as opposed to any real abuse,” said Rafael Pardo, who then was an associate law professor at Seattle University and now is a law professor at Emory University in Atlanta. Cuthbertson then admitted that he didn't have empirical data to support his warnings about abuse.64

Rise of For-Profits

For-profit schools — which account for a disproportionate amount of student loan problems — have been around since the country's earliest days, addressing a need for practical training that traditional public and nonprofit institutions often did not offer. Throughout their history, they have been praised for serving students who were ignored by traditional schools and criticized for cheating students by offering subpar education at inflated prices.

Early American colleges provided classical education and looked down upon practical training. That left an opening for for-profit schools to focus on such subjects as surveying, navigation, bookkeeping and even law and medicine. They suffered as traditional institutions eventually began creating curriculums in medicine, law and other professions. But for-profits continued to function by teaching such skills as barbering, cosmetology and stenography.

World War II spurred a jump in the number of for-profit schools — first training workers needed by wartime industries, then admitting returning veterans flush with the GI Bill's education benefits. Another growth spurt followed the 1972 amendments to the Higher Education Act, which made students at for-profit colleges eligible for federal education assistance. Previously such aid could be used only at public and nonprofit institutions.65

Enrollment in degree-granting for-profit schools soared between 1980 and 2010, before beginning to decline, but the percentage of their students who borrowed money to pay for the courses rose, from 61.3 percent in the 1995–96 academic year to almost all — 92 percent — in 2007–08.66 The growth was boosted by the Reagan administration's promotion of privatization in the 1980s, the increasing availability of education aid and aggressive marketing that later caused legal problems for many of the schools.67

Some schools ran misleading advertising that claimed to place high percentages of graduates into good jobs. Some sent recruiters to unemployment and welfare lines to sign up students who would qualify for aid but wouldn't necessarily do well in class. Some had recruiters canvass door-to-door in low-income neighborhoods to seek similar potential enrollees. Many of the recruiters were paid on commission, a violation of federal law. A study of 30 for-profit schools found that they spent an average 17 percent of their revenues on instruction and 23 percent on marketing.

The parent company of the University of Phoenix — the nation's largest for-profit university — paid a $10 million fine in 2004 for paying commissions. Career Education Corp. in 2013 agreed to a $10 million settlement for publishing greatly inflated placement rates.68

The Department of Education announced in September that it would stop recognizing accreditation of for-profit colleges by the Accrediting Council for Independent Colleges and Schools. The council had routinely approved schools that government agencies charged with fraud and mismanagement, the department said. The council is appealing the decision.69

Many of the schools' students were the first from lower-income families to seek higher education and did not thoroughly understand what they should expect from the schools and what obligations they were accepting when obtaining loans. Many also held jobs that interfered with the time they needed to keep up their studies.

Some for-profit schools went out of business, leaving students with debt and academic credits that were not transferable to other institutions. For instance, Corinthian Colleges, which served more than 81,000 students at 100 campuses in mostly Western states, filed for Chapter 11 bankruptcy in 2015.70 As a result of such closings, students often failed to get a degree and found it difficult to find good-paying jobs needed to repay their loans.71

Reform Proposals

Obama, in his 2015 State of the Union address, had proposed a federal-state partnership to provide free tuition at two-year community colleges.

His plan would use $6 billion in federal funds each year to pay three-quarters of the cost of making tuition free. States would pay for the rest. Students would have to maintain at least a 2.5 grade-point average and study at least half time to earn credits that would lead to a two-year certificate or could be transferred to a four-year institution. Lower-income students could use Pell Grants to pay other expenses.

Congress rejected Obama's plan, but his administration this year by executive action instructed the Labor Department to make $100 million available to community colleges for education and training, including free-tuition programs.72

Addressing complaints about abusive debt collectors, Obama also began an experimental program to have federal employees collect debts and help students cope with their repayment difficulties.

Deanne Loonin, founding director of the National Consumer Law Center's Student Loan Borrower Assistance Project, said all private debt collectors should be replaced. “They are incentivized just to collect money, not to work out ways that might be better for the borrowers,” she said.73

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Current Situation

Federal Fixes

As the presidential campaign raced toward its conclusion in October, Donald Trump provided details on his plan to ease the burden of student debt.

Trump said he would roll all public and private loans into an income-based repayment plan that would cap monthly repayments at 12.5 percent of a borrower's earnings, with the unpaid balance forgiven after 15 years. He did not offer a cost estimate. Congressional Republicans in the past have called similar plans fiscally irresponsible.

“Students should not be asked to pay more on the debt than they can afford,” Trump said. “And the debt should not be an albatross around their necks for the rest of their lives.”

The government could afford the program, he said, because the more-favorable repayment provisions would reduce loan defaults. He said he would free-up funds by cutting federal spending in other areas.

Trump also supported forcing colleges to use more of their endowments to reduce tuition and fees, called for lowering college costs by cutting federal regulations and promised to hold schools accountable for “administrative bloat.”74

Investors viewed Trump's promises on cutting regulations as a likely boon for private lenders and for-profit colleges. The University of Phoenix, DeVry University and Strayer University — leading for-profit schools — saw their stock prices rise the day after the election. Analysts attributed the gains in part to speculation that Trump will ease the Obama administration's clamp-down on the industry.75

Sallie Mae's stock jumped 15 percent on the same day. The financial publication Barron's linked the increase to the likely failure of free-tuition proposals, which would sustain demand for college loans.76

Other Trump reforms proposed at the federal level include allowing borrowers to refinance loans at lower rates, reducing interest rates on federal loans and simplifying the system.

Democratic Sen. Al Franken of Minnesota this year introduced legislation to allow borrowers to refinance federal loans, a proposal that has failed in previous Congresses. “You're able to do that on a car loan,” he said. “You're able to do it on a mortgage. You're able to do it on a business loan. You should be able to do it on federal student loans.”77

But that's a bad idea, says the Brookings Institution's Akers, because “it would create huge transfers to the people who need it the least.” Refinancing federal loans at lower rates reduces federal income and transfers money “from taxpayers to borrowers,” Akers says. Those with the highest debt — who tend to be well-paid professionals — would get the most relief, she notes. That federal aid should be focused on the needy, she argues.

Similar criticisms are directed at other proposals to reduce costs for both high- and low-income borrowers. But there is broad agreement about the need for simplification. Many borrowers who would benefit from income-based repayment plans, for example, don't enroll because the process seems too complicated.

“Our current system of income-driven repayment is a hodgepodge of problems that is difficult for students to navigate,” Akers says. “People who need it the most are the least able to negotiate the barriers.”

One complication for borrowers — having to file new paperwork every year to update earnings information — could be eliminated by tying repayment to the federal income tax system, said the Urban Institute's Baum. There is “broad consensus that borrowers should automatically be placed in [an income-driven] plan and that payments should be made through payroll withholding,” she said.78

Akers also likes the idea of income sharing, first proposed by Nobel Prize-winning economist Milton Friedman in 1955. In exchange for loans, borrowers agree to pay the lender a percentage of their income for a set period of time. Borrowers with high-paying jobs might end up repaying more than they borrowed. Others would repay less.79 Akers also proposes consolidating all student aid into one lending program and one grant program, while eliminating educational tax credits and loans to parents.

