Bookmark and Share

Rising College Costs Threaten Our Future

Interest rates just part of the affordability problem.

Congress and the presidential candidates are debating whether to let the rates on student loans double to 6.8%.  Although this argument has grabbed the headlines, it’s little more than a sideshow.  Even if rates are kept down, the student loan program falls far short of meeting rising college costs.  It doesn’t come close to enabling America’s youth to acquire the skills they need to compete in a tough global marketplace.

Education is the path to progress, both for individuals and for the nation. America has invested in education for more than a century. We built land grant colleges in 1862; made grade school free and compulsory by 1918; educated 8.8 million veterans on the G.I. Bill from 1944 to 1956; and bolstered science in the 1960s in response to Sputnik.

We owe our freedom to these investments, as well as our prosperity. In World War II we barely won the race to develop radar and the atomic bomb. Without America's investment in higher education, we could easily have lost.

Regardless of what happens to student loan interest rates, college is slipping out of reach for more and more Americans. The real problem is that states have drastically reduced their support for state colleges and universities. The reductions were caused in part by the recession, in part by unfunded retirement costs, and in part to pay for tax cuts. As a result, state colleges and universities have boosted tuition, trimmed enrollment, and eliminated many courses.


For example, the state of California has slashed its support of the California State University system. To cover the gap, the university has hiked tuition by 15 percent per year on average, a four-fold increase since 2001. Nationally, tuition has gone up 8 percent per year on average, while incomes have been flat for most people.

To make matters even worse, state colleges and universities are accepting fewer in-state students so they can fill their classes with out-of-state and foreign students who pay much more. The University of California has more than doubled its recruitment of out-of-state students who pay about $36,000 per year. Meanwhile, it has denied admission to nearly 20,000 deserving and fully-qualified California residents, who would pay only about $13,000 per year. This shift brings in nearly a half billion dollars in extra revenue to the university each year.

The U of C (University of California) is on its way to becoming the U of ABC (Anywhere-But-California). At the current rate, by 2020 more than half the students will come from out of state. For all practical purposes, this trend will kill affordable higher education in America.

The problem is greatest in the STEM fields: science, technology, engineering, and math. These fields account for more than half of America's economic growth. STEM provides the greatest benefit to employers, the greatest earning potential, the greatest protection from unemployment, and the greatest overall contribution to the economy. Yet, about 22 percent of the jobs in STEM fields are filled on a short-term basis by foreign-born workers on H-1B visas. Many of these highly skilled workers ultimately return to their countries of origin and build world-class companies there, rather than here. It's a loss we can't afford.

Increased funding for higher education is only part of the answer. We need to cast a wide net in our search for innovative solutions. For example, the best lecturers have discovered they can distribute their knowledge far more efficiently over the Internet than through the universities of today. Personal tutorials can be conducted over Skype. Universities can slash the administrative costs that have soared over the past decade. The college experience need not involve four years in residence in low-rise ivy-covered buildings arranged in a quad. There are other ways to impart knowledge and skills.

In conclusion, the interest rate on student debt is just a small part of the problem of college affordability. To keep America strong we must ensure that education is within reach of all who are ready to pursue it. It will take a combination of bigger budgets, innovative delivery, and new strategies for financing to prepare our youth for the jobs of the future and to help American companies to compete.

May 4, 2012

(A version of this was posted earlier at