Student Debt: Blame Law-Makers, Tax-Shirking Rich, War on Drugs, not Universities

By Juan Cole

In honor of President Obama’s support for Senator Elizabeth Warren’s bill to address the student debt crisis by offering students with older debt loads lower interest rates [see video below], I’m reprinting this golden oldie. The statistics in it have only gotten worse from a social point of view in the past few years.

Why is tuition so high in state universities that the NYT is wondering if families will go on being able to afford it?

As someone who has observed this rise in tuition over an academic career of 30 years, as graduate student and professor, I have some theories from an insider perspective.

State universities have had to raise tuition because state legislatures have continually cut back every year the amount of state funding for them. Already in 2005 this article in Philanthropy News Digest explained:

‘For example, less than 14 percent of the University of Oregon’s total revenue came from state funds in 2003-04, compared to 32 percent in 1985-86, while tuition fees accounted for more than 33 percent of the university’s budget, compared to 22 percent twenty years ago. Meanwhile, the University of Michigan has lost 12 percent of its state funding, or $43 million, over the past two years. According to UM spokeswoman Julie Peterson, state money now only accounts for 8 percent of the university’s budget. “We can’t rely on state funding alone,” said Peterson. “It simply isn’t enough.”‘

That statistic, whereby the University of Oregon went from having 33 percent of its total revenue from state sources in 1985 to 14 percent in 2005, was typical of what happened throughout the whole country. The typical revenue streams for state universities used to be 1) State support, 2) tuition and fees, 3) Federal grants, and 4) alumni donations and the resulting endowment. At some state universities, the state contribution may now be the fourth largest source.

Now, why did states cut back the universities so much? It wasn’t that the state legislators were bad people or anti-intellectuals for the most part.

The Reagan/ Grover Norquist line that government is not the solution, government is the problem, and the demand for lower taxes (especially on the wealthy) was influential in many states. So essentially the American big business class of about 3 million people was given the opportunity to quadruple its vast wealth through lower taxes (when you lower taxes on a particular segment of the public, that is wealth distribution in their favor). Meanwhile public functions of government are cut back and everybody else gets potholes, closed public libraries, underfunded state universities, etc.

I can remember when I started grad school at UCLA in 1979 I heard on the radio that because of steep cutbacks in property taxes, the state would no longer be able to afford to spray for mosquitoes. I thought to myself, lord, they’ll end up giving themselves malaria to avoid a millage!

A big drain on state budgets is the penitentiary system. In just the decade 1980 to 1990, the prison and jail population in the US doubled. Since 1980, the prison population has quadrupled. By the end of 2006, over 2 million persons were in prison and another 5 million were on probation or on parole. [In 2013 there were 2.4 million prisoners in the U.S.]

I remember reading in the Ann Arbor News in 1988 about a big debate at the statehouse in Lansing over funding for prisons versus funding for universities. The prisons won.

In these same nearly four decades, there have been substantial declines in violent crimes and crimes against property in the US. The vastly increased prison population was produced by unreasonably long prison sentences for non-violent crime, by ridiculous 3-strikes-and-you-are-out life sentences and by the completely failed ‘war on drugs’ and by mandatory sentencing guidelines imposed by legislatures on judges in drug cases. Half of prisoners in state prisons did not commit a violent crime, and 20% are drug offenders. [In 2013, for 51% of prisoners the most serious charge against them was drug related.]

This vast expansion in the number of imprisoned Americans required states to build prisons and to pay large amounts of money to keep people in them.

The states had to put their money into prosecuting, trying, imprisoning and then supporting to the tune of like $20,000 a year a bunch of . . . potheads [5% of the prison population].

So obviously the states had no money to spend on state universities, which were cut loose, and had to raise tuition and hit their alumni up for contributions just to try to keep their heads above water.

Of course, universities faced increased costs at the same time. European monopolies drove up the costs of medical journals in ways that the European Union should look into. Digitalization has been a huge added cost that cannot be escaped (in many cases it means paying twice for books and other materials, once in hard copy and once in digital form.) Universities with medical schools face the high costs of acquiring increasingly high tech, state of the art medical equipment. Etc.

