the PROSPER Act, the price of college, and eroding public goodwill

The current Congress is decidedly cool toward colleges and the students attending them. The House version of the tax bill that just passed eliminates the deduction on student loan interest and taxes graduate student tuition waivers as income. Both House and Senate bills tax the largest college endowments.

Now we have the PROSPER Act, introduced on Friday. The 500-plus page bill does many things. It kills the Department of Education’s ability to keep aid from going to for-profit schools with very high debt-to-income ratios, or to forgive the loans of defrauded student borrowers . It loosens the rules that keep colleges from steering students into questionable loans in exchange for parties, perks, and other kickbacks.

And it changes the student loan program dramatically, ending subsidized direct loans and replacing them with a program (Federal ONE) that looks more like current unsubsidized loans. Borrowing limits go up for undergrads and down for some grads. The terms for income-based repayment get tougher, with higher monthly payments and no forgiveness after 20 years. Public Service Loan Forgiveness, particularly important to law schools, comes to an end. (See Robert Kelchen’s blog for some highlights and his tweetstorm for a blow-by-blow read of the bill.)

To be honest, this could be worse. Although I dislike many of the provisions, given the Republican higher ed agenda there’s nothing shocking or unexpectedly punitive, like the grad tuition tax was.

Still, between the tax bill and this one, Congress has taken some sharp jabs at nonprofit higher ed. This goes along with a dramatic downward turn in Republican opinion of colleges over the last two years.Capture

Obviously, some of this is a culture war. Noah Smith highlights student protests and the politicization of the humanities and social sciences as the reason opinion has deteriorated. I think there are aspects of this that are problems, but the flames have mostly been fanned by those with a preexisting agenda. There just aren’t that many Reed Colleges out there.

I suspect colleges are also losing support, though, for another reason—one that is much less partisan. That is the cost of college.

I think colleges have ignored just how much goodwill has been burned up by the rise in college costs. For the last couple of weeks, I’ve been buried in data about tuition rates, net prices, and student loans. Although intellectually I knew how much prices risen, it was still shocking to realize how different the world of higher ed was in 1980.

The entire cost of college was $7,000 a year. For everything. At a four-year school. At a time when the value of the maximum Pell Grant was over $5,000, and the median household income was not far off from today’s. Seriously, I can’t begin to imagine.

The change has been long and gradual—the metaphorical boiling of the frog. The big rise in private tuitions took place in the 90s, but it wasn’t until after 2000 that costs at publics (both sticker price and net price—the price paid after scholarships and grant aid) increased dramatically. Unsurprisingly, student borrowing increased dramatically along with it. The Obama administration reforms, which expanded Pell Grants and improved loan repayment terms, haven’t meant lower costs for students and their families.

Picture1What I’m positing is that the rising cost of college and the accompanying reliance on student loans have eroded goodwill toward colleges in difficult-to-measure ways. On the one hand, the big drop in public opinion clearly happened in last two years, and is clearly partisan. Democrats have slightly ticked up in their assessment of college at the same time.

But I suspect that even support among Democrats may be weaker than it appears, particularly when it comes to bread-and-butter issues, rather than culture-war issues. Only a small minority (22%) of people think college is affordable, and only 40% think it provides good value for the money. And this is the case despite the growing wage gap between college grads and high school grads. Sympathy for proposals that hit colleges financially—whether that means taxing endowments, taxing tuition waivers, or anything else that looks like it will force colleges to tighten their belts—is likely to be relatively high, even among those friendly to college as an institution.

This is likely worsened by the common pricing strategy that deemphasizes the importance of sticker price and focuses on net price. But the perception, as well as the reality, of affordability matters. Today, even community college tuition ($3500 a year, on average) feels like a burden.

The point isn’t whether college is “worth it” in terms of the long-run income payoff. In a purely economic sense there’s no question it is and will continue to be. But pushing the burden of cost onto individuals and families, rather than distributing it more broadly, makes it feel unbearable, and makes people think colleges are just in it for the money. (Which sometimes they are.) I’m always surprised that my SUNY students think the mission of the university is to make money off of them.

This perception means that students and their families and the larger public will be reluctant to support higher education, whether in the form of direct funding, more financial aid, or the preservation of weird but mission-critical perks, like not taxing tuition waivers.

The PROSPER Act, should it come to fruition, will provide another test for public institutions. Federal borrowing limits for undergraduates will rise by $2,000 a year, to $7,500 for freshmen, $8,500 for sophomores, and $9,500 for juniors and seniors. If public institutions immediately default to expecting students to take out the new maximum in federal loans each year, they will continue to erode goodwill even among those not invested in the culture wars.

The sad thing is, this is a self-reinforcing cycle. Colleges, especially public institutions, may feel like they have no choice but to allow tuition to climb, then try to make up the difference for the lowest-income students. But by adopting this strategy, they undermine their very claim to public support. Letting borrowing continue to climb may solve budget problems in the short run. In the long run, it’s shooting yourself in the foot.




Written by epopp

December 4, 2017 at 3:55 pm

One Response

Subscribe to comments with RSS.

  1. […] Uncounted: Jobs and Graduates. I think colleges have ignored just how much goodwill has been burned up by the rise in college costs… Graduate Students Mobilize ‘to Stop Something That Can Ruin Us.’ Universities are also to […]


Comments are closed.

%d bloggers like this: