Dealing with the high cost of college

March 20th, 2019

Bloomberg’s big gift, college’s big cost

Last November, former New York City mayor Michael Bloomberg donated $1.8 billion to his alma mater, Johns Hopkins University, so that the school could increase financial aid for undergraduates. At present, it’s the biggest single contribution ever made to a college or university in the United States.

Writing in The New York Times, Bloomberg said he wanted to ensure that “the school that gave [him] a chance will be able to permanently open that same door of opportunity for others.” In his op-ed, Bloomberg also acknowledged that this particular gift only helps one school and more assistance for students is needed. “No qualified high school student should ever be barred entrance to a college based on his or her family’s bank account,” he writes. “Yet it happens all the time.”

College in America costs more than ever. In the 2017–2018 academic year, tuition alone at private nonprofit four-year institutions cost $34,740 on average, or 129% more than 30 years ago. At public institutions, tuition costs average $9,970 — 213% more than in 1988. According to Forbes, over the past three decades, “the cost to attend a university increased nearly eight times faster than wages did.”

Even so, the desire for college education shows no sign of slowing. The National Center for Education Statistics (NCES) projects colleges will enroll 20.5 million students by fall 2027, a figure barely below the 2010 peak of 21 million. However, few can fully finance their education up front. Americans carry a collective student loan of $1.4 trillion, and student loans exceed both car payments and credit card debt combined as a source of debt in the United States.

Explaining the high cost

What makes college cost so much? There’s no single answer. Supply and demand play a part. Michael Deniszczuk, then partner at PricewaterhouseCoopers, explains, “Universities have found that they could raise tuition at rates that outpace inflation to meet a rising demand . . . . As demand increases and supply remains steady, prices will go up.”

Also, while most colleges and universities are nonprofits, the costs of doing business still apply. “Colleges spend much of their money on staff and compensation,” College Board policy research scientist Jennifer Ma tells Business Insider, “so they have been experiencing an increasing cost of health insurance and other benefits.”

Financial aid itself has even been blamed for rising costs. In 1987, Secretary of Education William Bennett argued, “Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.” Bennett explained that schools could “blithely . . . raise their tuitions, confident that Federal loan subsidies would help cushion the increase.” The “Bennett hypothesis” continues to spark debate, but government studies during the Clinton, George W. Bush, and Obama administrations found no evidence to support it.

Hurting students, society

Despite the high cost, a majority of Americans — 68%, according to one poll last summer — still believe college is worth it. College graduates earn 56% more on average than high school grads and are more likely to own their own home, marry, and contribute to a retirement plan, the Associated Press reported in a January 12, 2017, USA Today article.

On the other hand, burdensome student debt threatens the college degree’s value as a path to financial stability. According to a CNBC report, “The student loan system is structured in a way that encourages people’s debt to balloon.” Debt consolidation and “rehabilitation” can save borrowers from default but can also carry fees increasing the amount owed. Forbearance programs allow temporary nonpayment, but interest still accrues and is added to the outstanding capital. Refinancing through private lenders eliminates federal loan forgiveness options. Finally, as Federal Reserve Chairman Jerome Powell testified before the Senate Banking Committee last spring, “Alone among all kinds of debt, we don’t allow student loan debt to be discharged in bankruptcy.”

Predatory practices make matters worse. Navient Corp., one of the largest federal student loan servicers, faces several lawsuits alleging that it made it harder for borrowers to access income-driven repayment plans, which set repayments based on a percentage of income, then forgive remaining balances after 20 to 25 years.

Student debt can also take a heavy psychological toll. One former student explained in a 2017 article in the Dayton (Ohio) Daily News, “I’m 26 and I graduated last year . . . with $25,000 in private loans and $20,000 in federal loans. . . . I am petrified about never being able to afford a home or afford to have children. . . . It’s a massive source of stress.”

Fulfilling God’s call

Several Christian traditions have founded and supported institutions of higher learning as part of their mission. Sometimes, but not always, private Christian schools also prove more affordable than their secular counterparts. Tuition and fees at member institutions of the Council for Christian Colleges & Universities, for example, are more than 20% cheaper on average than all private institutions, according to U.S. News & World Report. Helping students access higher education can be one way the church fulfills God’s call to seek the welfare of the larger community (Jeremiah 29:7).

Scripture also pays a lot of attention to debt. The law forbids Israelites to lend to one another at interest (Leviticus 25:35-38; Deuteronomy 23:19-20), and the prophet Ezekiel includes collecting interest among “detestable practices” (Ezekiel 18:10-13). Debt can reinforce oppressive power imbalances and status inequalities. It can also reduce people’s worth to the balances they owe. The biblical call to cancel debts every seventh year (Deuteronomy 15) may not be a pragmatic economic plan, but it could inspire policies to ease crushing financial constraints on students and graduates—policies people of faith can propose and advocate for in the public arena and in the voting booth.

At the very least, ministry to people struggling to pay for college provides the church with opportunities to counsel them not only about faithful stewardship of God-given resources but also about their inestimable value in the sight of Christ.


Student debt and race

The high cost of college can present an especially big barrier to education for African American students. Because of the wide financial gap between black households and white ones in the United States — the average white family’s net worth is $141,900, while the average black family’s is $11,000, according to the Pew Research Center — African American students often have fewer resources for funding a college education. Analysis of National Center for Education Statistics (NCES) data on the Student Loan Hero website shows that 77.7% of black students borrow to fund their college education — a significantly higher rate than the overall 60% average.

In addition, African American students generally carry more debt. They are 150% more likely than white students to carry $100,000 or more in student loan debt, according to data analysis by professor Robert Kelchen of Seton Hall. Controlling for nonracial factors lowered that likelihood to only 130%. Data analysis by the Center for American Progress found that 12 years after entering college in 2003–2004, “the median African American student owed more than they originally borrowed,” whether or not the student completed a degree program. Additionally, 49% of African American students defaulted on federal student loans during those years, more than twice the 21% default rate of white students.

“It’s a lot harder to repay loans when nobody in your family can help you pay them off,” Kelchen told Student Loan Hero. “Unemployment rates also tend to be higher for black and Hispanics, which makes repaying loans more difficult.”

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