Far East Cynic

This is nothing to celebrate.

This past weekend at the commencement ceremonies for Morehouse College, billionaire Robert Smith promised to pay off the student loan debt fully of every student graduating in 2019. When you consider that Morehouse had 396 people graduating. Just for argument’s sake lets assume all of them had student loans, that comes to approximately $25000 – $45000 per student ( depending on what you assume the top line total is.). Now, it is not that Smith cannot afford it – because he most certainly can:

The Morehouse College class of 2019 consists of 396 students, who have a combined estimate of $10-40 million in student loans. It’s a figure that’s close to the price Smith paid in 2015 (almost $20 mil) for his third home, a 6br/9ba Malibu mansion, but still a fraction of the amount Smith’s net worth has grown in the past few years (from $2.5 to $5 billion). In 2018, he surpassed Oprah Winfrey to become the richest black person in the US.  His other notable contributions in the eight-figure range include $20 million to the Smithsonian National Museum of African American History and Culture and $50 million to his alma mater, Cornell University. Smith was the first African-American to sign the Giving Pledge, the initiative started by Bill Gates and Warren Buffett where the wealthy (primarily billionaires) commit to donating at least half of their wealth by or at the end of their lives.

The news coverage of this has been very complimentary towards Smith. And it should be, it is an extraordinary gesture – one that will do more for these students than any words he could have said in his speech.  As someone who went to college on a scholarship, I know what it was like to start post-college life without a crushing burden of student debt. ( Of course, within a few years a lot of these beneficiaries will be married and incur a massive debt of another type). But still:

I cannot imagine even the most meaningful commencement speech having a larger impact on a student’s life than suddenly being free from tens of thousands of dollars in student loans. Many articles have spoken about the immediate impact on students, how many opportunities have opened up for them and how inspired they are to pay it forward. But this donation has done more than inspire those 400-some graduates — it’s deepened a conversation about student loan debt.

Which is a great point. This act of kindness is not something we should celebrate. We should treat this as what it is – a damning indictment of the current American higher education system. For the first time in US history, total student-loan debt exceeds $1.5 trillion — surpassing both auto-loan and credit-card debt.  That is completely obscene.

Now, several conservative columnists, using the standard “blame the victim” approach of the selfish souls of the Teabagger world, by asserting that students and parents should better assess the cost of a college education. Like most teabagger shibboleths, it has a kernel of truth – but ignores the broader issues. Namely, why is college tuition, especially at supposedly state-supported so f*cking expensive? CNBC toadies blame the government, which is true, only not for the reasons they believe.

The governments to blame are state governments, for getting liquored up on tax cuts and as a by-product continually reducing the share of the college or university expenses that they pay. That’s wrong, especially since it ignores the purpose of state universities and colleges such as my beloved alma mater. To provide affordable education for residents of the state – because investing in your citizens makes them better citizens and potentially more productive taxpayers. States like South Carolina, Kansas and a lot of other bastions of MAGA-dom seem to have forgotten entirely about the Morrill Acts.

New research in the journal Economics of Education Review finds the appropriation-cut-to-tuition pass-through rate has averaged 25.7 percent since 1987. In other words, for every $1,000 cut from per-student state and local appropriations, the average student can be expected to pay $257 more per year in tuition and fees. The research also indicates students are taking on more of the cost of state funding cuts in recent years than they were three decades ago. Before 2000, a student could be expected to pay $103 more in tuition for every $1,000 cut from public funding. After 2000, the figure jumps to $318.

If Betsy DeVos ever took time to actually do her job, instead of just shilling for college loan lenders and certified whack jobs, she would have noticed this set of statistics given by her department.

  CHANGE FROM 2000-2014  
STATE CURRENT TUITION INCREASE IN TUITION STATE FUNDING PER STUDENT SHARE OF TUITION HIKE EXPLAINED BY CUTS
Colorado $15.8k +$7.7k -$7.8k 101.3%
Arizona 10.8 +5.4 -6.0 111.3
California 9.0 +4.6 -5.6 123.2
Florida 7.0 +3.7 -5.6 153.1
Iowa 10.0 +5.0 -5.5 110.9
South Carolina 11.5 +6.4 -5.3 83.0
Georgia 7.2 +3.5 -5.1 147.9
Washington 9.6 +4.2 -4.8 114.3
Mississippi 5.8 +2.1 -4.4 211.2
Michigan 11.3 +4.7 -4.0 85.4
Rhode Island 11.5 +5.1 -3.9 76.4
Texas 7.5 +3.2 -3.9 121.2
Oregon 8.5 +3.5 -3.9 111.2
New Mexico 5.2 +2.6 -3.7 142.5
Ohio 10.6 +3.9 -3.6 91.2
Wisconsin 7.1 +2.7 -3.4 123.3
Hawaii 9.2 +4.0 -3.3 84.1
Massachusetts 9.0 +4.1 -3.3 79.9
Missouri 6.3 +2.2 -3.3 151.3
Pennsylvania 11.0 +3.4 -3.2 92.9
Indiana 8.1 +3.0 -3.2 106.7
Minnesota 8.0 +3.7 -3.2 86.0
Tennessee 8.3 +3.7 -3.1 84.6
Idaho 7.2 +3.1 -3.1 101.2
New Jersey 12.5 +5.5 -3.0 54.8
Connecticut 8.0 +2.4 -2.8 119.1
Kansas 6.6 +2.8 -2.8 98.1
Delaware 14.1 +4.9 -2.6 54.0
Nevada 6.0 +2.5 -2.6 106.0
New Hampshire 13.7 +4.7 -2.6 55.2
Kentucky 8.0 +4.2 -2.5 60.1
Virginia 9.4 +4.2 -2.4 56.6
Alabama 8.6 +4.0 -2.0 49.3
Utah 6.1 +2.9 -1.9 66.6
Maine 8.3 +3.2 -1.6 50.1
North Carolina 7.1 +3.9 -1.6 41.5
Louisana 5.9 +2.5 -1.5 57.8
Oklahoma 5.4 +3.1 -1.5 47.5
South Dakota 6.7 +2.8 -1.4 50.5
Arkansas 5.1 +2.3 -1.2 52.4
West Virginia 5.6 +2.2 -1.1 49.7
Vermont 12.1 +4.7 -0.9 19.0
Nebraska 4.8 +1.8 -0.8 48.3
Maryland 8.3 +2.0 -0.8 37.9
Illinois 9.0 +4.5 -0.4 8.5
New York 6.7 +1.2 -0.4 30.9
Montana 7.0 +2.9 -0.2 8.3
North Dakota 7.2 +3.3 +1.1
Alaska 6.3 +2.6 +3.4
Wyoming 5.1 +0.7 +7.6
Changes in funding and tuition at public universities

