Trump, Clinton, and the Biggest Mistake Being Made in the Student Debt Crisis

In this series, students and industry experts share stories and perspectives from inside the student debt crisis. Share yours here using #StudentDebt. 

You might think that in an election year, more attention would be paid to policy ideas than email servers and hair plugs. 

You might expect that the challenges facing real universities would make more media headlines than the legal woes of one shadowy “university.”

You also might think that in a slowly recovering economy, one that has forced states to cut billions of dollars from tuition programs, candidates would be stumping for new opportunities to help Americans stave off student debt.

You might think all of this, but you’d be wrong. By all accounts, this is no ordinary election.

This tumultuous election cycle has overshadowed crippling issues in our higher education system. At the heart of America’s higher ed woes is the rising cost of tuition. When our politicians do get around to addressing education, this is often where they go first.

Behind the Rising Costs

The rising costs of tuition are driven by a number of factors: a complex web of market forces, political priorities, normal inflation, and shifting industry and economic pressures. While it is certainly a complex issue and one that will not be solved with a single answer or traditional approach, I will highlight a few key causes.

For public universities, state tuitions have seen a dramatic increase due largely to cuts in state education funding – dramatic reductions in per-student subsidies. Last year, the Center for Budget Policy Priorities reported that 47 states had spent less per student in 2014 and 2015 than prior to the 2008 recession. Without these monies funneling into institutions, more costs must immediately shift to students.

Meanwhile, for private universities the explanation is much more complex. There’s an ongoing arms race to attract the best and the brightest students. To do so, schools have been investing in attractive student services, housing upgrades and sports facilities to make the campus experience more enticing.

Then there are the marketing and student acquisition costs that at many less selective universities can exceed several thousand dollars per student. On the positive side, in a surprising Robin Hood-style take-from-those-who-can-afford-and-give-to-those-who-can’t approach, schools give out significant amounts of financial aid that often equals or exceeds the amount of tuition revenue they collect. Growing endowments and fellowships can cover some of these financial aid costs, but not all private universities are well endowed.

In addition, and common to both public and private schools, economists point to the expansion of federal credit programs as another culprit. According to a 2015 report by the Federal Reserve Bank of New York, readily available credit for student loans has driven up tuition in much the same way that easily available lines of credit drove up home prices during the housing bubble.

When customers are able to find ways to pay whatever they are charged, there is little incentive for the suppliers to build cost efficiencies into their systems. So, while it’s great that these students aren’t turned away for their inability to pay, the result for many is crushing debt upon graduation. Stagnation in U.S. median household income for the past two decades means that paying down this debt is extremely difficult and hinders families from meeting basic needs and saving for the future.

This is all self-perpetuating. Many students have to borrow money to cover the increased education costs. And, as a result of available credit, students can afford the increased tuitions, keeping demand high. High demand fosters a competitive environment that encourages colleges to invest more in marketing, services, infrastructure, teaching and financial aid, which drives tuition even higher. And on, and on.

Compounding the problem: education is one of the few systems in which suppliers get paid regardless of outcome. This, of course, reduces the incentive to improve education quality or lower costs, particularly at for-profit universities. A survey by National Student Clearinghouse published the shocking statistics that for-profit private universities had average 6-year pass rates of a measly 30%, while nonprofit private universities are closer to 70%.

The Political Non-Answer

Our politicians address these financial challenges with financially driven solutions.

Donald Trump has been vague on his views for education, but seems to believe that the Federal government should be mostly hands-off. He has said that, “Education has to be at a local level. We cannot have the bureaucrats in Washington telling you how to manage your child’s education.” Simply palming off this difficult, but extraordinarily important challenge to states is ducking the issue.

Hillary Clinton has been more forthcoming about her plans to face higher education challenges. On June 27, she announced her "Tech and Innovation Agenda" at a rally in Denver. In that speech, and on her website, she proposed that her administration would commit $10 billion in federal finding for new programs, with an emphasis on accelerated learning programs for computer coding, career and technical training, and online learning.

Previously, she had articulated her “New College Compact,” a vision for America in  which education is attainable for all. The three core components include a plan to ensure no student has to borrow to pay for tuition, books, or fees for four-year state colleges, and free community college; to enable existing student loan debt to be refinanced at current, low rates; and to encourage more accountability from universities on their outcomes and for controlling costs.