Controlling Tuition

While the idea of free tuition commanded attention during the presidential campaign, federal and state lawmakers are adopting or considering other measures designed to constrain tuition. And some companies are helping debt-encumbered employees.

At the federal level, lawmakers are examining how high sports spending by colleges is affecting tuition rates. Five House members — three Democrats and two Republicans — have introduced a bill to create a Presidential Commission on Intercollegiate Athletics to study college sports financing, among other matters.

“The NCAA is simply incapable of reforming itself,” said Rep. Charlie Dent, R-Pa., one of the sponsors. “It's important for us to have a serious conversation about how all these conferences are going to be able to survive in this new system,” he said, referring to new rules adopted by the NCAA in 2014, in which the Power Five conferences were exempted from some requirements, such as limits on expense payments to players, staff sizes and recruiting.80

The NCAA last month did, however, increase emphasis on academics in the formula it uses to distribute revenues from its annual “March Madness” basketball championship tournament. Beginning in the 2019–20 academic year, the formula will take into account the proportion of a school's athletes who graduate within six years of enrollment. Currently, a school's share of those revenues depends on its success in the tournament, the number of athletic scholarships it awards and the number of teams it fields.81

The Knight Commission is urging that all NCAA distributions to schools be used only for education, health and safety — not for coaching salaries, recruiting and new athletic facilities.82

In addition to sports, federal lawmakers are looking at college endowments as a potential source of funds to reduce tuition charges. Rep. Tom Reed, a New York Republican, has proposed, but not yet introduced, legislation requiring colleges with endowments of more than $1 billion to spend a quarter of the funds' annual earnings to reduce tuition. The plan would affect about 90 schools.83

“It is a disservice to the next generation of students that colleges continue to stockpile large sums of money that are tax exempt, and for which donors receive tax deductions, while tuition costs continue to rise,” Reed said.84

Two congressional committees have asked 56 private institutions with endowments greater than $1 billion for information about how they use them. Reed said he hopes Congress will take up the bill next year.85 However, Finney says, the proposal could be unrealistic because many endowment donors prescribe how the money must be spent, and it is illegal to use restricted funds for other purposes.

In its response to the committees, Harvard said 84 percent of its $37.6 billion endowment — the largest in the country — is restricted. Last year, Harvard spent $1.8 billion from the endowment, including $175 million — less than 10 percent — for financial aid for undergraduates.86

At the state level, Virginia state colleges have until mid-2021 to comply with a law that caps how much they can subsidize intercollegiate athletics. The law hits hardest at Power Five universities — the University of Virginia and Virginia Tech — which bring in the most income from such sources as ticket sales and television rights. The schools can obtain no more than 20 percent of their sports budgets from student fees and other nonsports-generated university income.

Schools that play in the NCAA's top-tier Football Bowl Subdivision — but outside the Power Five conferences — can use institutional money for no more than 55 percent of their total athletics budget. The percentage rises as the level of competition diminishes and the opportunity for outside income shrinks. It's 70 percent for schools in the Football Championship Subdivision, the second tier of football competition. It's 92 percent in the lowest tier — Division III institutions that don't play football.

“I don't think this is going to be an anomaly,” Wood Selig, athletic director at Old Dominion University in Norfolk, Va., the only school with a 55 percent cap, said about the new Virginia law. “My sense is other states are going to take note.”87

State lawmakers also are looking into endowment-like reserve funds that public schools are accumulating. For instance, the University of Virginia has built a $2.2 billion fund for “strategic investments,” such as technology, laboratories or faculty recruitment, in addition to its $6 billion endowment. In recent years, similar reserve funds have totaled $2.4 billion at the University of Illinois, $2.3 billion at the University of Pittsburgh, $1.7 billion at the University of Michigan and $648 million at the University of Wisconsin.88

University officials say the reserves help to stabilize their finances at a time of economic volatility and shrinking and unreliable state aid. High reserves also lead to higher credit ratings, which cut borrowing costs, the officials say.

Democrat J. Chapman Petersen, a member of the Virginia Senate Education Committee, was among legislators who found the practice of retaining high reserves disturbing. If the University of Virginia spent the money, Petersen said, it could refund tuition and hire a personal tutor for all 16,500 undergraduate students.89

The university in October announced that it has used $6.8 million from the fund this year to provide financial aid to doctoral and business students as well as law students who take public service positions after graduation. The university's Board of Regents, at its November meeting, discussed other options for using the fund to make the school more affordable.90

Some businesses also are offering debt relief as a recruiting incentive. Law school graduates, for instance, currently enter the workforce with an average debt of $185,000 — up from $75,000 a decade ago, according to Mark Kantrowitz, an Illinois-based financial aid adviser. As a result, personnel officers have observed, young recruits find debt relief more attractive than generous retirement benefits.

Benefits can range from $100 a month to $2,000 a year. Companies usually cap the total benefit — up to $10,000 at PricewaterhouseCoopers and Fidelity Investments, and up to $30,000 at the computer graphics company Nvidia.

Six-figure debts dwarf such benefits, however, and just 3 percent of employers currently offer the aid. But it is popular with workers. More than 6,000 of Fidelity's 45,000 employees signed up for the benefit by November, for example, says company spokesperson Alicia Curran Sweeney.91

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Cost-Cutting Challenges

In the coming years, it will be difficult for colleges to shrink students' need to borrow. Schools are expected to have a hard time reducing tuition by cutting costs, and they likely will encounter new challenges that could drive up spending in other areas.

But constantly raising tuition and fees is unsustainable, some experts say, so colleges will face substantial pressure to become more efficient.

One solution is to drop out of top-tier football, as the University of Idaho is doing.92 Schools unwilling to take that radical step know they must find ways to curtail ever-rising sports costs.

“We've always got to build something bigger and better … and I don't think it is sustainable,” said Kansas State University President Kirk Schulz. Louisiana State University President F. King Alexander said the Southeastern Conference is “trying to figure out how to slow this spending machine down, [but] we just don't know where this whole thing is going to end up.”93

Beyond the pressures of competition, legal considerations restrict some attempts to rein in sports spending. For instance, federal antitrust laws prevent the NCAA or athletic conferences from imposing caps on multimillion-dollar salaries for coaches. And some college athletes have gone to court to overturn NCAA rules that prevent them from being paid to play. Athletes also asked the National Labor Relations Board (NLRB) for the right to unionize.

So far, the athletes have lost in court and at the NLRB, but the rulings were convoluted and the disputes are not over.94

The board already has supported unionization rights for students who work as teaching or research assistants at private colleges, ruling in August that students at Columbia could bargain with the university as members of the United Auto Workers (UAW). Some states had already allowed public-college students to organize.95

A growing number of students and part-time faculty across the country are seeking to join unions, challenging colleges' use of cheap labor to hold down costs, according to UAW Regional Director Julie Kushner.96 An Inside Higher Ed survey released this year found that only 8 percent of college chief academic officers expected to rely less on non-tenure-track faculty in the future, while 27 percent expected to rely more.97

Like many employers, colleges will have to pay mounting health care and retirement expenses, says Wellman, the former director of the Delta Cost Project. Such items can be more burdensome in higher education because of “stove-pipe” management: People who hire faculty don't think of those costs because fringe benefits are administered elsewhere, she says.

