Rising Debt: Who Owes and What Are the Consequences

by James V. Koch

Student Debt


Is there anyone reading this who disputes that the cost of higher education has risen much faster than either the Consumer Price Index or median household incomes? In our book, “Runaway College Costs,” we illustrate what this means. In 1999-2000, a typical non-supervisory worker in a manufacturing plant had to work 244.4 hours to pay the average level of tuition and fees at the typical four-year public university. By 2017-2018 , however, 446.7 hours of work by the same individual were required to do the same. Simply put, an increasing number of Americans, talented or not, cannot afford to attend college.

But many, nevertheless, try to do so and the almost inevitable result has been rising student debt — to an almost incredible $1.54 trillion in first quarter, 2020. Of students, 70 percent who earn a bachelor’s degree go to into debt to do so . Independent research tells us that student debtors are less likely than non-debtor students to buy houses or automobiles, less likely to save for their own retirements, more likely to have negative net worth, and more likely to still be living at home with mom and Dad

Are rising costs and mounting student debt inevitable? No. Indeed, while the reasons why college costs have risen so rapidly are multiple, most analysts have ignored an explanation staring them straight in the face — the actions of college governing boards. Virtually every cost increase on every campus must be approved by a college governing board. The members of these boards are usually labeled trustees and this label implies they hold a trust. Trustees not only approve cost increases, but typically do so unanimously. A study of the votes of more than 300 trustees over a three-year period in Virginia revealed only three occasions where even a single trustee voted against a proposed cost increase.

Prior to “Runaway College Costs,” scant attention has been given to the roles that trustees play in college cost inflation. Trustees, however, “control the spigot” as one college president explained it to us. About 80 percent of public college trustees are appointed by governors, with much smaller numbers being elected or otherwise appointed.

Understanding how trustees attain their positions stimulates one obvious solution — enact legislation that results in better qualified, more knowledgeable, and better trained individuals serving on college boards. Currently, most state statutes concerning higher education say little or nothing either about the qualifications of trustees or what they should be doing. Essentially, trustees are on their own in most states. Consequently, they do not understand that their very name, trustee, suggests they should act as fiduciaries who protect the best interests of students, parents, and citizens. They should not evolve into uncritical advocates of the institution or its president and must recognize that what is good for college presidents, senior administrators, and faculty may not also be good for students, parents, and citizens.

Writing new laws to improve the situation is not an overly difficult task. Model statutes already exist that can be modified to fit a particular state. The major and perhaps insurmountable problem is politics. Trustee appointments usually reflect political realities — who has given money to politicians in power, whose appointment would settle a political debt, whose appointment would appeal to a particular political constituency, or straightforward friendships. The needs of the board or institution in question are often secondary.

“Are you kidding?” is the reaction of most governors and legislators to the notion that they give up their ability to place individuals on college governing boards. Nevertheless, experience suggests they can be convinced to specify trustee qualifications and duties, to require trustee training, and to outline overall goals for higher education institutions. Trustees need not be forced to work from a blank slate as so many are currently. One of their primary objectives should be to make college more accessible and affordable.

“Runaway College Costs” is a practical guide to how the trustee appointment process might be tweaked and (most important) the things trustees can do to improve the situation. I will discuss these things in detail in my next post.

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