Tuition figures are from the most recent year for which data is available.

Source: Department of Education

Notice the trend? It’s in the wrong direction. Now I am quite aware that the problem is more complicated than that, as well as the fact that many states let their infrastructure on Campus go to shit ( as my alma mater did for a while before it became proactive about increasing the endowment). But still:

Even given this significant caveat, however, it is clear that state budget cuts dwarf administrative bloat as a cause for rising tuitions. If funding had held steady, universities could have built new buildings, hired more administrators and tended to other priorities while still keeping tuition hikes in check. With huge budget cuts, big tuition increases were inevitable.


The picture is a bit different at private schools, which do not receive state funding but have nonetheless seen substantial tuition increases. At private nonprofit colleges, the spending categories described above — student services and faculty and administrative salaries — together explain most of the tuition increase over the past two decades. Among for-profit institutions, it is much more difficult to pin down a reason for tuition increases, though 
recent research suggests that one big cause is the generosity of federal student aid: Some institutions may be raising tuition in order to capture as much government-backed money as possible.


The overarching message is that there is no single cause of the tuition boom. The reason for rising costs differs based on the type of institution and the state it’s in, and even varies over time. But, at least among public institutions, the dominant factor has been a steady decrease in support for higher education on the part of state legislatures.

This is why guys like Sam Brownback and Scott Walker need to be consigned to the outer darkness. But they are not the only ones who need greater scrutiny. The banks and other lenders, (shocker!) need to be chastised as well. Some specific things that can and should be done to them and by them are:


These lenders need to show greater forbearance, including developing more flexible payment options and at reduced interest cost. Next, there needs to be an expansion in the government’s existing income-based repayment plan.


Capping the amount of loan repayment to discretionary income at 10% should be a viable option for more borrowers. Doing so would relieve some financial pressure and increase the ability for students to pursue careers that best suit their interests and could provide greater societal benefit. This policy could also have the additive benefit of freeing up disposable income towards important retirement savings. Despite lenders’ willingness to lend, students (and their parents) should be encouraged to borrow only what they need.


More emphasis should be placed on the long-term financial benefits of graduating in four years, exploring needs-based and academic scholarships, and possible grant opportunities.


States can take the lead. Similar to what was just passed in Massachusetts, in January, financial-literacy training needs to infuse high-school curriculum especially around financial decisions related to how to best pay for college and other postsecondary educational opportunities.


Companies also can step up by acknowledging the impact that sizable student debt has on their employees and by being willing to expand existing employee benefits to encompass loan repayments. Employees that commit to long-term employment could see debt reduced. Such good-faith benefits will help attract and retain talent. ( Getting back to one of my continuing themes – employees are more than just “expenses”.SS)


And Congress could finally address the elephant in the room and abolish legal roadblocks so that student-loan debt, similar to other consumer debt, can be discharged in bankruptcy. Doing so will return more control to student borrowers as they address how best to honor their student-loan obligations.

Finally, universities could structure their tuition differently. Like offering
“flat tuition” with just one tuition rate for both residents and non-residents.

Contrary to what you may think, I am not on the “free college” bandwagon. Personally, I think there are more important things we could be paying for with government revenue, such as health care. But governments, particularly state governments – have to be coerced and / or beaten into submission, and made to increase their support for their universities. If the state of South Carolina can afford to give massive tax breaks to companies like Boeing and others, to get them to build plants in their “right to work for less” state, both the state of South Carolina and Boeing can pay more to improve the lives of S.C. citizens and build better citizens and employees.

Which brings us back to Mr. Smith and Morehouse. God bless him for doing an act of great kindness with his wealth instead of just whining for more tax breaks for rich people. But he should not have to be compelled into this act, just because the U.S., as a nation, again refuses to improve itself. Again, as Smith himself demonstrates, the money is there. To quote from his own commencement speech, ” When Dr. King said that the ‘arc of the moral universe bends toward justice,’ he wasn’t saying it bends on its own accord. It bends because we choose to put our shoulders into it together and push.”