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--:-- Host: The American economy is still feeling the traumatic effects of a two-year pandemic and lockdown-induced recession. Polls show that 94% of Americans are upset or concerned about the impact of rising prices. 95% believe the soaring inflation is very serious or somewhat serious.
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--:-- Host: On Tuesday, the Pacific Legal Foundation, a nonprofit organization that defends Americans from government overreach, filed a lawsuit challenging the Biden administration's authority to unilaterally cancel college loan debt. Here to help us understand the federal student loan program and how it contributes to unaffordable tuition costs is Lindsey Burke, director of the Center for Education Policy at the Heritage Foundation.
--:-- Lindsey Burke: Thanks for having me.
--:-- Host: Now, first off, how much has the cost of college increased in the past few decades?
--:-- Lindsey Burke: Well, the cost of college has increased significantly since 1991. Total federal aid, so all student loans and grants, have increased almost 300 percent. And in response, colleges and universities have more than doubled their tuition and fees in real terms.
--:-- Host: So you said the prices have doubled from 1991 to today. Is that adjusted for inflation?
--:-- Lindsey Burke: Exactly. That's right. Inflation-adjusted college tuition.
--:-- Host: So that's one reason why these massive federal subsidies are such a poorly designed policy. Colleges, when they increase costs, they pass those increased tuition rates along to everyone who attends.
--:-- Lindsey Burke: And that's something that Education Secretary Bill Bennett identified all the way back in 1987 when he wrote his now-famous op-ed "Our Greedy Colleges" saying that the more the federal government subsidizes higher education the more colleges will bring tuition in response.
--:-- Host: And there was a recent report from the New York Federal Reserve Bank that put some exact dollar figures on exactly how inflationary those subsidies are. They saw that for every additional dollar in subsidized student loans that universities raise tuition over 60 cents.
--:-- Lindsey Burke: And that is a pretty clear indication that universities are capturing a lot of the subsidy and they're not passing it along to students in terms of lower tuition rates. They're instead doing things like engaging in a facilities arms race to provide fancier facilities. They're amassing more real estate. They're hiring additional personnel that are not always teaching faculty.
--:-- Host: So they are spending their money in a way that isn't necessarily the best and highest use of funds, and they're increasing tuition at the same time.
--:-- Lindsey Burke: Are we seeing the same effect on the full spectrum of higher education? For example, are we seeing the same degree of inflation at community colleges and tech schools that we're seeing at elite institutions?
--:-- Lindsey Burke: Yeah, Seth, across the board, we've seen increases in tuition that are pretty significant, regardless of what sector you're in. But if you look at your traditional public four-year institutions, that's where we really see those college increases.
--:-- Host: Now, you've argued that the government subsidies are the primary driver of increased college costs. But are there other factors as well?
--:-- Lindsey Burke: You know, there are other reasons as well. Certainly, the cost of labor increases over time as a general rule. But what is exceptional is how expensive college has gotten.
--:-- Host: And you can look at subsidized industries and largely unsubsidized industries. So we can look at things like the tech sector. And as a broad rule, technology has become cheaper over time. The price of computing has declined significantly.
--:-- Lindsey Burke: And can look at other areas where the price of goods and services has reduced generally over time. And those are the sectors that are not largely subsidized by the federal taxpayer.
--:-- Host: By contrast, if you look at those highly subsidized sectors, higher education being cheap among them, that's where we see prices increase significantly over time, well above increases in the rate of inflation.
--:-- Lindsey Burke: Has college become more of a luxury experience than it was in the past? For example, are students purchasing more than just an education these days?
--:-- Lindsey Burke: Yeah, I think you've put it well. I think it has become more of a luxury experience in a lot of ways. When you see reports of universities that are building climbing walls and lazy rivers, that is part of that facilities arms race because they want to be able to attract students.
--:-- Host: Students and parents to some extent, they're looking for a quality education, but they're also looking for that experience as well. And they're willing to pay for it in large part, because they're doing it through a highly subsidized federal student loan program.
--:-- Lindsey Burke: It's another reason why we should be extremely cautious about so-called loan forgiveness. And remember, there's no such thing as loan forgiveness. It's simply a debt transfer onto all working Americans.
--:-- Host: But we should be cautious about loan forgiveness because, you know, part of what you're paying off is the sort of non-residential experience of student life that has almost become an expectation.
--:-- Lindsey Burke: And that is a big part of what is driving up costs. But universities are able to do that in large part because of the ubiquity in federal subsidies, because they know how easy it is for a student to get a significant federal loan with no credit check, no consideration of their creditworthiness, their future ability to repay what they might be studying, how well they did in high school.
--:-- Host: Washington cannot, nor shouldn't, quite frankly, take all of those factors into a tilt. But as a result, students receive this easy money, which universities think captured to plow into this facilities and amenities arms race.
--:-- Lindsey Burke: Now, is there any way for students to opt out of the luxury price tag education? For example, are there any schools that are advertising a more pared-down or more austere education option for a lower price point? Or is that just not proven to be marketable in today's social environment?
