Monday, April 22, 2019

Thoughts on Warren’s Proposed Jubilee

Senator Elizabeth Warren of Massachusetts, as part of her campaign for the Democratic Party nomination for President in 2020, has proposed forgiving existing college loans, as well as making public colleges and universities tuition-free.

A few thoughts.

People sometimes lose track of how ridiculous college costs are, so I fired up my internet machine and pulled some numbers.  I’m based in New Jersey, so I’ll use figures for Rutgers, which is the public flagship university here.

In-state full-time undergraduate tuition, Rutgers, 1990: $2922.

That figure in 2019 money:  $5597

Current cost of in-state full-time undergraduate tuition, Rutgers: $11,886

Factor by which tuition has outstripped inflation: 2.12

That’s only tuition; that’s not counting a “college fee” of over $1300, or anything else.  Tuition alone has more than doubled after accounting for inflation. Let’s try Brookdale:

In-county full-time undergraduate tuition, 1990: $1128

That figure in 2019 money: $2161

Current cost of in-county full-time undergraduate tuition: $145 x 30 = $4350

Factor by which tuition has outstripped inflation: 2.01

Is that a sign of out-of-control spending?  Nope. The operating budget has been declining for years.  It’s a sign of a combination of public disinvestment and the continuing escalation of the cost of health insurance.

Running at twice the rate of inflation for decades is unfair to those who came late to the party.  That’s not usually how we think about it, but it should be.

In that light, offering some mercy to folks who came late to the party seems reasonable.  It’s far from an entire solution, of course; price restraint requires rethinking the underlying business model, most assuredly including a more realistic (and sustained) level of operating funding.  Among other things, that would require rethinking the fatalistic and widespread assumption that concentrating all economic growth among a very few people is normal, natural, and inevitable.

Forgiveness of existing debt would empower plenty of folks in their 20’s and 30’s to start families, buy houses, and generate the kind of consumer demand that lifts the economy as a whole.  I don’t buy the argument that debt forgiveness is some sort of moral hazard, either. Yes, my loans are paid off, so I wouldn’t get a direct benefit. But if all those millennials freed of debt start bidding up house prices, then I get my benefit in the form of property appreciation.  These things are connected. And if the morally questionable behavior at hand is “going to college,” then I’m not exactly panicking.

Starting with a high bid -- total forgiveness -- allows room for compromise to get it passed.  I could imagine forgiving the interest on debt, for instance, while maintaining that folks have to repay the principal.  That would strike me as a reasonable concession to get it through.

The more important piece is the forward-looking part.  If colleges are deprived of tuition revenue, will the Feds or the states be willing to replace that lost revenue to colleges (and increase the total, to accommodate greater demand that suddenly won’t pay for itself)?  If they aren’t, then it’s an extinction-level unfunded mandate. If they are, then I’m happily on board.

For public colleges, that replacement could be straightforward enough.  Senator Warren has already specified that for-profit colleges won’t be eligible.  But America also has a large non-profit private sector in higher ed -- ranging from the Harvards to the St. Somebodys -- some of which charge remarkably high tuition.  I could imagine folks from that area raising some serious objections.

I have no illusions that a plan of this scope will pass anytime soon, and there’s no shortage of devils in the details.  But kudos to Senator Warren for raising the question. Project the current trends forward a couple of decades and the numbers become even more absurd.  Clearly, the trends are unsustainable. Whether through her plan or someone else’s, we need to have that conversation. Otherwise, if you think tuition is bad now...