Some general musings about college and university costs and financial aid concerns.

President Obama is issued comments on June 9th regarding the cost of Higher Education, and since my following and readership is almost equal to his, I determined I should also release my own statements. {humor}

The costs of Higher Education have risen to public scrutiny not because the actual costs have increased drastically, but because state and federal government financial support, in essence the subsidy to higher education, has been dramatically reduced. In Kentucky, for example, higher education funding has been cut about 25% since 2008 (kypolicy.org.) The reduced funding, the reduction in higher education subsidy, requires public universities to engage in essentially two activities: cutting budgets and increasing tuition and fees.

Budget cuts reduce the ability to repair, replace, or enhance laboratory equipment, computers, and other essential components required by programs. Budget cuts reduce or eliminate maintenance of buildings and necessary infrastructure, such as improving energy savings by replacing worn windows, replacing power grids, and networking infrastructure. Budget cuts limit cost-of-living increases, merit pay, and limit the health care subsidy colleges and universities provide to employees which buffers the impact of rising health care costs. Budget cuts effectively reduce the overall competitiveness of programs, departments, colleges, and universities in hiring desired new faculty, and reduce the attractiveness of work environments to current faculty and staff. If spending is cut “all the way to the bone,” how does the university grow and adapt to rapidly changing technologies and modes of learning?

President Obama would like to offer ways to tie payback of student loans to earnings. For instance, reports indicate student loan payments should be no higher than 10% of income. Some reports suggest that this might become a de facto forgiveness of student loans. After 20 years, the student loan is forgiven under the current Obama plan. If the former student works in public service or for a non-profit, the forgiveness occurs at 10 years. (nprEd)

I would really like the citizens of the United States to consider either free or high-subsidized higher education. Much of the developed world, much of Europe, Japan, and Korea, subsidize the education of their citizens. Many countries, like Germany, France, and the United Kingdom consider education to be a basic human right, and those sentiments extend into higher education.

For some reason, the United States supports Defense and Homeland Security far more than Education. Outside of September 11th, which was a terrorist attack, the United States hasn’t suffered any foreign military attack on its soil since … ever. Even the War with Mexico took place in Mexico. Some might suggest, “Well, the Battle of the Alamo,” was on U.S. soil. Actually, no it wasn’t. The Battle of the Alamo was part of the Texan Revolution, when colonists were rebelling against the Mexican government, their actual government. The Texas War of Independence resulted in the Republic of Texas, a wholly separate North American political entity, not part of the United States. (Mexican-American War; History.com)

The United States, at the federal level, supports Defense 10:1 over Education. Another way of thinking about this is for every dollar given to Defense, the federal government provides a dime to Education. Honestly, this ratio seems disturbing to me.

The concerns over student loan debt and repayment are legitimate concerns, but unfortunate concerns due to our American society entrenched in the misbegotten belief higher education results in the idealization of socialism, communism, or at best, liberalism. Furthermore, the notion “I don’t want my taxes to go to support a factory which does nothing but create Godless Liberals,” is a false analysis of higher education and yet remains a fairly common trope among the rural and unsophisticated  populace.

Specifically, my concerns relate to a number of issues. First, I’m bothered by for-profit universities being the primary destination of education grants, and the primary source of student loan defaults. For-profit universities lead the pack of student loan default rates. The two-year default rate was 13.6%, the three-year default rate was 21.8% for for-profit universities compared to 9.6% and 13% for public schools. (2013; ed.gov) For-profit universities also led the way with Federal Pell Grants awarded. Seven of the top ten Pell Grant colleges and universities are for-profit schools, with University of Phoenix leading this pack. Other members of this collection of schools include Ashford University, Kaplan University, DeVry University, and Everest University.

The University of Phoenix leads all universities with 259,998 Pell Grant recipients, amounting to about $945 million dollars in federal government financial aid given to a for-profit university. Now, I did a little figuring, downloading data provided by Ed.Gov. (Distribution of Federal Pell Grant by Institution, 2011-2012) I simply sorted the data from high to low based on number of recipients. I then summed the amount of federal Pell Grant dollars awarded. The seven for-profit universities received almost $2 billion dollars ($1.909B) in Pell Grant assistance.

$2 billion dollars of federal aid for education given to for-profit colleges. Wow.

Then, couple this with the other fact that for-profit universities are responsible for about 31% of student loan originators, and almost 50% of student loan defaults, and the data seems to indicate for-profit universities have gained access to and misused tax dollars really meant for public institutions. The HomeRoom blog of Ed.gov details how people need to do a better job of protecting themselves from the predatory practices of some for-profit colleges and universities. (“Protecting Americans from Predatory and Poor-Performing Career Training Programs,” HomeRoom; Ed.gov)

$2 billion dollars does not sound like much. However, when some states, like Kentucky, have experienced significant cuts in higher education over the last 7-8 years, those dollars might have been better spent in public education (they way they were meant to be spent) and not used for supporting for-profit colleges and universities.

In other words, why should taxpayer dollars be awarded to for-profit universities to the detriment of public colleges and universities, especially in light of the poor performance of student loans provided to students attending for-profit universities?

A few thoughts.

First, federal tax dollars should not be used to subsidize education at for-profit universities. If people want to attend a for-profit university, then use some other means. Private colleges and universities should also not be major beneficiaries of public dollars. Again, these are my thoughts, and given a good argument, I might be swayed. Public dollars should stay with public institutions.

Second, and really the entire premise of this post, is I truly believe higher education in the United States should be highly subsidized for people wanting to attend college, or free, in the case of First-time graduates who have no immediate family members with a college education, and free for those truly economically disadvantaged.

The general U.S. population needs to re-evaluate their attitudes towards education. Education is the cornerstone of society. Education is fundamental to employment; business and industry is completely reliant upon an educated workforce. Our society, overall, has reached its current level of achievements on the backs of engineers, chemists, physicists, and educated others, especially teachers. Specifically, our form of government, from local towns and cities, to our Congress, needs to support an educated electorate. The United States cannot afford thinking we can have white-collar wages with blue-collar effort. That sort of myopic focus will doom us to regressive economics, place us in direct competition with growing economies like India, Vietnam, Bangladesh, Brazil, and we cannot afford to match ourselves against those economies, as a country. Some areas of the country may be able to compete, such as Eastern Kentucky and Tennessee, Alabama, Mississippi, and Louisiana, but the United States must have a vision similar to that of Japan or Germany. The United States cannot be a world economic leader by competing against low-wage labor countries.

The United States could afford to double spending on education, from about $60 billion to $120 billion per year. Simply take funding from the Department of Defense and Homeland Security. The 2015 Defense budget request for the United States was $495 billion, not including allotments for Iraq and Afghanistan. Overseas operations in Iraq and Afghanistan adds $89 billion.

Put another way, doubling federal spending on education reduces our spending on defense by about 10%.

Am I the only one bothered by this?

I cannot help but think that regardless of how Congress talks about supporting education, few, if any Congresspeople, have actually made their votes and bills congruent with their speech. If the globe were invaded by Alien Accountants, I cannot help but think these aliens would automatically consider the United States an aggressor and war-like state based solely on the unbalance ratio of education spending versus military spending.

The cost of higher education is not escalating simply because the costs of education are escalating. No; the costs of higher education are escalating because state governments and Congress simply cut education and revealed the levels at which education has been subsidized. State and Federal legislators have simply reduced the subsidy and pushed the burden of the costs onto families and students. Legislators have also been manipulated to allow for-profit universities to use and misuse our tax dollars, allowing yet another financial fraud to be perpetrated upon decent people looking to make their lives better, and in doing so, make our society better.

What say you?

Pax.