But I think the ‘war on drugs’ and the cost of prisons [and slashed taxes on the wealthy have] deeply harmed state economies and has hurt access to state universities for working and middle class families.

Marijuana in particular may well have important medicinal properties, and it should just be legalized.

If the Religious Right could, it would just close down all the biology classes in the country (because after all they teach that wicked Darwin) and leave the development of biotech to the South Koreans, with Americans–denied the wealth that biotechnological innovation will bring in–turned into unemployed riffraff.

It turns out that if we had more personal freedoms, we’d have more state monies and could educate ourselves to develop our potential as free human beings.

In the past 40 years, the snowball has been going in the other direction– fewer personal freedoms, a vast gulag of the incarcerated, and less and less state money for the development of the minds of the public. We’ve built ourselves a big ignorant prison, with a loud-mouthed fundamentalist preacher for a warden, and called it America.

We should legalize pot, and tax the resulting industry. We should repeal mandatory sentencing guidelines and develop rehabilitation strategies rather than putting the ill-behaved in expensive state hotels. And we should go back to having state-funded state universities.

See also “The Koch Brothers and the End of State Universities”

———

Related video:

Senator Elizabeth Warren: “Senator Elizabeth Warren – Bank on Students Emergency Loan Refinancing Act”

22 Responses

  1. I agree the drug war and criminal justice profoundly effects state budgets. But legal drugs will come with significant public health costs.
    Maybe the federal government should cut “defense” spending (all aspects, not just DOD — “intelligence”, VA, DOE) to 2% of GDP. Have single payer, so total healthcare spending could be 9% of GDP like Canada instead of 17% of GDP like the US.

  2. The discount rate Is the interest rate the Federal Reserve charges to member commercial banks for borrowing. It’s currently 0.75%.

    If commercial banks borrow from a government entity at 0.75% to lend the money and profit or just make up for required reserves that they loaned for profit, then why can’t college students borrow directly from the government at the same rate to pay for their education?

  3. Reducing state funding has certainly been a major factor for the exponential rise of tuition in the US.

    European monopolies drove up the costs of medical journals in ways that the European Union should look into.

    However, this is a bit of a cop out. George Monbiot has written an exposé on price gouging by the big three scientific publishing corporations (Elsevier, Wiley, Springer). While two of them technically have their HQs in Europe, all are really international corporations, and one of them (Wiley) is based in New Jersey.

    While there is some pushback through open access and non-profit journals such as the PLoS series by the Public Library of Science, we academics need to face the fact that we have lost control of academic publishing and are contributing immense unpaid work (reviewing, editing) to a machine that is fleecing us (with most of the bill being unfairly passed on to undergrad students via tuition hikes).

    We also have largely lost control of our academic culture and administration, as chronicled in Ginsburg’s The Fall of the Faculty: The Rise of the All-Administrative University and Why It Matters. I would contend that one of the reason this matters is that those “professional” outside administrators tend to be steeped in neo-liberal ideology. Rather than fight for state funding on principled grounds (public service), the idea of higher ed as a personal investment came naturally to them, as did spending on ludicrous boondoggles in the race for building the biggest sports and amenities facilities yet.

    While neither beleaguered academics elbowing for the vanishing tenure track positions, nor students loaded with debt scrambling to finish and recoup the “investment” make for natural revolutionaries, we need to take back our own academic guilds, our publishing, as well as restore public state systems at all levels.

  4. At Salon.com Thomas Frank has a related piece excoriating American universities, public and private, for relentlessly and unconscionably jacking up prices every year since 1981, the press for failing to report on this and the government for failing to do anything about it.

    Link: link to salon.com

    • that is completely unfair w/ regard to state universities, which have been drastically cut by state legislators

      • I agree with you, Professor Cole. I attended OSU on the GI Bill in the early 1970s when I went back to college after my military discharge. I did work part-time than full when I dropped out for a quarter. But I got my undergraduate degree than went on to graduate school though I did receive a monthly stipend as a teaching assistant. I used all of the money allotted to me under the GI Bill. For both degrees. About ten thousand dollars rounding it off.

