New graduates have good reason to celebrate their academic achievements. After all, on average, a college degree remains a good indicator for boosting one’s lifetime earning potential. For many Americans, a college education is a lasting investment in future economic mobility.
After the gilded glow of the cap and gown and the pomp and circumstance of the commencement ceremony fade into memory, reality sets in. The soaring costs of higher education and growing student debt are climbing to unprecedented levels.
College debt creates a significant financial burden on many new graduates. For those fortunate to land a job in the still struggling economy, many will discover how hard it is to stretch a paycheck to cover the bills. Making ends meet – let alone trying to get ahead – is that much harder with more than $1 trillion in outstanding student loans in the United States.
The lion’s share of four-year degree recipients borrows money to attend college. The percentage has increased from 45 percent to about 66 percent in the last decade. After these graduates rejoice in flipping their tassels to the other side of the mortarboard, they not only walk away with a diploma, but they also walk away with an average debt of $23,000. That figure jumps to nearly $50,000 for less affluent students who choose to attend private colleges and receive less need-based financial aid.
So, what factors are causing the explosion in college tuition? And, does the student’s debt burden square with his or her earning potential post-graduation?
In the U.S. Senate, I’ve led efforts to make it easier for families to save for college. In the landmark 2001 federal tax laws, I secured a provision to make tax-free savings plans for college a permanent part of the tax code. Encouraging families to save for college rather than relying on student loans can help many future graduates get off to a stronger start after graduation. As then-Chairman of the Senate tax-writing committee, I also helped secure the tax deduction for college tuition and the tax deductibility of interest on student loans.
Now, even the longstanding sky-high rate of medical spending in the United States is less than the exploding growth of college tuition and fees. Public policy needs to find a better way to expose the true costs of paying for a higher education and educate consumers. That’s why I’m working to give American families better tools to make informed decisions when sending their students off to college. More useful information is necessary to help students check the value and earning potential of various college degrees. Not all degrees are created equal. Congress should have a serious debate about helping members of the next generation find the best path for their own personal pursuit of happiness as productive members of society. Those pathways ought to be as broad and diverse as the next generation, from military and public service to vocational training, college, and post-graduate degrees.
My efforts to address escalating tuition hikes and student debt include my crusade to shine a bright light on public and non-profit private colleges with well-funded endowments that park their assets in tax-preferred vehicles. Hoarding exorbitant assets in tax-preferred “rainy day funds” ought to be redirected towards lowering tuition for students and their families. Through my rigorous oversight of the tax-exempt sector, including universities, hospitals and media-based ministries, I’m working to make sure non-profits are holding up their end of the bargain for the public good. Tax-exempt colleges bear a unique responsibility to leverage their tax-advantaged resources to educate the public. That’s why I spearhead efforts to bring greater transparency to college revenues and expenses. The public has a right to know how tax-advantaged dollars at tax-exempt higher education institutions square with their mission. My review of soaring growth at college endowment funds a few years ago prompted several prominent schools to offer more generous student aid assistance. As public awareness builds, let’s hope the trend continues. Whereas attending college is not an entitlement, colleges that benefit from tax-advantaged vehicles and tax-exempt status do bear a social contract to make higher education more affordable and accessible to the public.
Congress can take steps aimed at reining in college costs. In May, I joined bipartisan forces in the U.S. Senate to try to bring greater transparency to the true cost of college tuition and fees. The bill we proposed would cut through the clutter of financial aid letters that families receive from prospective colleges. Decoding these letters to understand what is actually given, borrowed and owed can be next to impossible. By having a clear picture in standardized language what students’ debt burden will be after graduation, families would have an apples-to-apples cost-comparison to make with other colleges. This ought to help students avoid taking on excessive debt and become more discriminating shoppers. That alone could help control the soaring costs of college. Colleges are increasingly competing to one-up each other to attract students, either through apartment-style housing, gourmet food services or amazing amenities that other institutions cannot match. Empowering students and their families with better information about the cost and worth of a degree would help spark a race among colleges to provide a high-quality education at a good price.
Diplomas tied down with overwhelming student debt make it harder for the next generation to scale the ladder of opportunity.