The federal government and private lenders encouraged and subsidized these choices, enrolling the American middle class in a larger national project. As the Cold War got going, the government subsidized real estate development for the white middle class as a foundation of strengthening U.S. democracy and fighting communism. To this purpose, the federal government built infrastructure for transit and energy in rural regions, setting them up to be new residential areas. It partnered with banks to encourage more families to purchase homes and guaranteed home loans issued by private banks. Home ownership became a bedrock of middle-class wealth, and of achieving financial security, when these new homeowners either paid off their mortgage or sold their home for an increase over its purchase price.
Bout time this got some attention. Middle class is getting screwed over, again. When I graduated in the early 90s from the University of Minnesota this subject was being discussed. You did not have to be a math major to understand that 17% yearly tuition increases were unsustainable. It was easy to see the problem developing, just like the housing crisis.
Someone is getting STUPID rich off of this, too. Nice work, Ms Zaloom.
My husband & I saw this coming from way back. He’s an immigrant, so he had a dispassionate eye re college for the kids. Above all what we saw was that the levels of indebtedness were not equivalent to the potential benefits of private college. And coming out of college, so many young people end up living on credit cards that debt becomes a way of life. There’s no good solution to this. My 2 millenials got their degrees, but work is highly sketchy, low paying mostly quite interesting volunteer work in exchange for room & board or a small stipend. Their future will depend on anything they might inherit, which might be scant. I worry more about their future than my own.
I’ve been seeing this first hand, having started my career in higher ed in a financial aid office at a major public university shortly before the Great Recession. As the article mentions, many factors like declining state support and increasing amenities converged with the sudden economic downturn, making it incredibily difficult for middle class – and especially lower middle class – families to pay for college.
Interestingly, the very poor are often in a far more adventageous situation than the middle class. Federal and state gift aid covers roughly 70% of the estimated cost of attendace (tuition, books, transportation, room and board) for in-state students of the lowest economic bracket at my institution. And those same students are likely to get at least a sprinkling of institutional gift aid tacked on.
Contrast that with a family of three pulling in $60k with a single child attending college. They’re getting zero federal and state gift aid, and only qualify for limited federal loan programs. So that’s $25-26k for an in-state family to fund each year out-of-pocket or via debt accumulation. And $60k for a family of three doesn’t leave a whole lot of current surplus (let alone accumulated historical surplus) for college bills these days, even in a state with a very low cost of living index. Better hope that 529 plan is loaded, folks!
“Meanwhile, costs continued to rise. Why is hotly debated.”
Sure, the details are complex and largely obscure, but the underlying reasons are rent collection and regulatory capture. What started as a govt program to help people get a college education without getting gouged by private lenders, ended up, decades later, delivering the govt, institutions of higher learning, and individuals seeking college education into the clutches of the lenders. Originally the opportunities for rent collection by the lenders were marginal, but the climate of opinion in our time is such that they were able to bend the rules of the enterprise ever more in the direction of letting them and their higher education compatriots collect the huge rents that people are willing to pay to get a college education.
What it costs to deliver education didn’t go up more than the rate of general inflation. What happened is that the owners were allowed to introduce rents at their pleasure that have nothing to do with their costs, and are limited only by the utility, real or imagined, of a college education to their victims. If immiseration for decades seems worth it to the college-bound class, that level of costs to their victims is what the owners can charge
There is also a problem with the assumption that parents will actually help a child go to school. Middle class parentage in no way assures parental financial support. Obtaining legal emancipation such that their income is not taken into account for financial aid packages is both legally and emotionally challenging. As a result, supposedly middle class students who are in no better position than low income students due to deadbeat parents are left with no choice but to individually take out large private loans which can significantly impact their lives into their forties.
One issue not mentioned here is that – assuming students find ways to finance their education – the prospects of loan payback significantly constrain their career choices – such as they are these days. Yet another example of fear as a means of control.
Unfortunately, students should fear accumulating unsustainable loan debt in our current reality. Once you have that debt, your ability to purchase a first home, pay for childcare, etc. becomes substantially restricted.
In our peer group of 30 and 40 year-old’s (consisting of working parents, couples w/o children, and adult singles), my partner and I are about the only ones not still paying down student loan debt – we never accrued any. We’re the anomaly, and it’s only because we got stupid lucky.
In my partner’s case, she was an excellent student and got scholarship funding out the wazoo in undergrad. I was in the probably the last population of kids who had parents with high-paying blue collar jobs that allowed them to subsidize my wayward college days. That, and we both got our advanced degrees funded by virtue of University employment. We also happened to both land in a college town with rising home values and a relatively low entry point, purchasing (separately, before we knew each other) our first homes in our mid-20s. All that in combination made it possible down the line for us to afford our highest unexpected expense – childcare for twins – without too much stress.
Don’t know anyone else who has been that lucky…unless they already came from means.
