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We know that Americans have accumulated an astounding $1.2 trillion in student debt, and we know that $85 billion of that debt is past due.
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We know thatthe average head of household under 40spends more a month on student loan payments (around $404) than the average college-educated family spends on groceries every month.
The question is how this situation got so bad, and why the debt keeps piling up higher and higher.
The answer is pretty simple: While the cost of college education has skyrocketed, state governments are doing dramatically less to help residents foot the bill — and that goes back way before the topic garnered a bunch of attention during the Great Recession. It goes back to the 1980s.
A mismatch has emerged
"[Students are] put in a position where its an investment you have to make," said Reid Setzer, a policy analyst at D.C. based group, Young Invincibles (YI). "But that hasn't been matched by public support."
On the cost side, tuition at private colleges surged an average of 44% from 1993 to 2013. At public institutions it jumped 79% during the same period.
You'll note that part of that period includes the Great Recession — a time when states slashed budgets to make up for collapsing tax revenue. Like everything else, higher education was hit hard by these cuts.
From 2000 to 2010, public higher education funding (that's on the state and local level) fell 21% per student, according to the New York Federal Reserve. At the same time, costs rose an average of 33.1% at public institutions.
Meanwhile, federal aid programs like the Pell Grant Program have not kept their awards up with inflation. An award that once covered 75% of in-state tuition now covers less than 30%.
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In short: "People don't want to raise taxes to fund education," said Setzer.
Over the last few years, states have seen their coffers fill up again as the US economy has recovered. But state funding for education has not kept pace with that at all. In fact, state funding for higher-ed remains an average of 23% lower than it was before the recession, state by state.
It is clearwe still have a huge problem here, recession or not.
See, the recession was just a catalyst — it was the event that created a storm of millions of unemployed who were suddenly unable to pay their loans, and millions of students who had indebted themselves to go to college and then graduated into an employment wasteland.
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But this whole mess is bigger than that.
What we're witnessing, according to some in the world of high-education, is an ideological shift — one that is putting our entire educational system at risk.
In June, F. King Alexander, the President of the Louisiana State University testified before the US Senate about what he said was the "greatest challenge facing public higher education today...the continual decline of state appropriations."
It wasn't always this way
See this under-funding didn't start in 2000, or even in the 1990s.
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"....state reductions experienced in the early 1980s were just the beginning of a three-and-a-half decade decline in state support for public higher education," King toldthe Senators.
"The result has been that state funding for higher education sits currently around 48% to 50% below where it was in 1981 in state tax effort, which measures state spending as a percentage of higher education support by state per capita income."
Basically, consciously or unconsciously, the states decided that it was up to the federal government to fund higher-education. They abdicated their responsibility. The recession just meant they could cut more all at once than they had in the past.
Studies blame this declining support for as much as 80% of net tuition increases from 2001-2011, according to King's testimony.
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"If we don’t look to new federal policies to address this ongoing state funding dilemma, we will continue to witness an international (OECD) decline in the percentage of our 25-34 year old population with college degrees, which has fallen to a ranking of 12th," said King.
"This declining international ranking is even more problematic when you consider that our 55-64 year old population ranks in first in the same OECD category."
Looks like one generation is really getting the short end here.
Linette is a senior correspondent at Business Insider who focuses her writing on tech, finance and economics as well as international relations. She also conducts investigations into controversial companies, like Tesla. She joined BI in the summer of 2011 after graduating from Columbia University's School of Journalism and holds a BA from Columbia University, where she finished her undergraduate education in 2008. In 2017 she won the Folio 'Rising Star' award for top women in media. In 2020 she won the 'Excellence in Financial Journalism' Award in opinion writing from NYSSCPA for a piece on US-China relations, 'The Huawei indictment marks the end of US and China's cycle of trust.' In 2023 she won the New York Press Club award for commentary in digital journalism for a series of stories about the stock market's decline in 2022.She contributes to "Marketplace," a radio show from American Public Media, and can be seen on MSNBC and CNN. Some recent stories by Linette:
- 'They're all broke': How the kings of Miami's pandemic-era boom came crashing down
- Wall Street's sharks are circling 'dumb and greedy' banks on the verge of failing
- 'They will learn nothing from this': Tech leaders remain staggeringly oblivious to the true lessons of Silicon Valley Bank
- Elon's stale playbook
- 'An over-levered clown': Elon Musk is gambling his business empire on his takeover of Twitter
- 'Lots of companies are going to get vaporized': The tech titans of Silicon Valley are in serious trouble — and they're going to take the rest of the stock market down with them
- Tesla knew its Model S battery had a design flaw that could lead to leaks and, ultimately, fires starting in 2012. It sold the car anyway.
