A profitable student loan market has fueled an arms race among colleges and universities, along with an astronomic rise in tuition that seeks to capture the student loan dollar through increasing fees.
College graduation season is here, and that means students should be celebrating their hard-earned educations. But have you seen the headlines being made by many of our nation’s campuses lately?
On Monday, you could read about a new study of public universities showing that schools with the highest presidential salaries also had the fastest-growing student debt. That same night, Senator Elizabeth Warren was on the Colbert Report to bring attention to the nation’s student loan debt, which now exceeds $1 trillion. And over the weekend, New York University was the subject of a New York Times investigation detailing inhumane working conditions at its far-flung Abu Dhabi campus, the crown jewel in president John Sexton’s octopus-like plan to grow the university throughout New York City’s Greenwich Village and across the globe.
At their core, these stories reflect a fundamental change in higher education: universities act increasingly like big businesses that treat students as customers.
This transformation is part of a larger cultural shift that can be traced back to the 1970s and ‘80s, when policymakers began to view higher education more as a private good (benefitting individual students) than as a public good (helping the nation prosper by creating better educated citizens). In previous decades, public universities enjoyed robust support from state and federal government, and tuition at some of the country’s best universities was free or nearly free. But Republican governors like Ronald Reagan argued that states should not subsidize intellectual curiosity, while economists like Milton Friedman advocated against the notion of free education, claiming that students seeking a private advantage should pay for it themselves. Just take the example of the University of California at Berkeley, in Reagan’s home state: in 1960, tuition was free for a California resident; today it costs $12,872 with an additional $14,414 for room and board.
But how did policymakers envision that students would pay for that private good? Through student loans, of course. Under the theory that student debt was “good debt,” student lending limits rose during Reagan’s presidency, and a profitable student loan market emerged. This in turn fueled the rise in college tuition, as universities sought to capture the student loan dollar through increasing fees. In fact, since 1978 the cost of college has increased in absolute dollars by 1120%. All the while, universities have worked to convince students that their institutions are the most worthy of skyrocketing fees, perpetuating a [ … ]