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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  • ABro1973

    This article ignores two things that are critical to the increase in education cost.

    First, the student loan subsidies and guarantees and bankruptcy protections for student loans are insane. That’s NOT LIMITED GOVERNMENT. The government is backing every single student loan. It’s ACTIVE government, actively encouraging and enabling a whole generation to stack on the non-dischargeable debt. This increased debt, through government activism, is PRECISELY what’s driving the tuition boom, as schools have realized that every year they CAN charge more, and the )borrowed, guaranteed, subsidized) dollars will be there to pay!

    Second, as a result of this guaranteed inflation, schools are spending these massive amounts of new money on development that is unnecessary, but diverts the money to the for-profit sector, creating a need for higher tuition to pay for all this stuff. Construction, banking, and finance are all making out like bandits, through crony capitalism “helping” schools continue to expand, spending all this new money. Banks lend colleges money, knowing the bonds will get paid back by student loans. Construction companies build huge new buildings for schools, just to spend this wealth that keeps rolling in. These bonds and buildings don’t make a single kid smarter, but they’re a big part of tuition increases — no just higher salaries for administrators.

  • jan

    That, keeping working folks down/limiting education to those who can afford to pay for it out of pocket in advance, pretty much is the bottom line.

  • Anonymous

    some of the conservative trolls who may be paid for by the Heritage Foundation are posting that education is an entitlement, not a right. I see that as being wrong. Education is a responsibility. And we should all get the best and most amount of it for ourselves and for the nation. We can’t compete in a global world when we are falling so far behind the rest of the world in learning. One recent news story said that world wide we were 14th in reading, 17th in science and worse than that in math. We are hurting ourselves by not investing in education.

    We stopped building things, we cut labor, and now our big thing seems to be to just create debt. The rich are getting richer by just creating situations where the rest of us are soon parted with even more of what little we had to begin with.

    When we had the first GI Bill, for every dollar we spent on education, we had $7 back, making a profit. In return we were admired for our standard of living and our social mobility. Now we have a increasing number of people living in poverty. It is a bad trade off.

  • Peter

    Get your facts straight!!! They might be backing the loans but those loans are next to impossible to discharge courtesy of Republican led efforts to reform bankruptcy laws. If student loans are defaulted on they can take everything from 401K’s to pay cheque deductions, social security payments and the icing is you could even be barred from section 8 and other forms of social safety net programs. If you are going to post something online, please do not add to the confusion by muddying the waters with half truths, hearsay and right wing noise propaganda, if you don’t like what you read or find it so disagreeable, stick to fox news or the drudge report.

  • ABro1973

    If by “just now” you mean “constantly since the 1970s” then OK … otherwise, you’re wrong.

  • Anonymous

    You (and the Dept. of Education) are making it sound as if we’ve fallen off this great pedestal. The truth is that America has never done all that well in these tests in the first place. The latest PISA results are out and yet again, we’re in the middle to the back of the pack depending on subject tested. The only conclusion that can be drawn is that “No Child Left Behind” and “Race To The Top” have been a colossal waste of time and resources.

    What we have is creativity, as we’ve always had. We’ve historically sucked at standardized tests yet we have the most patents and the most Nobel prizes of anyone in the world. We invent it, China makes it. Shanghai’s at the top of the heap in PISA. Well guess what China’s best at? Copying other people’s stuff and following orders, because they couldn’t create their way out of a wet paper bag if their lives depended on it.

    The reason the GI Bill worked was because we had a robust manufacturing sector. That is now gone, and it didn’t move offshore just because some evil CEO waved his hand and made it so. Consumers had to create a demand for that junk in the first place. We Americans wanted more stuff and we wanted it cheap. We made our bed and now we’re sleeping in it.

  • Anonymous

    we didn’t create that demand, it was created for us. We didn’t know it existed until Walmart did it. They were making money and becoming rich back when they had signs all over their stores saying they promoted Americans workers, “Buy American”and “Made in America” signs were everywhere. And the people shopped. And the Walmart owners got rich, and Americans were working.

    Further more, pushing more US citizens into poverty helped create the demand for cheaper things. When wages were good, the low prices at Walmart were an advantage. Paying less for American made products helped a lot of people. Then, sending jobs overseas, replacing goods with cheaply made, poor quality goods became more of a necessity for many.

    You have the cart before the horse.

  • Matthew Davidson

    The data on UK tuition fees is out of date; in late 2010 the government voted to raise fees from £3,000 to £9,000. Furthermore, in recent weeks, the government has started selling off the debt to private financial institutions (at a bargain price). The result of students getting deep into debt on the promise of winning (largely non-existent) jobs is what education critic Andrew McGettigan calls “sub-prime degrees”.

  • Anonymous

    Does not the new internet way of education come into play in a open and free market since? Are their degrees ok in the world?