--:-- Lindsey Burke: There are schools that are doing a lot in terms of how they innovate in pricing. You need to look at schools like Tillsdale College that have really focused on the academics getting that classical education.
--:-- Host: You have to look at other colleges like Patrick Henry College that have done the same. Colleges that do not participate in the federal student loan program.
--:-- Lindsey Burke: Wyoming Catholic College, which was run by the current president of the Heritage Foundation, was another one that said, we are not going to participate in this federal subsidy, in these federal student loan programs.
--:-- Host: And then you can look at other colleges like Purdue University, where Mitch Daniels there, President Daniels, has said, you know, we're going to try some innovative financing options like income share agreements, where we are going to bank on you as a student and we will ask for payment until you are employed.
--:-- Lindsey Burke: And that's a really innovative setup because it requires the university, which has effectively become the lender, to really have a solid understanding of the likelihood of return on investment.
--:-- Host: So there is a lot of innovation that is percolating. I think we tend to stifle that innovation significantly when we continue to increase the note of federal subsidies and the perks that have come along with things like the student loan forgiveness scheme.
--:-- Lindsey Burke: So can college graduates today still expect to earn a higher lifetime income compared to non-college graduates? Or is that just not a guarantee anymore?
--:-- Lindsey Burke: Yes. As a matter of course, they can, in general, expect to earn more than their non-college-going counterparts. And in some cases, this is hundreds of thousands of dollars more over the course of your working lifetime.
--:-- Host: And of course, when we then talk about graduate students and professional degree holders, doctors and lawyers, we're talking about millions more in annual lifetime earnings over the course of your working career relative to a high school graduate.
--:-- Lindsey Burke: And so it's certainly pay off as a general matter. However, it does not pay off for everyone.
--:-- Host: So when asked, is college worth it? I think the answer is always, it depends.
--:-- Lindsey Burke: It depends on what your life's goals are, what you want to study, the amount of debt you may or may not have to get into to go.
--:-- Host: What I think is unfortunate, today though is that we have sold this false narrative to high school kids and younger in particular that says your only path to climbing the ladder of upward economic nobility in America runs through a four-year college.
--:-- Lindsey Burke: And that just isn't the case. And it pushes people who may have been better served going an alternative route doing trade school or starting a business on their own.
--:-- Host: It pushes them into a higher education model that's a bad fit for them and could end up actually saddling them with significant debt.
--:-- Lindsey Burke: But unless we can move away from this idea that everybody has to go to college to be successful, we're going to see a lot of that in the future.
--:-- Host: And that's going to require not only a public policy response, but it's also going to require industry business leaders to step up and say, we're not going to require college degrees for jobs that don't actually need them as a signal that you're going to do a good job in a given career.
--:-- Lindsey Burke: So it does require the private sector to step up as well and move away from the bachelor's degree being a proxy for employability.
--:-- Host: Now, broadly speaking, which degree types are still high earners and which ones are putting students in long-term debt?
--:-- Lindsey Burke: There are a lot of lists that show exactly that. And if you look at the list, they have a consistent finding, which is that engineers end up being some of the most stable courses of study that you should choose if you go to college.
--:-- Lindsey Burke: Engineering of all types, that is always the top slot. Near the bottom tend to be things like social work, education, communications, degrees. Those tend to have a poor return on investment.
--:-- Host: And as you look at the work done by Preston Cooper, who has done a lot of excellent analysis of ROI for college, he has found that in many, many cases, master's degrees have a negative return on investment.
--:-- Lindsey Burke: So I think that's one red flag that people should be aware of is that, generally speaking, master's degrees don't tend to pay off.
--:-- Host: Now, what about the administrative portion of schools? How much has that grown over the past few decades? And what portion of college funds are going toward administration?
--:-- Lindsey Burke: Yeah, so that's a huge issue. And I'm glad you brought that up. It's a big driver of increases in college costs.
--:-- Host: The ratio of administrators to faculty continues to grow, as in we continue to see a number of administrators increase relative to the number of faculty.
--:-- Lindsey Burke: A big portion of that administrative staff now are these diversity, equity, and inclusion staff.
--:-- Host: Most universities employ diversity, equity, and inclusion staff. But in many cases at universities, there are far more DEI staff than there are history professors, for instance.
--:-- Lindsey Burke: There are far more DEI staff than there are staff who are charged with compliance with the Americans with Disabilities Act, which is something that universities have to do under federal law.
--:-- Host: Yet they have far more DEI officials. And one really rearing example of this is the University of Michigan has on staff 163 paid individuals dedicated to diversity, equity, and inclusion.
--:-- Lindsey Burke: And so I think it does show you the extent of administrative bloats that we're seeing in higher education today that is not contributing to overall academic excellence.
--:-- Host: All right. Well, Lindsay, thank you so much for coming on.
--:-- Lindsey Burke: Thank you so much for having me. I really appreciate it.
--:-- Host: Until next time, this has been a Sunday edition of Morning Wire.
