The real crisis in education is access, not debt

Jan 8, JDN 2457762

A few weeks ago I tried to provide assurances that the “student debt crisis” is really not much of a crisis; there is a lot of debt, but it is being spent on a very good investment both for individuals and for society. Student debt is not that large in the scheme of things, and it more than pays for itself in the long run.

But this does not mean we are not in the midst of an education crisis. It’s simply not about debt.

The crisis I’m worried about involves access.

As you may recall, there are a substantial number of people with very small amounts of student debt, and they tend to be the most likely to default. The highest default rates are among the group of people with student debt greater than $0 but less than $5000.

So how is it that there are people with only $5,000 in student debt anyway? You can’t buy much college for $5,000 these days, as tuition prices have risen at an enormous rate: From 1983 to 2013, in inflation-adjusted dollars, average annual tuition rose from $7,286 at public institutions and $17,333 at private institutions to $15,640 at public institutions and $35,987 at private institutions—more than doubling in each case.

Enrollments are much higher, but this by itself should not raise tuition per student. So where is all the extra money going? Some of it is due to increases in public funding that have failed to keep up with higher enrollments; but a lot of it just seems to be going to higher pay for administrators and athletic coaches. This is definitely a problem; students should not be forced to subsidize the millions of dollars most universities lose on funding athletics—the NCAA, who if anything are surely biased in favor of athletics, found that the total net loss due to athletics spending at FBS universities was $17 million per year. Only a handful of schools actually turn a profit on athletics, all of them Division I. So it might be fair to speak of an “irresponsible college administration crisis”, administrators who heap wealth upon themselves and their beloved athletic programs while students struggle to pay their bills, or even a “college tuition crisis” where tuition keeps rising far beyond what is sustainable. But that’s not the same thing as a “student debt crisis”—just as the mortgage crisis we had in 2008 is distinct from the slow-burning housing price crisis we’ve been in since the 1980s. Making restrictions on mortgages tighter might prevent banks from being as predatory as they have been lately, but it won’t suddenly allow people to better afford houses.

And likewise, I’m much more worried about students who don’t go to college because they are afraid of this so-called “debt crisis”; they’re going to end up much worse off. As Eduardo Porter put it in the New York Times:

And yet Mr. Beltrán says he probably wouldn’t have gone to college full time if he hadn’t received a Pell grant and financial aid from New York State to defray the costs. He has also heard too many stories about people struggling under an unbearable burden of student loans to even consider going into debt. “Honestly, I don’t think I would have gone,” he said. “I couldn’t have done four years.”

And that would have been the wrong decision.

His reasoning is not unusual. The rising cost of college looms like an insurmountable obstacle for many low-income Americans hoping to get a higher education. The notion of a college education becoming a financial albatross around the neck of the nation’s youth is a growing meme across the culture. Some education experts now advise high school graduates that a college education may not be such a good investment after all. “Sticker price matters a lot,” said Lawrence Katz, a professor of Harvard University. “It is a deterrent.”




And the most perplexing part of this accounting is that regardless of cost, getting a degree is the best financial decision a young American can make.

According to the O.E.C.D.’s report, a college degree is worth $365,000 for the average American man after subtracting all its direct and indirect costs over a lifetime. For women — who still tend to earn less than men — it’s worth $185,000.

College graduates have higher employment rates and make more money. According to the O.E.C.D., a typical graduate from a four-year college earns 84 percent more than a high school graduate. A graduate from a community college makes 16 percent more.

A college education is more profitable in the United States than in pretty much every other advanced nation. Only Irish women get more for the investment: $185,960 net.

So, these students who have $5,000 or less in student debt; what does that mean? That amount couldn’t even pay for a single year at most universities, so how did that happen?

Well, they almost certainly went to community college; only a community college could provide you with a nontrivial amount of education for less than $5,000. But community colleges vary tremendously in their quality, and some have truly terrible matriculation rates. While most students who start at a four-year school do eventually get a bachelor’s degree (57% at public schools, 78% at private schools), only 17% of students who start at community college do. And once students drop out, they very rarely actually return to complete a degree.

Indeed, the only way to really have that little student debt is to drop out quickly. Most students who drop out do so chiefly for reasons that really aren’t all that surprising: Mostly, they can’t afford to pay their bills. “Unable to balance school and work” is the number 1 reported reason why students drop out of college.

In the American system, student loans are only designed to pay the direct expenses of education; they often don’t cover the real costs of housing, food, transportation and healthcare, and even when they do, they basically never cover the opportunity cost of education—the money you could be making if you were working full-time instead of going to college. For many poor students, simply breaking even on their own expenses isn’t good enough; they have families that need to be taken care of, and that means working full-time. Many of them even need to provide for their parents or grandparents who may be poor or disabled. Yet in the US system it is tacitly assumed that your parents will help you—so when you need to help them, what are you supposed to do? You give up on college and you get a job.

The most successful reforms for solving this problem have been comprehensive; they involved working to support students directly and intensively in all aspects of their lives, not just the direct financial costs of school itself.

Another option would be to do something more like what they do in Sweden, where there is also a lot of student debt, but for a very different reason. The direct cost of college is paid automatically by the government. Yet essentially all Swedish students have student debt, and total student debt in Sweden is much larger than other European countries and comparable to the United States; why? Because Sweden understands that you should also provide for the opportunity cost. In Sweden, students live fully self-sufficient on student loans, just as if they were working full-time. They are not expected to be supported by their parents.

The problem with American student loans, then, is not that they are too large—but that they are too small. They don’t provide for what students actually need, and thus don’t allow them to make the large investment in their education that would have paid off in the long run. Panic over student loans being too large could make the problem worse, if it causes us to reduce the amount of loanable funds available for students.