Beyond specific challenges to cost cutting, higher education institutions remain tough to manage because they lack the kind of “objectively measured” outcomes that businesses rely on to make budget decisions, University of San Francisco Provost Heller said. “This absence of clear, measurable goals hampers universities in their attempts to control costs by closing or shrinking marginal programs,” he said. “Instead, new initiatives tend to get layered on top of old ones, thus adding to costs.”98

Staisloff, the cost-containment consultant, says some colleges are moving to a new management model that holds down spending without diminishing educational quality. Faculty members teach more classes, while others take over such nonteaching duties as grading and advising, he says.

Colleges also need to look at eliminating under-subscribed classes, he says. “Generally we find in almost every university we've studied that 50 percent or more of undergraduate students are in 20 or fewer programs, at institutions with 50, 100 or 150 programs,” he says.

Universities could also become more efficient by utilizing facilities during evenings, weekends and summer breaks, Staisloff says. Information technology offers cost-cutting opportunities as well, he says.

“Once you get smart about how you're utilizing your most important asset — your faculty members — you can really increase their efficiency and put millions of dollars back on the table,” Staisloff says.

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Should public-college tuition be free?


Morley Winograd
President and CEO, Campaign for Free College Tuition. Written for CQ Researcher, November 2016

It's a simple fact that our nation's economic success depends on a highly educated and skilled workforce. In the 20th century, as our growing Industrial Age economy required workers with a high school education, states and communities funded public high schools for both girls and boys to respond to these new demands. Later in the century, Congress enacted the GI Bill of Rights and then the Higher Education Act of 1965 to encourage college enrollment, thereby establishing the educational foundation for our rapidly expanding middle class.

It is only in this century that we have asked a generation — Millennials, born between about 1982 and 2003 — to self-finance the education they need and that our country needs in order to be economically successful. This misguided approach must end before America loses its global competitive edge for good.

Just when a college degree or certificate became a ticket to the middle class, we have made it too expensive for most families to send their kids to college. Since 1973, according to the Center on Budget and Policy Priorities, “average inflation-adjusted public college tuition has increased by 274 percent while median household income has grown by only 7 percent.” Students and families took out loans to cover the gap, effectively mortgaging their financial future to try to meet the challenge. The resulting rise in student debt levels is a dangerous warning sign that our country is abandoning its historical commitment to education as a key component of the promise of upward economic mobility.

Only free public college tuition has the power to permanently fix this problem. America has always used government resources to provide sufficient funds to those willing and able to acquire the skills and knowledge they need to be successful. While free public college tuition will require a major investment by government, the return on that investment will pay dividends for decades. The W.E. Upjohn Institute for Employment Research found that the Kalamazoo Promise — the nation's pioneering scholarship program providing a free college education to public high school graduates — has produced a return on investment of 11.3 percent in the first 10 years of its existence.

Now is the time to expand our country's commitment to free universal public education from primary and secondary education to higher education to ensure we have a skilled workforce capable of competing in the 21st-century economy.


Rick Staisloff
Founder, rpkGROUP, a higher-education consulting firm. Written for CQ Researcher, November 2016

The call for free college tuition is in the air. During this past season of campaigning, political candidates competed to offer more and more largess for higher education. And who shouldn't want free tuition? Precisely the colleges that would receive this gift.

Over the past 50-plus years, our national and state policies have focused on how to help students afford an ever costlier degree. Nowhere have we asked the more fundamental question: Why does college cost so much to begin with? It is time to tackle the real issues that increase the cost of college for all students without adding to the quality of their educational experience. Adopting a free-college policy would likely eliminate the momentum of a very nascent movement seeking to lower the cost of a college education.

What would a lower-cost education look like? It would not be one of lower quality. It would require fewer degree programs, appropriately larger class sizes, less research at nonresearch institutions and more streamlined and efficient administrative services. All doable, as demonstrated by best practices at colleges that have been willing to do the basic blocking and tackling involved with reforming education.

Beyond the improvements in the traditional model most of us passed through as students, real cost reductions are achievable from the emergence of innovative delivery models. Competency-based education models, for example, focus on mastery of competencies and not on the length of time needed to learn these skills. Such models show great promise in “bending the cost curve” of higher education.

Rather than write an ever larger, publicly funded check for costly, inefficient education models, colleges and students would be better served by targeted investment in programs that create efficiencies at colleges and support educational innovations until they become sustainable. Use the funding that would go for free college to provide seed money for innovations such as competency-based education and open educational resources, which make educational materials free and accessible. We also should fund shared service models in which institutions can more cost effectively share curriculum, faculty, libraries and materials, as well as administrative services.

If we make college free, we risk devaluing a college education. More to the point, we'll lose any concern over what it costs. That's not good for higher education or the students it serves.

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1944–1976Federal government begins offering aid to college students.
1944GI Bill grants to World War II veterans spurs college attendance.
1958Shaken by the 1957 Soviet Union launch of the Sputnik satellite, Congress covers 90 percent of the costs of colleges making low-interest loans to students in fields deemed essential to national defense.
1965Federally guaranteed private loans are made available to low- and moderate-income students…. Federal government pays the interest for low-income students until they leave school…. Federal employees handle debt collection…. More than half of high school graduates now attend post-secondary schools.
1972Pell Grants are created for needy students…. Student Loan Marketing Association (Sallie Mae) is established to purchase loans from lenders so they can make more loans.
1976Congress bans cancellation of student loans durring bankruptcy proceedings until five years after graduation.
1978–2005Federal government expands eligibility for loans and grants.
1978All students become eligible for private loans guaranteed by the federal government.
1980Parents can obtain guaranteed loans for their children.
1981Republican Ronald Reagan's administration begins to transfer debt collection from the Education Department to private contractors.
1993Federal government begins lending to students in competition with private lenders…. Lower-income students become eligible for repayment plans tied to their earnings.
1997Sallie Mae starts evolving into a private business that lends directly to students…. Middle-class families are allowed to receive tuition tax credits, tax deductions for student loan interest and tax-free college savings accounts…. Two-thirds of high school graduates attend post-secondary educational institutions, the highest proportion ever.
2005Congress makes student loans almost impossible to escape through bankruptcy.
2007–PresentScandal rocks private lenders, and federal government moves into direct-lending business.
2007Lender-to-college kickbacks and other scandals lead to agreements by Sallie Mae and other lenders to pay financial penalties and end unethical practices…. Loan forgiveness is offered to low-income borrowers in public service jobs who have made payments for 10 years and to others who have made payments for 25 years…. More borrowers can have repayments tied to their earnings.
2010Federal government stops guaranteeing private loans.
2012Tuition for the first time exceeds state aid as a funding source for public colleges.
2014Borrowers can make repayments at just 10 percent of their earnings, with forgiveness after 20 years…. All public service workers get loan forgiveness after 10 years.
2015Congress rejects President Obama's proposed federal-state program to provide free tuition at two-year community colleges…. Sen. Bernie Sanders of Vermont makes free college tuition a key issue in his campaign for the 2016 Democratic presidential nomination…. Former Secretary of State Hillary Clinton, Sanders' chief rival, proposes giving federal funds to state colleges that lower tuition so students don't need to borrow.
2016Total student debt reaches $1.26 billion. Clinton joins Sanders in proposing free college tuition…. Obama instructs Labor Department to give community colleges $100 million for education, training and free-tuition programs…. Administration moves some debt collection from private companies to federal agencies…. Cost of attending public universities has risen 28 percent above inflation since 2007–08 school year…. Then-GOP-candidate Donald Trump proposes capping monthly student debt repayments at 12.5 percent of a borrower's earnings and forgiving the unpaid balance after 15 years.

