Missing the Story on Student Debt

By Watson Scott Swail, President  & CEO, Educational Policy Institute/EPI International

This morning my colleague Kimberly Landis sent me the following graph from the Association of Independent Colleges & Universities of Ohio (AICUO) which lists the undergraduate debt per credential awarded at Ohio postsecondary institutions, by sector and type. Take a look and let’s discuss.

My point is that 99 percent of readers are going to take away the wrong point from this graphic: that students who graduate from two- and four-year for-profit colleges have greater debt burden than other students. While this is true, it is not the critical point. We all know that two-year public institutions are the biggest bargain around, and four-year publics are still more affordable than other four-year institutions.

Let’s dig deeper. Focus on the lower part of the graphic: the four-year institutions. The real story here is not that the graduates of the for-profits have so much debt (they do), but that the four-year public institutions, those heavily subsidized by state (direct subsidy) and federal (research grants and other supports (e.g., Student Support Services, Title III, IV, and V, etc.)) governments, have $23k in debt. For you non-math majors, that amount equals 81 percent of the debt of for-profit graduates.

This is a very, very important point, because we should be asking policymakers, college and university presidents and their VPs for finance, NACUBO, and others how this level of debt at a public institution is possible given the public taxpayer support, compared to the for-profits which receive ZERO GOVERNMENT SUBSIDIES. This is seemingly outrageous that the two figures are in the same ballpark. If this is the case, why not just privatize the entire system and keep taxpayers and governments out of it and let the market adjust accordingly? If we did, the price would most certainly come down for the for-profits due to a larger market.

Of course, the reason we don’t is that we value education as a public necessity and we need to ensure that there is opportunity for quality education (and note that those debt numbers have nothing to do with quality; that is a separate AND very important conversation in itself) for all constituents, not just the affluent. If the government would step out of the higher education arena, there would be no guarantees that affordable options would be available. Of course, that’s the same rationale for why universal health care should be run by the government, too, but that is also a different article for a different time.

With all these public subsidies, surely running in the $10-$20k per student, why is the gap between the four-year public and for-profit institutions only about $5k? If we added the subsidy as “debt” (it is, in essence, debt to society), then would not the “debt” of a public four-year degree be about $35k per graduated student? More expensive than the privates?

Just a thought. I would like hear yours. Please comment.

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About Educational Policy Institute

The Educational Policy Institute is a Washington, DC-based research think tank on education and the social sciences. EPI conducts evaluation and policy studies on various educational issues from Pre-K to workforce outcomes in the United States, Canada, and beyond. Visit us at educationalpolicy.org.
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3 Responses to Missing the Story on Student Debt

  1. tyrebiter says:

    Finally, someone who can distinguish between “price” and “cost”!

  2. seeking says:

    I appreciate the invitation to dialogue on this issue. I agree that access and support for higher education are a public necessity. I challenge the statement, however, that non-profits recieve ZERO GOVERNMENT SUBSIDIES. According to the college board, non-profits were the recipients of
    24% of Pell grant funds (2009-10)
    over 25% of all subsidized Stafford Loans (2008-9)
    over 28% of all unsubsidized Stafford Loans (2008-9)
    and over 10% of all ACG and SMART grants (2008-9)

    SIGNIFICANT GOVERNEMENT SUBSIDIES for a business that only educates approximately 9% of college students (according to National Center for Education Statistics, 2009). Clearly there is a profit to be made off of the government subsidies that non-profits receive. But, unlike public colleges and universities non-profits have no public agenda for research, civic engagement, or economic development that is at the core of the mission most community colleges, regional public universities and public flagship universities.

    • I think you meant “for-profit” in your comment, but your point is made. Very true: much of the Pell funds go to the for-profit sector, but it isn’t a direct subsidy. Community colleges and non-profit four-year institutions also receive significant Pell and loan funds, but they do get direct subsidies to operate, too. So they double up. Point well taken, though.

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