It’s college application season. That means millions of high school seniors around the country are scrambling to finalize applications and essays. However, at the same time, they are asking themselves, “how will I pay for this?”
Education is the great equalizer in our country. We pride ourselves on being a meritocracy – on the idea that anyone, including those who grow up in the poorest neighborhoods, can pull themselves out of poverty through education. People with a college degree earn 98 percent more per hour than those with a high school diploma. Over an average lifetime, that equates to nearly $1 million dollars. Today, those with a four-year degree have an unemployment rate of 2.5 percent, half of the national average.
Lawmakers in 1944 understood the importance of a college education when they passed the GI Bill to subsidize the education of veterans returning from the war. Veterans who used this program were partially responsible for the economic boom of 1950s, as they earned more, advanced in their careers, and were better equipped to start families. To this day, we provide free public K-12 education so that all students can prepare themselves for college.
Even so, over the past 30 years, it has become increasingly difficult for middle and lower class Americans to attend college. Since 1982, the typical family income has increased by 147 percent. However, the price of college education has increased by 500 percent.
The result has been twofold. First, many lower-income students are giving up on the dream of college. Others have saddled themselves with tremendous amounts of debt. Today, there is more than $1.3 trillion of outstanding student loan debt. This number is growing by $2,726 per second.
Student loan debt may be a reason our economy is still in stagnation. The burden of student debt is hindering our innovation and entrepreneurship, a core component of our economic prowess. Students are postponing marriage and home purchases; combined with the decrease in small businesses, this drags our economy down.
This is a problem created by the irresponsible behavior of private universities. It’s not that universities are building more labs, computer centers, or hiring more professors. In fact, on some counts, universities have actually decreased the number of professors. Instead, universities are spending more on their administrative bureaucracies.
For example, NYU is one of the most expensive schools in the country, costing upwards of $70,000 a year, and is notorious for creating student debt. Their new president will receive a newly renovated penthouse costing $1.1 million.
In 2013, NYU gave loans (that were often forgiven) to its faculty so that they could buy vacation homes. Yale, spent $17 million last year renovating its president’s home. In the early 2000s, Columbia spent more than $20 million to redo its president’s mansion. This is in addition to generous salaries. NYU’s retiring president will make $2.5 million this year. And while, these presidents relax in their posh penthouses, 18 year olds are spending their weekends using debt calculators, applying for loans, and trying to understand interest rates.
So, what’s the solution? There should be increased regulation on private colleges college and universities. Just as we seek to regulate Wall Street banks or drug companies, the time has come to regulate colleges. That means passing legislation and tying tuition increases to the inflation rate. It means making it a requirement for colleges to disclose salaries and spending to the public, so that it can be audited. That means, pushing colleges to absorb existing debt whenever they can.
Colleges have been allowed to raise tuition costs unhindered because they have been able to pass on loans to students. However, a teenager does not have the perspective to understand how $200,000 in loans will impact his or her financial future. Congress must limit the maximum student-loan amount a student can owe after four years. This combined with passing a mandate that colleges cannot increase tuition at a rate greater than inflation will allow for costs and debt to come under control. Colleges that fail to comply should lose their “non-profit” status and their endowments should be taxed at the highest rate of 39.6 percent.
For centuries, colleges have billed themselves as non-profits. As a result, taxpayers give them subsidies, look the other way at their spending, and finance the debt of students so that some college presidents can live in penthouses. It’s hard to understand how they retain “non-profit” status with $32 billion in the bank. It’s been recently noted that, “Harvard is a hedge-fund, operating a college on the side.”
It is now time for us to apply the same scrutiny that we do to hedge funds to colleges. We must start treating colleges like businesses, because they truly function as one.
Today, the American dream is being denied by our colleges, not Wall Street or Washington (the typical scapegoats). It is time for our nation to regulate colleges further and ensure that future generations have the ability to access higher education and the American dream.