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Short Features

But critics say free tuition isn't really free.

Many American education reformers look enviously at Ireland, Sweden, Germany and other European countries that offer free tuition to their citizens — and even to international students who enroll there. They also look longingly at Australia and its handling of student loan payments, where repayment is tied to the borrower's income.

But American critics say “free” tuition comes at a cost: European countries hold down the government's free tuition costs by limiting college admission. What's more, foreign schools are Spartan compared with their American counterparts, offering fewer extracurricular activities and other amenities.

Some research indicates that free tuition can lead students to discount the value of education and not work as hard to succeed at it. “European studies have found that students who pay more in tuition exert greater effort and are more likely to graduate on time,” said Chenny Ng, an education policy researcher at Northwestern University.1 Germany also found that free tuition led students to extend their time in college, with some becoming “eternal students.”2

The policy remains extremely popular, however. When Germany's high court in 2005 overturned a national law banning tuition, for example, 10 states began assessing students about 500 euros a semester, which would be about $545 today. By the end of 2014, public protest had caused all the assessments to be repealed.3

A student studies at the Free University of Berlin (Getty Images/Ulrich Baumgarten)  
A student studies at the Free University of Berlin. Germany and several other European countries offer free tuition to citizens — and even to international students. (Getty Images/Ulrich Baumgarten)

Free tuition in Europe is certainly popular with American and British students, thousands of whom study in continental Europe each year to avoid higher costs at universities in their own countries. With more than 300 European colleges teaching courses in English, U.S. and U.K. students are even attracted to schools that charge tuition, because most cost less than $2,225 a year.4

Tuition is free or nominal in some countries because national and state governments pay most of the costs. But European educational institutions — including those that charge tuition — tend to be more bare-boned than in the United States, with more basic campus facilities and few intercollegiate sports, recreational facilities or extracurricular activities.5

European students spend little time on campus when not studying because “there is not a lot to do other than classes,” said Mirjam Milsch, a German who studied at the New Jersey Institute of Technology and at Fachhochschule Hannover in Germany.6

And free tuition, ironically, is no panacea for students wanting to avoid debt, according to the international Organisation for Economic Co-operation and Development (OECD) in Paris. European students borrow to pay for such things as books, supplies, food and housing. Because borrowers repay only a small amount each month, they may take 20 to 30 years to retire the debt, and they don't tend to default.7

Cultural reasons help explain why European students borrow. For instance, in Sweden, college students are considered self-supporting adults so their parents are not expected to help pay for their higher education. One study found that only 2 percent of Swedish men were still living with their parents at home after age 30, compared with a quarter in Spain and a third in Italy.8

In addition, the cost of living in Sweden is high. As a result, at least seven in 10 Swedish students borrow to pay for schooling, and they accumulate an average debt of about $20,000.9

Australia was a pioneer in tying loan repayments to borrowers' incomes, a practice later adopted in the United Kingdom and New Zealand.

“One great benefit of the Australian system is simplicity,” said Andrew Norton, higher-education program director of the Grattan Institute, an Australian think tank.10

The country has one repayment system, and payments are collected along with taxes, usually as a paycheck deduction. But Australian students can borrow only for education costs, not living expenses, and debt is not forgiven until death. However, repayment doesn't begin until borrowers are earning the equivalent of about $41,500 in U.S. dollars, and then they pay 4 percent of their annual earnings.

The Grattan Institute says the system has one significant flaw: It provides benefits to affluent families that don't need the assistance. For instance, Norton said, many Australian women drop out of the workforce to raise children and often return to take part-time jobs with wages below the repayment threshold. As a result, they can avoid repayment for a substantial period, even if married to a high-income spouse. Denying forgiveness to larger estates would help prevent that, the institute said.11

European countries hold down government costs for free tuition by limiting admissions at their higher education institutions. Germany, for instance, begins placing pupils in educational “tracks” by age 10: the Gymnasium (the most advanced school) for academic careers; the Realschule (a secondary school) for other white-collar jobs; and the Hauptschule (a general school) for learning a trade.12

In contrast, says Barmak Nassirian, federal policy director at the American Association of State Colleges and Universities in Washington, the United States is “the world leader in access to higher education. Nobody else admits as large a portion of the population.”

“We want more people and more kinds of people” to go to college, says Rick Staisloff, a consultant in Annapolis, Md., to educational and other nonprofit institutions who opposes federally supported free tuition because, he says, it would relieve pressure on colleges to control costs.

While a larger proportion of Americans than Europeans may be admitted to postsecondary schools, a bigger percentage of Irish and Norwegian students graduate, according to an OECD report this year. Among Americans ages 25 to 34, the report said, 46.5 percent had earned a postsecondary degree, compared with 52 percent in Ireland and 48.1 percent in Norway. The United States was substantially ahead of Germany's 29.6 percent, marginally ahead of Sweden and Denmark and about 6 percentage points better than Finland and Iceland.

The OECD figures count all postsecondary education, including vocational programs leading to blue-collar jobs.13

— Tom Price

[1] Chenny Ng, “Free tuition won't help students,” The Washington Post, Nov. 13, 2015,

[2] Charles Lane, “College doesn't need to be free,” The Washington Post, May 21, 2015,

[3] Sonali Kohli, “The price of free education,” Los Angeles Times, Nov. 4, 2015,

[4] Bernie Sanders, “Make college free for all,” The Washington Post, Oct. 22, 2015,; Cathaleen Chen, “Free college in Europe: An attractive option, but not for everyone,” The Christian Science Monitor, Feb. 23, 2016,; and Samantha North, “British students ditch costly UK for free education in Europe,” The Telegraph, Jan. 29, 2015,; Katie Lobosco, “Americans are moving to Europe for free college degrees,” CNN Money, Feb. 23, 2016,

[5] Karin Klein, “‘Free’ college in Europe isn't that great a deal,” The Sacramento Bee, June 27, 2016,

[6] Mirjam Milsch, “Contrast College Life in the U.S. Against a Home Country,” U.S. News & World Report, Aug. 14, 2014,

[7] Susan Dynarski, “America Can Fix Its Student Loan Crisis. Ask Australia,” The New York Times, July 9, 2016,

[8] Matt Phillips, “The High Price of a Free College Education in Sweden,” The Atlantic, May 31, 2013,

[9] Susan Dynarski, “Why Small Student Debt Can Mean Big Problems,” The New York Times, Sept. 1, 2015,

[10] Beckie Supiano, “What America Can Learn From Australia's Student-Loan System,” The Chronicle of Higher Education, Jan. 5, 2016,

[11] Ibid.; Dynarski, “America Can Fix Its Student Loan Crisis,” op. cit.