        I read a headline, I think in Salon, that OSU is now the most expensive public university in the country. But I must admit I didn’t read the article. Quite frankly, seeing that headline just turned me off from reading the article.

      • Perhaps not completely unfair. You probably saw the study reported last month which correlates high pay of public university presidents, which can reach into the millions (and I gather that football coaches are often paid even more), with high student debt and a high use of part-time faculty at those universities.

        link to nytimes.com

        • saw it? I was partly behind it!

          but upper admin salaries are miniscule compared to state cuts of university budgets over past 30 yrs

  5. This is good insight and analysis. But I do not believe it is the whole explanation, and does not support the headline to not “blame the universities.” They are operating as a cartel and decisions are driven by a burgeoning class of self-interested administrators.

  6. Interesting, both the reminder about how our legislatures and other rulers have been short-changing the education=citizenship part of our culture, and the penurious responses that even “progressive” representatives are putting out there. Warren’s little nipping at the corners of “student loan debt” might result in a tiny marginal bump in people being able to take part in the latest housing bubble, but does not really touch the fundamental debt slavery that is built into this piece of the “polittle-ical economy.”

    For a little context on the fundamentals of the enormous trillion-dollar scam, yet another example of the Few bleeding the life out of the Many, there’s this primer from Rolling Stone, with a link to an also illuminating Taibbi article: “Ripping Off Young America: The College-Loan Scandal”, link to rollingstone.com

    For a little more detail, with some examination of location differences in the problem and some correlations like one between employment rate and rate of default on those still crushing loans, there’s this article in Financial Times, which includes this telling quote from Sen. Warren:

    ““In other words, the game is still rigged to make the rich and powerful even more rich and powerful,” Warren wrote in a Wednesday letter to her constituents. “And that means we’ve got more work to do to help make sure the next kid can get ahead and the kid after that and the kid after that.” link to thefiscaltimes.com Dare one ask, what about the millions that have been very often suckered into loans that we taxpayers guarantee, made by predatory lending institutions and loan brokers and co-conspiratorial school administrations, to CURRENT debt slaves? link to brookings.edu, and this item, link to pewsocialtrends.org

    For a picture of the scope of the problem, and link to one of the resources that is looking for REAL remedies, which ought to start with a freakin’ Jubilee, link to forbes.com, you might look here: link to projectonstudentdebt.org And please hold the Puritan noise about “just obligations, that unlike TBTF and other bastards with clout, the ‘zombie debtor’ must be made to pay, and pay, and pay, with no relief even in bankruptcy,” try this view: “Bankruptcy Panel’s Proposals Favor Debtors, Anger Creditors”, link to online.wsj.com For a view on the harshness of the 1997 revisions to the Code, and some notes on how buying legislators was a growing racket even way back in 1997, look here: “Bankruptcy Plans Harsh On Debtors”, link to articles.sun-sentinel.com

    There are other costs too: link to apa.org

    On the other hand, does anyone who could actually FIX something actually care? Obama has tiny fractional proposals, for stuff like carbon emissions and “ending the war in Notagainistan,” and now some prospective student debt morsel. Sen. Warren has another thing that might bleed off some of the building head of steam, too, but not stop the other bleeding and dying. Big whoop.

    • I think the larger game here is the extermination of education as anything but a way to (a) keep kids under control & (b) turn them into money-earning machines. The cultural Right excoriates public & liberal education for creating kids who have thoughts that stray beyond the Bible, the corporate Right campaigns to privatize everything and cut taxes, and the theocratic Right waits for their inevitable victory in any educational “marketplace” based on low costs due to their use of volunteer fanatic labor in their madrassas. See Louisiana.

      The idea that education is there for socialization, and that socialization is not just obedience training or job training but the creation of people who can break from the herd regardless of their born class and caste, seems to be pretty recent. And its premises were shallowly rooted, such that when in the ’60s one generation actually took the idealistic mission of education at its word while another generation rebelled against their kids sharing education with blacks, the entire consensus supporting the edifice collapsed. Leaving only an “investment” in job programming as a motive for most parents & kids. The lag time between that collapse and now makes it impossible to save what’s left of education as we know it. Only the bad guys have been at work on the replacement – sitting your kids in front of a website full of Christofascist content, including public domain textbooks and dime novels from the racist Edwardian era (seriously, it’s happening)… and having the government hand over a huge check to the bad guys for the privilege. College is returning to its 18th century role of training two kinds of elites – rich heirs and clergymen.

