How ‘Limited Government’ Is Burying a Generation in Debt

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The cost of tuition in this country has increased at an almost unbelievable pace over the past generation – twice as fast as the costs of health care. According to an analysis by Bloomberg News, over the past 35 years, the cost of a college education in the US has increased 12-fold.

But all of those additional dollars pouring in aren’t improving students’ instruction. Spending on teaching has remained relatively flat, according to The Delta Cost Project.

The leading driver of higher tuition costs are cuts to state budgets for higher education. Long before revenues crashed in the Great Recession, politicians were funding tax cuts for corporations and the wealthy by slashing education budgets. And American students and their families have had to make up the difference out-of-pocket.

The trend has been especially pronounced since the crash. Between 2007 and 2012, 48 states reduced education funding, 15 of them by 30 percent or more, according to the State Higher Education Executive Officers Association. As CNN reported last year, “states have cut the amount of money they are giving to colleges by a total of $15.2 billion since 2007, or 17.4%.”And average costs at public schools rose by more than 12 percent during that same period.

All of this has a lot to do with our young people entering the workforce with crippling debt burdens. That isn’t the case in England, for example, where the average cost of higher education is $5,300 dollars per year. American college students pay, on average, almost $14,000 for tuition; in Norway, Denmark, France, Sweden and Germany, tuition costs come in at less than $1,000.

While tuitions are rising across the board, the cost drivers are different in public and private institutions. Tuition alone has never entirely covered the costs of educating students in either for-profit private schools or public institutions. Those costs are subsidized by either public dollars or private donations. But only private institutions have to turn a profit.

And while public institutions are catching up, much more of the growth in private school tuition pays for administrators’ bloated salaries. As Benjamin Ginsberg noted in The Washington Monthly, “between 1975 and 2005, the number of administrators and managers employed by public institutions increased by 66 percent. During the same time period, the number of administrators employed by private colleges and universities grew by 135 percent.”

And just as American CEOs earn much more than their counterparts in other countries, university presidents are raking in the biggest bucks, too. According to Forbes, in 2010, the ten highest paid college presidents – all at private schools — earned an average of almost $2.1 million in salary and compensation. Compare those figures to the UK, where reports that the best paid university head brought home $767,000 created a full-blown scandal, according to The Guardian.

And it’s not just salaries. The Boston Globe recently reported that “college presidents across the country are negotiating huge exit packages when they step down, which critics say is emblematic of schools’ unrestrained spending on everything from administrative salaries to elaborate new buildings that drive up the cost of higher education.”

We have roughly the same average rate of educational attainment as the other wealthy countries in the Organization for Economic Cooperation and Development (OECD) and our government spends roughly the average share of our economic output on higher education. But on top of that, Americans pay more than three times the average of other rich countries for “tertiary education” out-of-pocket, financed through the private sector (this includes not only colleges and universities, but also technical training institutes, community colleges, nursing schools, research laboratories and distance learning centers).

Our disproportionate reliance on private sector higher education, with its bloated administrative spending, has a lot to do with the exorbitant costs American students and their families pay. And it has a lot to do with our $1.2 trillion mountain of student debt – the second largest source of debt after mortgages. And as Forbes notes, that “figure does not tell the full story… as the $1.2 trillion does not include funds students must divert away from retirement savings, parent borrowing, or credit card debt.”

It’s a huge ripoff and it’s hurting the prospects of an entire generation of Americans.

Joshua Holland is a senior digital producer for BillMoyers.com. He’s the author of The Fifteen Biggest Lies About the Economy (and Everything Else the Right Doesn’t Want You to Know about Taxes, Jobs and Corporate America) (Wiley: 2010), and host of Politics and Reality Radio. Follow him on Twitter or drop him an email at hollandj [at] moyersmedia [dot] com.
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