[12] Isabelle de Pommereau, “Global education lessons: Germany's respected voc-tech path with Meisters,” The Christian Science Monitor, Sept. 1, 2013,

[13] “Population with tertiary education,” Organisation for Economic Co-operation and Development, 2016,

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Most are provided by the federal government.

Students and parents face a bewildering array of options when shopping for loans to finance postsecondary education.14 Potential lenders include federal and state governments as well as banks, credit unions, other private lending companies and schools themselves.

More than 90 percent of outstanding student debt is for federal loans, which are available in a variety of programs and repayment plans, some of which are subsidized.15 For instance:

  • Perkins Loans provide up to $5,500 a year for undergraduates ($8,000 for graduate students) from low-income families at 5 percent interest. Colleges administer the loans from a revolving fund replenished by borrowers' repayments and federal support, so the number of such loans available on a campus depends on the balance in a school's fund.

  • Direct Subsidized Loans are available to undergraduate students with financial need. The loans do not accrue interest — currently at 3.76 percent — until the student leaves school. The annual maximum loan amount varies: $3,500 for freshmen, $4,500 for sophomores and $5,500 for juniors and seniors.

  • Direct Unsubsidized Loans provide between $5,500 and $20,500 to undergraduate and graduate students, depending on the level of study and whether borrowers are dependent on their parents. Interest is currently 3.76 percent for undergraduates and 5.31 percent for graduate students.

  • Direct PLUS Loans are available to graduate students and parents of undergrads, currently at 6.31 percent interest. The maximum loan amount depends on the cost of attending the school.

Federal loans offer benefits usually not provided by private lenders. Borrowers don't start repaying the loans until they leave school or fail to carry at least a half-time course load. The government does not conduct credit checks, except for PLUS loans, and a student usually does not need a co-signer to guarantee the loan's repayment. The government will temporarily postpone or lower payments if a borrower has financial hardship.

In addition, federal loans can be forgiven if a school defrauds a borrower, if the borrower dies or is disabled or if a school closes and students cannot transfer their credits — a problem faced by many students who attended shoddy for-profit institutions.16

Some or all of a federal loan also can be forgiven if the borrower takes a public-service job.

For instance, a direct loan borrower can get up to $17,500 forgiven after teaching in a low-income school for five straight years. The remaining debt can be forgiven after a borrower makes repayments and works for 10 years in a combination of any government job, any 501 (c)(3) nonprofit organization, AmeriCorps, Peace Corps and any nonprofit that provides services to the military, emergency management, public safety, law enforcement, public interest law, early childhood education, public health, public education, public libraries, the disabled and the elderly.

Borrowers with multiple federal loans can consolidate them into one to simplify repayment and lower monthly payments by stretching them over up to 30 years. If the loans have different interest rates, they will be averaged to create a new rate.

Borrowers also can choose among income-based repayment plans, which require payments of 10 to 20 percent of the borrower's adjusted gross income above the poverty rate, which for the contiguous 48 states currently is $11,880 annually for an individual, plus about $4,100 for each additional family member. The remaining balance is forgiven after 20 to 25 years, depending on the plan. Borrowers must recertify their income and family size each year. Critics say some borrowers don't enter income-based plans because they think the plans are too complicated.

Except for Perkins loans, interest rates are calculated each July 1 for loans to be made during the following 12 months. The rate is based on the spring rates for the 10-year Treasury note, increased by varying amounts depending on the loan type. The rate then is fixed for the life of the loan.17 Those borrowers also pay an origination fee — about 1 percent on Direct Loans and about 4.25 percent on PLUS loans. Because of generally lower interest rates and opportunities for lowering monthly payments and having outstanding balances forgiven, most borrowers find federal loans more appealing than those offered by banks or other private-sector lenders. But the federal government restricts how much students and parents can borrow, so private lenders often fill in the gaps.

Interest rates and loan terms vary among private lenders. A study this year by Credible, an online lending marketplace, determined that the average rates at private lenders were 5.37 percent for undergraduates with a co-signer and 7.46 percent for those who did not have a co-signer. Graduate students with a co-signer paid 4.59 percent, while those without paid 6.21.

According to MeasureOne, a market-research and consulting firm, 94 percent of new private undergraduate loans during the 2015–16 academic year had a co-signer, as did 61 percent of loans to graduate students.18

Some states offer their own loan programs. For instance, New Jersey — the state with the largest program, with about $2 billion in outstanding loans — has been criticized for its aggressive repayment policies. The program charges higher interest than the federal government and commands repayment by garnishing wages, canceling state income tax refunds, revoking professional licenses and confiscating lottery winnings, all without obtaining court orders. Death does not end demands for repayment from the borrower's estate or from co-signers.

In contrast, Massachusetts — with the second-largest loan portfolio, $1.3 billion — forgives the debt if a borrower becomes disabled or dies. Rather than offering its own loans, Pennsylvania services federal loans provided to its residents.19

— Tom Price

[14] Unless otherwise noted, information in this section came from “Federal student loans for college or career school are an investment in your future,” U.S. Department of Education,

[15] Tara Siegel Bernard, “The Many Pitfalls of Private Student Loans,” The New York Times, Sept. 5, 2015,

[16] For background, see Barbara Mantel, “Career Colleges,” CQ Researcher, Jan. 7, 2011, pp. 1–24.

[17] Ann Carrns, “Rates on Federal Student Loans Are Falling for This Year,” The New York Times, June 25, 2016,

[18] Ron Lieber, “Co-Signing for a Student? Think First About Yourself,” The New York Times, Aug. 13, 2016,

[19] Annie Waldman, “Even Death Is No Reprieve From a Student's Debt,” The New York Times, July 4, 2016,

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Akers, Beth, and Matthew M. Chingos , Game of Loans: The Rhetoric and Reality of Student Debt , Princeton University Press, 2016. Akers of the Brookings Institution and Chingos of the Urban Institute say public panic about student debt is overblown.

Angulo, A.J. , Diploma Mill$: How For-Profit Colleges Stiffed Students, Taxpayers, and the American Dream , Johns Hopkins University Press, 2016. A professor of education and history at Winthrop University in Rock Hill, S.C., says for-profit schools have exploited low-income students and that those schools' students account for a disproportionate number of loan defaults.

Baum, Sandy , Student Debt: Rhetoric and Realities of Higher Education Financing , Palgrave Macmillan, 2016. Many student debt problems stem from bad borrowing choices, says the author, who prepares the College Board's annual report on higher-education prices.

Brada, Josef C., Wojciech Bienkowski and Masaaki Kuboniwa, eds., International Perspectives on Financing Higher Education , Palgrave Macmillan, 2015. Education scholars from around the world describe how various countries pay for higher education.


