Students are paying a bigger share of their college bills, parents are paying less, and families are beginning to turn away from well-known and expensive colleges in favor of cheaper ones, including community colleges or anything near home. So says the 2012 version of Sallie Mae’s annual report, “How America Pays for College,” a collection of dry statistics that nevertheless reflect the rapidly rising anxiety about higher education and whether the cost is worth it.
The anxiety seems justified amid the growing number of students who, after running up $100,000 in student loans, take $25,000-a-year jobs after graduation—placing them in a position akin to the postcrash debtors whose homes are now worth less than what they owe on them.
Glenn Reynolds, the professor and pundit who runs the influential site Instapundit, has popularized the term “higher education bubble,” Some dark scenarios see several hundred colleges disappearing as students turn to online education or skip higher education altogether. Pundits like George Will have embraced the bubble theory (“Many parents and the children they send to college are paying rapidly rising prices for something of declining quality”) and billionaire Peter Thiel, who spotted the housing bubble early, is now paying selected students not to go to college.
Sallie Mae’s report offers a brighter view. It says students and parents strongly agree that higher education is a worthwhile investment in the future and 70 percent think college is needed more than ever. That’s comforting, but several arrows point in the other direction. Almost 54 percent of recent college graduates are underemployed or unemployed, even in scientific and technical fields, according to a study conducted for the Associated Press by Northeastern University researchers. The study said college grads under the age of 25 were more likely to work at Starbucks or a local restaurant than as engineers, scientists, or mathematicians.
Bureau of Labor Statistics data show that as many as one out of three college graduates today are in jobs that previously or historically have been filled by people with lesser educations or none. The U.S. now has 115,000 janitors with college degrees, along with 83,000 bartenders, 80,000 heavy-duty truck drivers, and 323,000 waiters and waitresses.
Employers, because they realize that many college graduates aren’t really educated, now routinely quiz job seekers on what they majored in and what courses they took, a practice virtually unknown a generation ago. Good luck if you majored in gender studies, communications, art history, pop culture, or (really) the history of dancing in Montana in the 1850s.
Current and former collegians now owe more than $1 trillion in student loans—and only 26 percent of the debtors are currently paying anything back, down from 38 percent five years ago. (These loans cannot be discharged in bankruptcy, a reform imposed to stymie borrowers who would graduate and promptly file for bankruptcy.)
The cost of college rose 440 percent between 1982 and 2007, compared with cost of living increases of 106 percent and family income growth of 147 percent over the same period. The Sallie Mae report indicates that even students from high-income families are taking out student loans—27 percent used federal loans in 2012, up from 19 percent last year.
According to the “Bennett hypothesis,” named for former U.S. Secretary of Education William Bennett, federal aid doesn’t help students because colleges and universities just cream off the extra money by raising prices. Peter Wood, now president of the National Association of Scholars, recalls numerous meetings of college administrators where the topic was setting tuition for the next year.
“The regnant phrase was ‘Don’t leave money sitting on the table,’” he writes. “The metaphoric table in question was the one on which the government has laid out a sumptuous banquet of increases of financial aid. Our job was to consume as much of it as possible in tuition increases.”
Where does all that money go? Much of it to lavish spa-like facilities and grand new construction, including $100 million or so for multicultural centers and sports stadiums. The debt taken on by colleges has risen 88 percent since 2001, to $307 billion. Jeff Selingo of the Chronicle of Higher Education writes about a “lost decade” of wild campus spending: “The almost insatiable demand for a college credential meant that schools could raise their prices and families would go to almost any end, including taking on huge amounts of debt, to pay the bill. In 2003, only two colleges charged more than $40,000 a year for tuition, fees, and room and board; by 2009, 224 were above that mark.” And now many are inching toward (or past) $50,000 a year.
A good deal of the money also goes to a spreading bureaucracy of administrators, who now outnumber teachers on American campuses. They work in multicultural programs, deal with the blizzard of government paperwork, and have job titles unheard of a decade or so ago: “Assistant Director of Residential Education,” “Vice President for Strategic Enrollment Management,” and “Student Services Program Coordinator.” Colleges gain another windfall by employing “adjuncts,” the serfs of the academic world, who teach for about $3,700 per course. Adjuncts and other “contingent faculty,” such as lecturers, make up more than half of college and university teachers.
Meanwhile, learning has presumably decreased—students are studying 50 percent less than a couple of decades ago. Courses are often watered down and much easier. Pop-culture courses are spreading—studying Lady Gaga, Madonna, or a TV sitcom is no longer unusual—and grade inflation, which long ago virtually abolished the F, has made the C obsolescent as well. But rigorous courses can still be found, and as Sallie Mae reports, families remain confident that a degree from a good college is a reliable ticket to the good life.
Colleges are entering a critical period, but so far the customers still believe.