Notice, however, that all of these solutions, while potentially of some help, are in large part focused on funneling funding into programs, cutting costs or lowering interest rates to save money. Increased taxes notwithstanding, these ideas could create some temporary relief, but real, long-term solutions will rely on a fundamental change of mindset.

Real Change, not Pocket Change

Back in April, I wrote a piece on this subject. I posited that technology – not taxes – is the answer to America’s Higher Ed challenges. In essence, I believe that the solution lies in creating greater efficiencies and new opportunities through innovative technology – changing the way we view and approach higher education as a whole – and not in funneling more money into the existing system.

We do not have easy or perfect answers to such a widespread, complex issue, but we can suggest promising approaches and new models to make a significant difference.

One step our universities can take is an unbundling of their offerings, with more choice provided to the student. High-touch, in-person experiences tend to be more expensive, while technology driven online approaches tend to be more cost-effective. Universities can create both in-person and online offerings and give students more choice. They can offer more in-person experiences for those who prefer that approach and can afford them. For those who prefer the online approach, or for those who would struggle to pay, universities can use online tools to create new, more accommodating models. Furthermore, advances in adaptive and personalized learning technologies can help universities and students make data-driven decisions about the types of learning experiences that will lead to their success.

Students may be given an option to take one or two years’ worth of coursework entirely online, saving on dorm living and the costs of on-campus life. Universities can offer reduced tuition to those students while saving on their facilities costs, or they might choose to increase the total number of students to keep all their facilities busy. Because online learning can take place at any time of day, students could also work during those two years, earning money, requiring less, if any, borrowed funding to complete their educations.

Some institutions, like Arizona State University, are already experimenting with these models through initiatives like the Global Freshman Academy. I would encourage leadership at other universities to follow suit – recognizing the debt challenge and broadening the spectrum of college experience to open doors for a broader array of students. The incremental cost per student of online models is low enough that more innovative approaches like that of the Global Freshman Academy are possible. In this model, students learn for free, and pay for credit only if they pass – a new model that aligns student outcomes with university revenue.

Universities can also employ more blended models – using online education to give students the fundamentals of a subject, and in-person time with professors to delve into the nuances. This model creates better efficiencies in the classroom and can foster a better quality of education overall for the money.

Savings through College Readiness

Until these options are more readily available, however, students and parents who are concerned with high tuition costs must take steps to protect themselves.

One of the most effective ways to cut college costs is to ensure preparedness. Studies show that less than 40% of high school seniors are adequately prepared for college-level courses, and one of the widely reported “hidden” costs of college is remedial coursework. These are classes required by a university to ensure that students are caught up. They enable all students to adhere to proper standards, but they come at additional costs for those who need them and do not count toward graduation. Furthermore, students who need remedial coursework take longer to graduate and have lower graduation rates overall compared to students who are prepared for college on day one.

A solution: students can take additional classes prior to heading off to college – perhaps during the summer before or over a gap year – and free online courses or Massive Open Online Courses (MOOCs) offer ample opportunities for advanced placement (AP) or college-level prep work. Just Google “Free AP MOOCs” and you will find a number of them. Otherwise, students may be required to throw more money at a problem that has much less expensive – or even free – solutions elsewhere. 

The Answer from the Oval Office

Which brings us back to our next president: the biggest mistake being made right now in the campaign rhetoric is a unilateral focus on strictly financial solutions: throwing money at a problem or rampant, destructive cost-cutting. The next president, and his or her administration, will sit in a unique position that transcends just an ability to control costs – they can shape the conversation.

By opening dialogs between universities, students, education innovators, accreditors, and the business sector (who will ultimately be hiring graduates based on the strength of their education), the President can spur new thinking and encourage new innovative models that will offer long-term relief and new pathways for students. This is one area in which Clinton’s thinking is headed in the right direction. As part of her June 27 announcement, she also articulated a need to encourage universities to offer pathways to credit for the completion of online courses and training.

These questions and challenges are thorny and there is no direct or perfect answer. But, by starting inclusive conversations, fostering innovation and expanding education choices, the next President can help us move forward.

I strongly believe that a deep and directed exploration of new education models will be the first step in halting this crushing debt crisis in its tracks.