Robert Reich and College Affordability

By Dr. Watson Scott Swail, President & CEO, Educational Policy Institute

Last week, Robert Reich, the former Secretary of Commerce in the Clinton Administration, send this out on his Facebook account:

HOW TO PAY FOR COLLEGE. This week I start teaching the second semester here at Berkeley. Many of my students and students at other universities are drowning in debt – which is distorting their career moves (they can’t afford to become social workers, for example), causing huge anxiety (the job market is still bad for new graduates), and creating another potential debt bubble. Yet as states continue to withdraw support from public higher education (where 80 percent of American students get their university education), tuition and fees are rising to make up the shortfall. 

What’s the solution? Eliminate tuition and fees for public higher education, and require instead that students pay 12 percent of their earnings for the first 12 years of their full-time employment into a fund that finances public higher education. (According to my back-of-the-envelope calculation, this would yield enough revenue.) That way, graduates who choose to high-paying careers (investment bankers, corporate lawyers, business consultants, etc.) would subsidize those who choose low-paying ones (social workers, public defenders, and teachers), and no one would begin paying until they’re working full time. What do you think?

I always enjoy reading Dr. Reich’s blogs and articles because he has a very passionate and direct way of viewing things. While I typically agree with him, in this instance, I only agree in theory. I’ve come to believe that our system of ever-increasing tuition and fee charges, leading to ever-increasing debt burdens for students and families, are reaching an absolute immoral level, especially for those in the bottom two thirds of the income ladder. For the graduating class of 2011, 66 percent of graduates have an average debt of $26,000 and 37 million Americans are currently paying off student debt. Eighteen percent of parents are taking out PLUS loans. The PLUS loan is important, because it is a debt incurred by the parent, not the student. We have serious issues about college affordability.

But what do we do about it?

I’ve written before about income contingent loan programs in the Swail Letter. They have worked exceedingly well in some countries, most prominently is Australia. But there is a hitch to Australia. First, it is relatively small in comparison, with 23 million people and only one million university-level students, compared to over 8 million in the US. Second, it is less diverse, politically and socially, than the United States. And third, and most importantly, it is an island far from any other continent. This is most important because an ICL program has to be able to tax graduates for up to 20 years in most systems. If they aren’t there, they are hard to tax. The same could be said to a point in the US system, but with state responsibility and ownership of education, there is little chance that it would work here, mostly because of political divisions.

Finally, a major challenge in the US compared to Australia and other countries is the sheer diversity of postsecondary education in the US—public, private, not-for-profit, for profit, two-year, four-year, less than two year—it makes one dizzy just thinking about it.

The US does have an ICL system, of course. But not many students take advantage of it and it doesn’t work as fluidly as the Australian system. It’s too bad, because it could change how we do things.

To make any future systems work, we ultimately need to make decisions about what we need and how we educate our youth about what they need. Then we can really have the discussion about how much it costs and how we pay for it. We actually have to have some quotas in the US about how many college degrees we need. I know, we don’t like to talk about that because we are the United States of America. We welcome everyone and everyone has a shot at the brass ring. We are the land of opportunity. True. We are also the land of increasing corporate, public, and student debt. Each US citizen owns $55,000 of the cumulative public debt in the US, which increases as $2.5 billion each day. That’s our America right now.

So, we have to have some uncomfortable discussions about what we really need from a very expensive education system beyond high school. We are beyond the level where we need another three million anthropologists or even computer programmers coming out of our colleges. We need to have a much better idea of what we need or at least what we think we need. But we don’t. We don’t really have a clue, and what clue we have never informs a discussion about what programs and curricula we should generate at the postsecondary level.

Once we have do this, then, perhaps we can talk about how much it costs and how we pay. If we think certain degrees are important for society at large, then perhaps students shouldn’t have to pay for those degrees. So, then, who pays for it? Well, taxpayers, of course, via some direct subsidy or some type of ICL system as in Dr. Reich’s comments. These graduates will benefit and they will pay taxes, and the system benefits from their having a degree. But one must clearly understand: this only works when we are investing in degrees that matter. We need anthropologists and certainly other liberal arts “thinkers.” But we need to have a limit on what we put students through because too many college graduates are not getting jobs in our marketplace. That, in turn, drives other government subsidies that we really don’t like. And debt ratios. And retirement. And so on.

This discussion is much to simplistic, I understand, and we know full well that there exist situations that do not fit into nice little boxes. But I would love to see us move to a more simple financial aid and repayment system, like an ICL, but only if we could handle the issues of what education outputs we need, how they link to both the workforce and our societal needs, how much they cost, and who and how much we have to pay.

Interested in your thoughts.


3 thoughts on “Robert Reich and College Affordability

  1. One issue with this (as well as various schemes for charging different tuition rates for different majors) is that most universities have traditionally been very liberal about allowing students to change majors. This means that you have to come up with a fair way to price tuition for students who might go through half a dozen majors during their college careers. I don’t think you want to create situations where a student says “I’m 90% through major X, but if I graduate in that major I’ll have a ton of student loan debt. I can switch to major Y and get a nice subsidy. It’s time to switch majors again.”

    1. There are ways to deal with these issues which you raise. It isn’t a non-starter, at least in a tangible way. But it is politically. But yes, there is a huge upfront cost, or you bring it in over a period of 6-8 years by percentages…

  2. It’s a complete non-starter. How do you finance the thing to start? You don’t start getting repayment for 4-6 years and no State in Union can float its institutions that much cash. What do you do about noncompleters? What do you do with part-time by choice workers?

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