Top Threats to Higher
Ed in 2019
Threat No. 3 — Price
Sensitivity
Although
wealth has grown considerably since the great recession, it has not been evenly
distributed. Those with the capacity to invest have seen tremendous gains in
the past decade, but many in the working class and the lower middle class have experienced
income growth that has not kept pace with inflation. The stress of their
increased cost of living has made them more debt averse than in previous decades
when it comes to student loans.
Student debt has rightfully become a major focus of the
media in recent years; however, some of the debt story is misleading. Here are
some important facts that the mainstream media haven’t adequately covered:
·
This week, Inside
Higher Ed reported that wealthy students are responsible for “some of the
most drastic borrowing increases.”
·
A recent article
in Business Insider reports that 40%
of student debt is for graduate school. Also, as of 2016, 51% of the households
with student-loan debt are those of advanced-degree holders.
·
For-profit institutions are the secondary-education
sector with the highest
percentage of baccalaureate students taking on $50,000 or more in debt (32%)
compared to 11% overall.
·
A new study
produced by AICUP (The Association of Independent Colleges and University of
Pennsylvania) shows that the net tuition (the amount paid after financial aid
is awarded) among Pennsylvania’s independent colleges has increased at a rate lower
than inflation for nearly a decade.
·
The Federal Reserve reported
that as of 2016, 10% of household debt was student loans, and 9% was auto
loans, 6% was credit-card debt, and 67% was mortgage debt.
The return on investment of a college education remains
high, as long as students persist through graduation. According to a report
published by the Center for American Progress this summer, the median
student-loan debt of defaulters is $9,625 because two-thirds of the people who
default on student loans are those that didn’t earn a degree.
The average debt upon graduation from a four-year
institution is $29,650. A recent Newsweek
article
clarifies the details of that figure:
“That
‘average’ is heavily skewed by large balances held by a minority of students—most
likely, older, independent students who are allowed to borrow more—and probably
doesn't reflect the typical college student's experience. In fact,
three-quarters of students at four-year public colleges and two-thirds of
students at private schools graduate with less than $30,000 in debt; about half
have borrowed less than $20,000 and four in 10 come in under $10,000. Three in
10 undergraduates have no debt at all.”
This year we reached a new high in discount
rates nationally, which means that colleges and universities are charging
smaller percentages of their published tuition rates than ever before. To quote
a wise colleague, “The market is dictating the cost of a college degree.”
Some of that discount is covered by funded scholarships, but
most of it is tuition these institutions forego. This has been made possible primarily
through careful budget management and under-publicized cost reductions, but at
some institutions it is resulting in unsustainable operating deficits.
The result of rising discounts is that even though total
student debt has reached an all-time high, according to the aforementioned Newsweek article “In recent years, students
collectively have been borrowing less, not more, for college. In fact, new
borrowing—and new is the critical word here—has fallen in each of the past
seven years.”
The
public narrative is that a degree has become financially unattainable, but the
truth is that on average, it has become more affordable.