Carlson, Scott, and Beckie Supiano , “How Clinton's ‘Free College’ Could Cause a Cascade of Problems,” The Chronicle of Higher Education, July 27, 2016, Free public-school tuition can have unintended consequences, including the possible demise of small private schools, experts say.

Dynarski, Susan , “Why Students With Smallest Debts Have the Larger Problem,” The New York Times, Sept. 1, 2015, A professor of public policy, education and economics at the University of Michigan explains that student-debt defaults are concentrated among student drop-outs, who tend to have small debts but have more difficulty than graduates paying the loans back.

Goldrick-Rab, Sara , “Make college free,” Social Mobility Memos, Brookings Institution, Oct. 16, 2015, An expert on college affordability argues that low-income students would benefit from a simple system that makes college free for everyone.

Samuelson, Robert J. , “It's time to drop the college-for-all crusade,” The Washington Post, May 27, 2012, Encouraging college for everyone ignores the fact that most U.S. jobs do not require higher education, says an economics columnist.

Staben, Chuck , “Why We're Leaving the Football Arms Race,” Inside Higher Ed, April 29, 2016, The University of Idaho's president says his school decided to drop out of big-time football largely to save money on rising football program costs, which some say add to tuition costs and contribute to higher student debt.

Steele, James B., and Lance Williams , “Who Got Rich Off the Student Debt Crisis,” The Center for Investigative Reporting, June 28, 2016, Investigative reporters argue that government, lenders and for-profit schools are substantially to blame for the student debt crisis.

Reports and Studies

“Great Jobs, Great Lives: The Relationship Between Student Debt, Experiences and Perceptions of College Worth,” Gallup Inc. and Purdue University, 2015, An annual survey of college graduates explores graduates' attitudes toward the cost and value of education and how well they are prepared for the job market. Significant numbers say debt caused them to postpone further education, buying a house or car or starting a business.

Baum, Sandy “College Endowments, College Prices, and Financial Aid,” statement before the Subcommittee on Oversight, U.S. House Ways and Means Committee, Sept. 13, 2016, A researcher who prepares the annual College Board study of tuition costs reviews key issues in college finance, including declining state support and the relationship between rising tuition and federal subsidies.

Harris, Michael S. , “What is the typical teaching load for university faculty?” Higher Ed Professor, May 11, 2015, The director of the Center for Teaching Excellence at Southern Methodist University explores typical faculty workloads.

Heller, Donald E. , “Does Federal Financial Aid Drive Up College Prices?” American Council on Education, April 2013, The provost at the University of San Francisco, who is also a professor of education, reviews scores of studies on the impact of federal aid on tuition and finds the studies to be “ambiguous at best.”

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The Next Step

Federal Support

Caputo, Ibby, and Jon Marcus , “The Controversial Reason Some Religious Colleges Forgo Federal Funding,” The Atlantic, July 7, 2016, Some religious colleges do not participate in federal financial-aid programs because they don't want to be restricted by Title IV regulations, which provide protections for LGBTQ students and govern how to respond to sexual assault.

Clark, Kim, Greg Daugherty and Kaitlin Mulhere , “What Trump's Election Means for College Students and Parents,” Time, Nov. 9, 2016, President-elect Donald Trump might change the way students pay for college, including privatizing loans and tweaking repayment plans, experts speculate.

Reedy, Caitlin , “Students worry Trump lacks a plan to address student debt,” The Michigan Daily, Nov. 10, 2016, Some students on the University of Michigan's campus expressed concern about President-elect Trump's views on tackling student debt.

Rising Costs

Belkin, Douglas , “College Tuition Rises 2.4% at Public Schools, College Board Says,” The Wall Street Journal, Oct. 26, 2016, Although the rate of tuition increase has slowed since rapid rises during and immediately after the 2008 recession, even small increases are exacerbated by wage stagnation, low inflation and less grant money.

Deruy, Emily , “The Racial Disparity of the Student-Loan Crisis,” The Atlantic, Oct. 24, 2016, The debt gap between black and white graduates more than triples in the years after college.

Edwards, Andrew , “Cal State University board considering tuition hike for next school year,” Press-Telegram, Nov. 7, 2016, Members of the Cal State University Board of Trustees will decide whether a tuition increase for the 2017–18 academic year can help raise $344 million.

State and Local Funding

Brown, Sarah , “Bottom Line: How State Budget Cuts Affect Your Education,” The New York Times, Nov. 3, 2016, State spending on higher education in Louisiana and Illinois decreased significantly in the past year, while appropriations for schools increased in Wyoming and North Dakota.

Rhodes, Dawn , “U. of I. backs deal that would set benchmarks in exchange for state funding,” Chicago Tribune, Nov. 10, 2016, University of Illinois trustees supported a plan that secures funding in exchange for commitments to benchmark standards, increases financial aid and limits tuition hikes.

Travis, Scott , “Florida looks for ways to make college affordable,” Sun Sentinel, Nov. 4, 2016, Having already frozen tuition increases, Florida state officials are looking for more ways to cut costs for college students.

University Spending

Coleman, Emily K. , “CLC boosts spending to attract more international students,” Lake County News-Sun, Nov. 10, 2016, The College of Lake County spent almost $20,000 for recruiters to go to foreign countries to attract students.

Hobson, Will, and Steven Rich , “The latest extravagances in the college sports arms race? Laser tag and mini golf,” The Washington Post, Dec. 21, 2015, Clemson University and other top-tier sports schools continue to ramp up spending on expensive facilities.

McDonald, Michael , “Harvard Raises $1.2 Billion But Slow Returns Crimp Budget,” Bloomberg, Nov. 1, 2016, Despite Harvard University's $1.2 billion fundraising effort, the school said it still needs to slow spending because of an underperforming endowment.

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American Association of State Colleges and Universities
1307 New York Ave., N.W., Fifth Floor, Washington, DC 20005
Promotes public higher education.

American Association of University Professors
1133 19th St., N.W., Suite 200, Washington, DC 20036
Defends academic freedom, advances faculty influence in higher education, defines professional standards.

The College Board
250 Vesey St., New York, NY 10281
Administers the Scholastic Aptitude Test and the Advanced Placement program and publishes an annual report on the costs of college.

Institute for Research on Higher Education
Graduate School of Education, University of Pennsylvania, 3700 Walnut St., Philadelphia, PA 19104
Researches finance in public higher education.

Knight Commission on Intercollegiate Athletics
200 S. Biscayne Blvd., Miami, FL 33131
Advocates college sports reform.