The timeline in the article doesn’t really jibe with my memories. States didn’t start hacking into public U support until the 90s, but high tuition and high debt seemed entrenched in the 80s. During Clinton’s 2nd term the fed gov’t began offering consolidation of existing loans into awesome low interest packages.
That was when I stopped paying attention. Next thing I know, subsidized loans are a thing of the past, private lenders are the main dealer, and my kid is off to college in a couple weeks to a clasically underfunded state school.
When my child started college there were two conditions: tuition had to be paid in advance, and they wouldn’t tell me how much it cost.
Their answer was they’d have to see what the feds would contribute. When I said I didn’t care about that, I just wanted to know how much. They refused to tell me.
In my day, the cost was tied to a college credit. If you took a 3-credit course, simply multiply.
Pretty much everyone I knew was in some kind of business or STEM class, and while STEM books are legitimately hard to write and perhaps worth a ton of cash, the fact is that there are professors and booksellers who conspire to squash any kind of secondary market for textbooks.
I knew quite a few people who were forced to spend $500+ on books every semester. That’s $4k-$6k over four years. That’s a quarter of your Pell grants.*
The truth is that nothing substantial has changed in e.g. accounting such that you couldn’t teach Intro from the same text for 5 years. New editions every year should be the exception rather than the rule.
* And I don’t recall what is the lifetime limit on Pell grants, so perhaps books account for more than a quarter.
One correction for the article: the main motivation for building expensive new athletic facilities is that universities rightly regard the athletic department as a revenue center, not an educational one. And it’s not revenue in the form of tuition: the schools that spend $50m on a new stadium are the same ones that hand out full-ride scholarships to athletes, woo them with special dorms and other (sometimes illegal) perks, and exempt them from the kinds of academic standards that other scholarship-recipients are subject to.
You don’t need a stadium that seats 20,000 people if your goal is to teach physical fitness, teamwork, or how to play football. And you don’t need a brand new stadium every 12 years, either.
20,000? You’re thinking small. Why not go for 100,000? (I never realized just how big, in comparison to other stadiums, the University of Michigan’s “Big House” actually is.)
When I was there it was a point of honor that all but a few thousand of Ann Arbor’s residents could fit in the stadium…
But I question the perception that sports programs are actually profit centers. They’re certainly such for the coaches, administrators and ancillary staff, but the argument that they provide net revenue to the institution at large (even including the increment in alumni giving) has, afaik never been thoroughly proved. It’s like the claims that taxpayer-funded stadiums are a net win for communities, which typically – well, no.
I think that ultimately the problem of educational costs is not directly soluble without some kind of massive change in how most people get educated. Because for the most part you don’t just want professors teaching bigger or more classes. And adjunct pay is about as low as it can be squeezed.
From the little I know the stadium is a significant revenue stream. The money from BigTen TV contracts is the biggest source with bowl game payouts next. Those monies then are used to subsidy virtually all other sports programs at the U and in particular women sports programs as well as full athletic scholarships.
Via the Detroit News:
Michigan athletic director Warde Manuel presented the budget at the Michigan Board of Regents meeting Thursday afternoon.
The department projects revenues of nearly $188 million, including a significant boost from the Big Ten financial distributions. Michigan will receive $52.1 million in Big Ten conference disbursements.
The Big Ten’s new television football and basketball agreements last year gave Michigan a big chunk from the conference. Michigan received $51.1 million in conference disbursements, a significant increase from the $36.3 million in 2017.
Bowl game payouts:
Here is the revenue distribution for the six major bowl games: the Sugar Bowl, Fiesta Bowl, Orange Bowl, Peach Bowl, Rose Bowl and Cotton Bowl.
Each conference receives $300,000 for each school that meets the NCAA’s academic performance review (APR) for participation in a postseason bowl; FBS Independents like Notre Dame also receive the same amount.
Each of the 10 conferences receive a base payout, again pending that academic performance review. For the Power 5 conferences with contracts to send its champion to the Orange, Rose and Sugar Bowl, each conference receives around $54 million . For the other Group of Five conferences that do not have automatic bids for its champion, they divide a total of around $81.32 million amongst themselves. Notre Dame automatically gets $2.65 million if it meets that APR review; all other independents receive less than $1 million .
Each conference gets $6 million for every football team it sends to a playoff semifinal game. They also get an additional $4 million for participation in one of the other non-playoff New Year’s Six bowl games. There is no additional revenue added for making the national championship game.
Each conference gets an additional $2.25 million to cover travel expenses for each game.
Ah. I didn’t realize the TV numbers had gone so high. I still do wonder after all the salaries (and about the hundreds of places that aren’t UM or equivalent and still build huge edifices.)
There is also the question of how much, if any, of that money goes back to the schools actual academic mission as opposed to it just being school athletics paying for more school athletics, which just seems like a wash.
Athletic departments make sure to provide enough revenue to their parent organizations to ensure that the athletic department “draws a lot of water” and gets whatever it wants whenever its needs conflict with those of other departments.