The lack of support for poor students isn’t the only problem. There are also huge barriers to education in the US based upon race. While Asian students do as well (if not better) than White students, Black and Latino students have substantially lower levels of educational attainment. Affirmative action programs can reduce these disparities, but they are unpopular and widely regarded as unfair, and not entirely without reason.

A better option—indeed one that should be a no-brainer in my opinion—is not to create counter-biases in favor of Black and Latino students (which is what affirmative action is), but to eliminate biases in favor of White students that we know exist. Chief among these are so-called “legacy admissions”, in which elite universities attract wealthy alumni donors by granting their children admission and funding regardless of whether they even remotely deserve it or would contribute anything academically to the university.

These “legacy admissions” are frankly un-American. They go against everything our nation supposedly stands for; in fact, they reek of feudalism. And unsurprisingly, they bias heavily in favor of White students—indeed, over 90 percent of legacy admits are White and Protestant. Athletic admissions are also contrary to the stated mission of the university, though their racial biases are more complicated (Black students are highly overrepresented in football and basketball admits, for example) and it is at least not inherently un-American to select students based upon their athletic talent as opposed to their academic talent.

But this by itself would not be enough; the gaps are clearly too large to close that way. Getting into college is only the start, and graduation rates are much worse for Black students than White students. Moreover, the education gap begins well before college—high school dropout rates are much higher among Black and Latino studentsas well.

In fact, even closing the education gap by itself would not be enough; racial biases permeate our whole society. Black individuals with college degrees are substantially more likely to be unemployed and have substantially lower wages on average than White individuals with college degrees—indeed, a bachelor’s degree gets a Black man a lower mean wage than a White man would get with only an associate’s degree.

Fortunately, the barriers against women in college education have largely been conquered. In fact, there are now more women in US undergraduate institutions than men. This is not to say that there are not barriers against women in society at large; women still make about 75% as much income as men on average, and even once you adjust for factors such as education and career choice they still only make about 95% as much. Moreover, these factors we’re controlling for are endogenous. Women don’t choose their careers in a vacuum, they choose them based upon a variety of social and cultural pressures. The fact that 93% of auto mechanics are men and 79% of clerical workers are women might reflect innate differences in preferences—but it could just as well reflect a variety of cultural biases or even outright discrimination. Quite likely, it’s some combination of these. So it is not obvious to me that the “adjusted” wage gap is actually a more accurate reflection of the treatment of women in our society than the “unadjusted” wage gap; the true level of bias is most likely somewhere in between the two figures.

Gender wage gaps vary substantially across age groups and between even quite similar countries: Middle-aged women in Germany make 28% less than middle-aged men, while in France that gap is only 19%. Young women in Latvia make 14% less than young men, but in Romania they make 1.1% more. This variation clearly shows that this is not purely the effect of some innate genetic difference in skills or preferences; it must be at least in large part the product of cultural pressures or policy choices.

Even within academia, women are less likely to be hired full-time instead of part-time, awarded tenure, or promoted to administrative positions. Moreover, this must be active discrimination in some form, because gaps in hiring and wage offers between men and women persist in randomized controlled experiments. You can literally present the exact same resume and get a different result depending on whether you attached a male name or a female name.

But at least when it comes to the particular question of getting bachelor’s degrees, we have achieved something approaching equality across gender, and that is no minor accomplishment. Most countries in the world still have more men than women graduating from college, and in some countries the difference is terrifyingly large. I found from World Bank data that in the Democratic Republic of Congo, only 3% of men go to college—and less than 1% of women do. Even in Germany, 29% of men graduate from college but only 19% of women do. Getting both of these figures over 30% and actually having women higher than men is a substantial achievement for which the United States should be proud.

Yet it still remains the case that Americans who are poor, Black, Native American, or Latino are substantially less likely to ever make it through college. Panic about student debt might well be making this problem worse, as someone whose family makes $15,000 per year is bound to hear $50,000 in debt as an overwhelming burden, even as you try to explain that it will eventually pay for itself seven times over.

We need to instead be talking about the barriers that are keeping people from attending college, and pressuring them to drop out once they do. Debt is not the problem. Even tuition is not really the problem. Access is the problem. College is an astonishingly good investment—but most people never get the chance to make it. That is what we need to change.


2 thoughts on “The real crisis in education is access, not debt

  1. You write “someone whose family makes $15,000 per year is bound to hear $50,000 in debt as an overwhelming burden, even as you try to explain that it will eventually pay for itself seven times over.” Better one should say that it MAY pay for itself seven times over.
    Also, for whom and when is the payoff? Presumably the student, in years to come. But who shoulders the debt? In many cases, in the near term, it would fall on the parents; in the longer term, perhaps the student who is going out in the world with a $500/month albatross of debt from that $50K loan.
    So I argue that debt and tuition/college costs are indeed the problems. Consider that a student taking a normal load of 15 credits has about 200 hours in the classroom in a semester. Suppose that the cost of going to college for that semester is about $20,000. This means that such classroom instruction is costing $100/hour. Our educational system should be able to do better than that.


  2. For-profit colleges are another layer on top of this.

    They advertise aggressively, in particular targeting low-income individuals. The education they offer is essentially worthless. And it’s difficult to get student debt forgiven, especially if you didn’t graduate.

    My partner spent a few years after college working on getting very low income people into housing. Debt from for-profit colleges was VERY prevalent among her clients. It turns out, if you don’t know anyone who has ever attended a real college, it’s hard to identify for-profit colleges as predatory.


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