      Probably the greatest blow against intellectual activity since the Christians took over the Roman Empire. And look how that turned out.

  7. Mc phee…there you go again, using 20 words when two would do..of course you are dead right on the button…it’s just another racket ..12per cent juice..no bankruptcy allowed..the mafia would be happy…the banks get bailed out..GM..gets bailed out..but the kids get fleeced..what a country?

    • Two would do for what? Want two words? “Humanity f__led.” Your immune system and general physiology are full of words, rich with learning and communication and feedback. Blogging seems to me to be a bit of whatever homeostatic and anti-pathogenic structure there might be… Also part of deadlier processes, too. Brevity is only the soul of wit, not wisdom…

      • Mc phee…touché …I should have kept my simple minded mouth,away from even attempting to be snarky with such a brilliant intellect…

  8. [We should legalize pot, and tax the resulting industry. ]

    Now drug lobby calls for pot legalization. But once this is achieved, it is really naive to think that pot taxes will help education.

    It is more likely that legal drug sellers will share the tax burden with other businesses. In exchange for certain favors, they will agree to pay more taxes so that others will pay less.

    • Jerry Brown successfully got people to vote to raise taxes for education in California last year. You’re being too cynical.

  9. Professor Cole, a wonderful, concise look at capitalism run amok, with its overly privatized prisons and education. Why should the French get free education AND health care! Man the barricades, Americans! How stupid are we to buy the Exceptionalism crap of the MSM!

    I do think the core domestic issues which feed this corruption and over-privatization are our bought politicians and the ‘imbedded’ MSM. Any solutions there, My good Professor?

    • Oh, I am confident that when the public becomes sufficiently exercised, they shall change their condition. They often have a slow burn of decades. In the meantime, we can at least analyze and point out the shell games to those with eyes to see.

  10. In the flavor of earlier comments: “(when you lower taxes on a particular segment of the public, that is wealth distribution in their favor)” is hardly a fair assessment.

    The wealthy make most of their money from investments of capital (their wealth). Securities are valued according to the Net Present Value of their future expected earnings. Income tax reduction is only part of the picture. Capital gains taxes have been severely cut. Such Bushy tax cuts are likely to be viewed as an immediate increase in regards to equity’s net earnings in perpetuity. Thus, valuations models show an immediate increase (substantial given it takes into account all future years–40 is about the extent of it) in wealth. Stock market was in the toilet for Bush and might have made the Great Depression look like the good old days if not for tax cuts. Only there is no growth involved and the future prospects for growth may not be that rosy with tax cuts given the infrastructure tends to collapse including students graduating in debt over their heads are not going to be demanding consumers by definition.

    Problem is if you now raise those taxes to what used to be considered fair, then the economy would take a severe hit now for the same reasons–so you can imagine the arguments and scenarios Obama’s Wall St. advisers beseech him with..

    Inflation would be good for the little people who already are in debt–particularly caught naively in the real esate bubble/mortgage fiasco. Inflation is bad for the wealthy who lend as they get paid back in cheaper dollars. What was that federal reserve rate Jeffrey?

    It’s more than taxes and tax cuts are also likely to create overnight wealth of substance for only wealthy individuals.

    This is also an example as to why they probably don’t let me teach finance anymore.

  11. Very insightful and I certainly gained a new perspective on government in higher education (previously I was sold only on universities raising tuition because of easy access to student loans).

    However, I do want to point out that not only has the War on Drugs affected higher education in the form of prison funding > university funding, but also that any student convicted of a drug crime while receiving loans must repay them immediately and also lose eligibility for federal student loans. It is a cold, cruel, and ideologically calculating trap that most students are (like most aspects of their loans) completely in the dark about until they find themselves in the slightest bit of legal trouble.

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