Hold Colleges Accountable For America’s Student Loan Crisis

Although his administration has already provided more student debt relief than any other in history, news reports suggest President Biden is looking to cancel even more student loan debt. Whether the President will embrace his campaign proposal of up to $10,000 of in debt relief, or provide more targeted loan forgiveness (he should to help those in most need), one thing is certain—America’s universities and colleges will once again get a free pass for the financial mess that they helped to create.

Since the 1970s, U.S. institutions of higher learning have done everything in their means to avoid the hard decisions that would hold tuition costs down. Rather than cut wasteful spending and bloat, colleges and universities have rapidly expanded administrative staff and constructed new infrastructure in an effort to “keep up with the joneses.” Administrators now outnumber faculty at a growing number of schools. For example, the number of administrators at Yale University today slightly exceeds the number of faculty (5,066 managers and staff compared to 4,937 instructors).

Meanwhile, college and university presidents seem much more interested in building cutting edge dormitories and amenities like “lazy river pools” to attract more paying customers, rather than modernizing and innovating their school’s outmoded model of higher education.

What’s worse is that our nation’s institutions of higher education have financed this spending boom on the backs of students and their families. Since 1970, average in-state tuition has risen over 2,000% at both public and private schools, while average student loan debt has jumped 317% on average.

Most school administrators act as though college loans are a minimal inconvenience for students and their families, as a former university dean once told me, no more burdensome than the cost of a loan for an inexpensive car. And when pressed on why tuition has risen so much so fast, most direct blame to less government support for America’s colleges and universities. In reality, national investment in higher education in America is much greater today (in inflation-adjusted dollars) than in the 1960s. For example, the defense budget is about 1.8 times higher today than it was in 1960, while federal appropriations to higher education are more than 10 times higher.

Looking at the astronomical rise in the cost of earning a bachelors since the 1970s, it’s clear most college and university presidents see nothing wrong with raising tuition every year. In fact, some colleges have hiked tuition to improve their reputation as elite institutions. As Stephen Trachtenberg (former President of George Washington University) acknowledged in 2012, “people equate price with the value of their education.”

Unfortunately, while student debt relief would benefit millions of current and former students, it would only exacerbate the underlying problem—that colleges and universities have no incentive to rein in costs or modernize their degree requirements. In order to avoid another student loan bailout down the road, President Biden should aim at lowering the price of a college degree, by pursuing policies that lead to lower tuition bills for all students. For example, colleges should be challenged to accept at least one semester of Advanced Placement (AP) credit for students who get a 3 or more on their AP exam. In addition, Congress should prohibit using Pell Grants, guaranteed student loans, and other federal assistance at post-secondary institutions that raise tuition faster than inflation or some other metric. Finally, schools should be required to offer “no frills” degrees where students can opt-out of costly services like job placement programs, access to athletic and social facilities, and requirements to live on campus.

Providing targeted student loan relief—such as expanding and reforming income-driven repayment programs that directly tie debt cancellation to a borrower’s ability to pay—could provide an economic lifeline to those in need. But broad debt cancellation, especially without holding schools accountable for their irresponsible financial management, would simply kick the broken higher education financing problem down the road.

If the past is any example, college and university presidents will almost always choose to make students borrow more rather than curb spending on administrative costs and amenities that have little to do with their core educational mission. That has to stop before we saddle another generation of students and their families with more debt.