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[1] Neil Swidey, “The college debt crisis, is even worse than you think,” The Boston Globe, May 22, 2016,

[2] Jillian Berman, “Class of 2015 has the most student debt in U.S. history,” Market Watch, May 9, 2015,; Josh Boak, “Why It Matters: Student Debt,” The Associated Press, Sept. 5, 2016,

[3] Jeffrey J. Selingo, “Incomes aren't the only thing not keeping pace with rising tuition. Neither are scholarships,” The Washington Post, Sept. 16, 2016,

[4] Danielle Douglas-Gabriel, “Tuition at public colleges has soared in the past decade, but student fees have risen faster,” The Washington Post, June 22, 2016,

[5] Sandy Baum, “College Endowments, College Prices, and Financial Aid,” statement before the Subcommittee on Oversight, U.S. House Ways and Means Committee, Sept. 13, 2016,

[6] “Higher Education: State Funding Trends and Policies on Affordability,” U.S. Government Accountability Office, December 2014,

[7] Danielle Douglas-Gabriel, “Students now pay more of their public university tuition than state governments,” The Washington Post, Jan. 5, 2015,

[8] Jon Marcus, “New analysis shows problematic boom in higher ed administrators,” The Eye, New England Center for Investigative Reporting, Feb. 6, 2014,

[9] Baum, op. cit.

[10] Also see Dan Bauman, “Bonuses Push More Public-College Leaders Past $1 Million,” The Chronicle of Higher Education, July 17, 2016,

[11] “Busting the Myths: The Annual Report on the Economic Status of the Profession 2014–15,” American Association of University Professors, 2014–15,; “Higher Education at a Crossroads: The Annual Report on the Economic Status of the Profession, 2015–16,” American Association of University Professors,

[12] Paul F. Campos, “The Real Reason College Tuition Costs So Much,” The New York Times, April 4, 2015,

[13] Susan Dynarski, “Why Students with Smallest Debt Have the Larger Problems,” The New York Times, Aug. 31, 2015,; Alan Greenblatt, “Hot Topics: Student Debt” CQ Researcher, June 27, 2016.

[14] Baum, op. cit.

[15] A.J. Angulo, Diploma Mills: How For-Profit Colleges Stiffed Students, Taxpayers, and the American Dream (2016); Donald E. Heller, “Does Federal Financial Aid Drive Up College Prices?” American Council on Education, April 2013,

[16] Ann Carrns, “U.S. Puts Private Student Loan Servicers on Notice: Play Nice,” The New York Times, Aug. 26, 2016,

[17] James B. Steele and Lance Williams, “Who Got Rich off the Student Debt Crisis,” The Center for Investigative Reporting, June 28, 2016,

[18] Joni E. Finney, “2016 College Affordability Diagnosis National Report,” Institute for Research on Higher Education, University of Pennsylvania Graduate School of Education,

[19] Greenblatt, op. cit.

[20] Katrina vanden Heuvel, “Free college? We can afford it,” The Washington Post, May 1, 2012, Also see Deanna Templeton and, “What Happens to Student Loans When You Die?” ABC News, June 23, 2013,

[21] “Here's what every student and family should expect under Hillary's plan,” Hillary for America,; “Hillary Clinton's Commitment: A Debt-Free Future for America's Graduates,” Hillary for America,; Stephanie Saul and Matt Flegenheimer, “Hillary Clinton Embraces Ideas From Bernie Sanders's College Tuition Plan,” The New York Times, July 6, 2016,

[22] Bernie Sanders, “Make college free for all,” The Washington Post, Oct. 22, 2015,

[23] Sara Goldrick-Rab, “Make college free,” Social Mobility Memos, Brookings Institution, Oct. 16, 2015,

[24] Robert J. Samuelson, “It's time to drop the college-for-all crusade,” The Washington Post, May 27, 2012,

[25] Kevin Carey, “The Trouble With Hillary Clinton's Free Tuition Plan,” The New York Times, July 19, 2016,

[26] Saul and Flegenheimer, op. cit.

[27] Katie Pavlich, “Scott Walker: Hillary's Education Plan Benefits Her Liberal Academic Friends, Not Students,” Townhall, Aug. 12, 2015,; Julie Bosman, “2016 Ambitions Seen in Walker's Push for University Cuts in Wisconsin,” The New York Times, Feb. 16, 2015,

[28] Doug Lederman, “Clinton ‘Free’ Plan Would Swell College Enrollments,” Inside Higher Ed, Sept. 2, 2016,

[29] Scott Carlson and Beckie Supiano, “How Clinton's ‘Free College’ Could Cause a Cascade of Problems,” The Chronicle of Higher Education, July 27, 2016,

[30] Lederman, op. cit.

[31] Carlson and Supiano, op. cit.

[32] Lederman, op. cit.

[33] David O. Lucca, Taylor Nadauld and Karen Shen, “Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs,” Federal Reserve Bank of New York, July 2015, revised October 2016,

[34] Veronique De Rugy, “Subsidized loans drive college tuition, student debt to record levels,” The Washington Examiner, July 12, 2013,

[35] Ibid.

[36] Lucca, op. cit.

[37] Baum, op. cit.

[38] Robert Kiener, “Future of Public Universities,” CQ Researcher, Jan. 18, 2013, pp. 53–80.

[39] Gary Fethke, “Why Does Tuition Go Up? Because Taxpayer Support Goes Down,” The Chronicle of Higher Education, April 1, 2012,

[40] Heller, op. cit.

[41] Rajashri Chakrabarti, Maricar Mabutas and Basit Zafar, “Soaring Tuitions: Are Public Funding Cuts to Blame?” Liberty Street Economics, Federal Reserve Bank of New York, Sept. 19, 2012,

[42] Heller, op. cit.

[43] Valerie Strauss, “School left $4 million by librarian is spending $100,000 on library — and $1 million on a scoreboard,” The Washington Post, Sept. 17, 2016,

[44] “Trends In Spending And Institutional Funding,” Knight Commission on Intercollegiate Athletics,

[45] Steve Berkowitz, Christopher Schnaars and Sean Dougherty, “NCAA Salaries,” USA Today, 2016,

[46] Trends In Spending And Institutional Funding,” op. cit.

[47] Robert Carpenter, Howard Bunsis, Judith Kullberg and Steven Cole, “Moving toward Financial Sustainability: Student & Faculty Report on the University Budget,” Eastern Michigan University, 2016.

[48] Charlie Sykes, “Hillary Clinton's Bailout for the College-Industrial Complex,” Right Wisconsin, Aug. 23, 2016,

[49] Stephanie Saul, “N.Y.U. President's Penthouse Gets a Face-Lift Worth $1.1 Million (or More),” The New York Times, Dec. 15, 2015,

[50] Ibid.

[51] Steven Pearlstein, “Four tough things universities should do to rein in costs,” The Washington Post, Nov. 25, 2015,

[52] Michael S. Harris, “What is the typical teaching load for university faculty?” Higher Ed Professor, May 11, 2015,

[53] Peter James Bentley and Svein Kyvik, “Academic work from a comparative perspective,” Higher Education, April 2012,

[54] “Higher Education at a Crossroads: The Annual Report on the Economic Status of the Profession, 2015–16,” op. cit.

[55] Heller, op. cit.

[56] Tom Price, “Rising College Costs: Should Congress penalize schools that raise fees?” CQ Researcher, Dec. 5, 2003, pp. 1013–1044.

[57] Marcia Clemmitt, “Student Debt,” CQ Researcher, Oct. 21, 2011, pp. 877–900; Heller, op. cit.; Steele and Williams, op. cit.

