“Tuition rates keep rising and student loan debt is becoming an increasing issue in our country. Is tuition-free higher education a possible solution?”

By Oleg Biletsky

     Throughout his 2016 presidential campaign, Bernie Sanders spoke numerous times about the need to make all public colleges tuition-free, and it is easy to see why this was a central theme of his campaign. Americans owe approximately $1.3 billion in student loan debt with around 44 million people in total owing some amount of money for taking out student loans. On average, a class of 2016 graduate has $37,172 in student loan debt, which is a 6% increase from last year. The increase in student loan debt is mirrored by the increase in tuition rates. According to the National Center for Education Statistics, from 2011-12 to 2016-17, the prices for tuition and fees rose by 11% for public two-year colleges, by 9% for public four-year schools and by 13% at private four-year schools after adjusting for inflation. The reason behind this sharp increase in tuition rates can be attributed to a number of factors, but the biggest causes of this rise include the sharp spike in demand for college graduates in employment markets, increase in administrative positions, and an increase in student aid. In order to understand how tuition rates can be lowered, we must first dig deeper into the biggest factors in the rise of tuition costs.  

Main Causes of the Rise in Tuition Rates

     Over the last several decades, there has been a sharp increase in employers who demand workers with college degrees. According to a 2015 report from Georgetown University’s Center on Education and the Workforce, the percentage of college-educated employees in the workforce rose from 13% to 32% between 1967 and 2007. The rise in demand for college-educated workers increased the need for college degrees. Since 1995, the enrollment in undergraduate, graduate and professional programs has increased by 50%. This surge in demand is one of causes of the massive rise in tuition rates, but they also keep ascending due to the increase in administrative positions. According to the Department of Education data, administrative positions at colleges and universities grew by 60% between 1993 and 2009. A study conducted at the California State Polytechnic University, Pomona discovered that in the California State University System alone, the number of administrators grew from 3,800 to 12,183 between 1975 and 2008, while the number of full-time faculty rose from 11,614 to only 12,019. This expansion of university administration drives up costs for universities who, in turn, have to increase tuition rates for their students. The other cause of the sharp rise in tuition rates could surprisingly be the biggest reason for this increase, and it is the expansion of student aid. According to a study from the National Bureau of Economic Research, student aid is responsible for most of tuition increases from 1987 to 2010. The idea is that if students can borrow increasingly more money every year, colleges can then charge more every year. Thus, there is a vicious ongoing cycle within the American higher education system: a rise in tuition rates causes an increase in student aid, and a rise in student aid then increases tuition rates. All these factors contribute to the rise in tuition rates, so now the question becomes how do we cut these rates to $0?

Sanders’s Proposal for Tuition-Free Public College

     On May 19th, 2015, Bernie Sanders unveiled the “College for All Act,” which proposed a plan to make all four-year public universities tuition-free. Under the act, the federal government would cover 67% of the $70 billion annual tuition cost for all public colleges and universities in the U.S., with states paying for the other 33% of the cost. The bill was introduced in the 114th Congress but was not enacted. Nevertheless, Bernie Sanders still advertised his plan during his presidential campaign and has continued to support this legislation after he dropped out of the presidential race. On the surface, the College for All Act seems to be the optimal solution for cutting tuition rates and decreasing student debt, but how would this act work?

     The act proposed to pay off $70 billion in annual tuition costs for all public colleges and universities by implementing a “Robin Hood Tax” on Wall Street. Also known as as the Financial Transaction Tax or the Tobin Tax, it would impose a 0.5% fee on stock trades, 0.1% fee on bonds and a 0.005% fee on derivatives. According to the Robin Hood Tax Campaign, around 1000 economists support the FTT, and they estimate that the tax could raise as much as $350 billion a year in the US alone. The FTT seems to be a great idea on the surface, but it has many critics that argue the tax would not only not live up to $350 billion estimate, but it would lose money for the country altogether. Critics bring up the example of Sweden and France, who experimented with the FTT in 1984 and 2002 respectively and had to abolish the tax due to the damage it imposed on their economies. Sweden, for instance, imposed a 0.5% tax on the purchase or sale of an equity security. The tax was abolished in 1991 because it ended up driving between 90%-99% of traders in bonds, equities and derivatives out of Stockholm. The tax brought in very little revenue while forcing most businesses to move out of Sweden.

     It appears that the Robin Hood Tax proposed by Senator Bernie Sanders to pay off $70 billion in annual public college tuition costs may not work as well in practice as it does in theory. If the FTT would not be used to pay for public colleges, the federal government would have to substantially cut some of its other programs. Given that the Republicans currently control Congress and the White House, it is unlikely that they will consider Sanders’s plan or any budget cuts to other programs in order to raise money to pay off tuition rates for public universities. If tuition-free public higher education is unlikely to be implemented in the near future, are there any alternative steps we could take to drive down tuition rates and student debt?

Alternative Solutions?

     Many critics of Sanders’s plan stated that the federal government should be aiming to decrease the costs of universities instead of trying to pay off their costs by making public colleges tuition-free. Driving down university costs would not only help deal with the issue of student loan debt, but it would save the government money that it could put into other beneficial programs. Cutting university costs would mean dealing with some of the factors that drive up tuition rates that we discussed earlier. One way to drive down university costs is to reorganize the administrative structures of various universities around the country. UC Berkeley, for instance, eliminated around 300 administrative positions a few years ago in an effort that saved the college $20 million. Another way to drive down university costs is to rethink our student aid programs. As we have learned earlier, an increase in student aid has a major impact on the increase in tuition rates. Reorganizing our student aid system may be the optimal solution to lowering tuition costs and student loans. In any case, we must find a way or ways to deal with the rise of student loan debt, as a continued increase in student loans would be devastating for our younger population.

     The student loan debt and college costs are only getting worse, and if tuition-free higher education can’t be implemented at this time to assist our students, we need an alternative solution to start fixing this major issue.

 

Sources

Image Source: Credit: hxdbzxy via Shutterstock/Salon

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