[58] Heller, op. cit.

[59] Steele and Williams, op. cit.

[60] Clemmitt, op. cit.; Steele and Williams, op. cit.

[61] Ibid.

[62] “Attorney General Cuomo Announces Settlement With Sallie Mae Over Its Student Loan Practices,” Office of the Attorney General of New York, April 11, 2007,

[63] “Student loan fixes that make sense,” The Washington Post, June 15, 2014,

[64] “An Undue Hardship? Discharging Educational Debt in Bankruptcy,” hearing before the Commercial and Administrative Law Subcommittee, House Judiciary Committee, Sept. 23, 2009,

[65] Angulo, op. cit.

[66] Heller, op. cit.; Clemmitt, op. cit.

[67] Angulo, op. cit.

[68] Ibid.

[69] Susan Dynarski, “A Conveyor Belt of Dropouts and Debt at For-Profit Colleges,” The New York Times, Oct. 28, 2016,

[70] Allie Bidwell, “For-Profit Corinthian Colleges Files for Chapter 11 Bankruptcy,” U.S. News & World Report, May 4, 2015,

[71] Steele and Williams, op. cit.

[72] Greenblatt, op. cit.; “President Obama's community college proposal doesn't make the grade,” The Washington Post, Feb. 11, 2015,

[73] Steele and Williams, op. cit.

[74] Danielle Douglas-Gabriel, “Trump just laid out a pretty radical student debt plan,” The Washington Post, Oct. 13, 2016,

[75] Amy Scott, “For-profit colleges get a post-election bounce,” “Marketplace,” Nov. 10, 2016,

[76] Alex Eule, “Election 2016: And Now for the Winning Stocks,” Barron's, Nov. 9, 2016,

[77] Esme Murphy, “Franken Introduces Bill To Allow Refinancing Of Federal Student Loans,” CBS Minnesota, Jan. 21, 2016,

[78] Sandy Baum and Martha C. Johnson, “Strengthening Federal Student Aid: An Assessment of Proposals for Reforming Federal Student Loan Repayment and Federal Education Tax Benefits,” Urban Institute, Feb. 3, 2016,

[79] Beth Akers, “How Income Share Agreements Could Play a Role in Higher Ed Financing,” Brookings Institution, Oct. 16, 2014,

[80] “H.R. 275,”,; Erik Brady, Steve Berkowitz and Jodi Upton, “Can college athletics continue to spend like this?” USA Today, April 23, 2016,

[81] Michelle Brutlag Hosick, “DI to distribute revenue based on academics,” National Collegiate Athletic Association, Oct. 27, 2016,; “DI group issues survey on revenue distribution,” National Collegiate Athletic Association, May 6, 2016,

[82] “Knight Commission Calls for NCAA To Transform Its Guidelines for March Madness Revenues To Better Support College Athletes and Protect Financial Integrity,” Knight Commission on Intercollegiate Athletics, May 10, 2016,

[83] Alan Greenblatt, “Hot Topics: Student Debt” CQ Researcher, June 27, 2016.

[84] Collin Binkley, “Trump off on how colleges use endowments,” The Associated Press, Sept. 24, 2016,

[85] Rick Seltzer, “Lawmaker With the Idea Higher Ed Leaders Hate,” Inside Higher Ed, May 12, 2016,

[86] Drew Gilpin Faust, Harvard University President, letter to Orrin Hatch, Chairman, U.S. Senate Finance Committee; Kevin Brady, Chairman, House Ways and Means Committee; Peter Roskam, Chairman, Ways and Means Subcommittee on Oversight, March 31, 2016,

[87] “H 1897,” Virginia Legislative Information System, 2015,; Erik Brady, Steve Berkowitz and Christopher Schnaars, “2nd-tier schools feeling squeeze,” USA Today, May 27, 2015,

[88] Nick Anderson, “U-Va. set aside $2.2 billion for ‘strategic investments,’” The Washington Post, July 13, 2016,; Nick Anderson, Susan Svrluga and Danielle Douglas-Gabriel, “Lawmakers want to know why U-Va. stockpiled billions but still boosted tuition,” The Washington Post, Aug. 25 2016,

[89] Ibid.

[90] T. Rees Shapiro and Danielle Douglas-Gabriel, “U-Va. board is discussing ways to decrease tuition,” The Washington Post, Nov. 11, 2016,

[91] Elizabeth Olson, “Firms Offering Cash to Help New Lawyers Pay Their Student Debt,” The New York Times,; Greenblatt, op. cit.; Tara Siegel Bernard, “Aid to Repay School Loan Is Coveted Job Benefit,” The New York Times, March 26, 2016,

[92] Chuck Staben, “Why We're Leaving the Football Arms Race,” Inside Higher Ed, April 29, 2016,

[93] Will Hobson, “At Clemson, football success brings windfall that most schools only dream of,” The Washington Post, Sept. 21, 2016,

[94] Joe Nocera, “Ruling Stands, but Status Quo May Yet Collapse,” The New York Times, Oct. 4, 2016,

[95] Danielle Douglas-Gabriel, “Labor board ruling on graduate student employment rankles universities, lawmakers,” The Washington Post, Aug. 24, 2016,

[96] Kathleen Megan, “UConn Graduate Assistants First To Unionize In State,” The Hartford Courant, April 18, 2014,

[97] “Higher Education at a Crossroads: The Economic Value of Tenure and the Security of the Profession,” op. cit.

[98] Heller, op. cit.

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About the Author

Tom Price, author of this week's edition of CQ Researcher  

Tom Price, a contributing writer for CQ Researcher, is a Washington-based freelance journalist who previously was a correspondent in the Cox Newspapers Washington Bureau and chief politics writer for The Dayton Daily News and The (Dayton) Journal Herald. He is author or co-author of five books including, with former U.S. Rep. Tony Hall (D-Ohio), Changing The Face of Hunger: One Man's Story of How Liberals, Conservatives, Democrats, Republicans and People of Faith Are Joining Forces to Help the Hungry, the Poor and the Oppressed. His previous CQ Researcher reports include examinations of political polarization and social media in campaigns.

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Document APA Citation
Price, T. (2016, November 18). Student debt. CQ researcher, 26, 965-988. Retrieved from
Document ID: cqresrre2016111800
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ISSUE TRACKER for Related Reports
College Financing
Nov. 18, 2016  Student Debt
Oct. 21, 2011  Student Debt
Jan. 25, 2008  Student Aid
Dec. 05, 2003  Rising College Costs
Nov. 20, 1992  Paying for College
May 19, 1989  What's Behind High College Price Tags
May 23, 1986  Student Aid
Aug. 14, 1981  Tuition Tax Credits
Feb. 24, 1971  College Financing
Nov. 27, 1968  Financing of Private Colleges
Mar. 25, 1959  Costs of Education
May 04, 1955  Higher Education For The Millions
College Financing and Funding
Consumer Behavior
Consumer Credit and Debt
Cost of Education and School Funding
General Employment and Labor
Regional Political Affairs: Europe
Student Movements
Undergraduate and Graduate Education
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