In a much-hyped speech on the economy today, President Obama actually addressed a plethora of issues ranging from health care, home ownership, Afghanistan, equal rights, and yes even education. One part of the speech caught my attention:
I’m also going to use the power of my office over the next few months to highlight a topic that’s straining the budgets of just about every American family – the soaring cost of higher education.
Three years ago, I worked with Democrats to reform the student loan system so that taxpayer dollars stopped padding the pockets of big banks, and instead helped more kids afford college. I capped loan repayments at 10% of monthly income for responsible borrowers. And this week, we’re working with both parties to reverse the doubling of student loan rates that occurred a few weeks ago because of Congressional inaction.
Being a student and hopefully soon a full-time employee within the world of higher education, I am glad to see the President addressing this growing problem. And make no mistake, this is a real problem:
Between 2000–01 and 2010–11, prices for undergraduate tuition, room, and board at public institutions rose 42 percent, and prices at private not-for-profit institutions rose 31 percent, after adjustment for inflation.
Addressing the doubling of student loan rates is an important part of a solution, but it is only a minor step.
Now, if we could get something like Elizabeth Warren's bill which pegs student loan interest rates on Stafford loans to the rate that banks receive from the federal reserve to pass, then we would be on to something. Her proposal makes a lot of sense: if banks can borrow money from the federal government at 0.75%, then students should not be paying 6.8% on the money they borrow to get an education. Here are her own words on why the status quo is morally indefensible:
Instead of helping our students, the government is making a profit on student loans. That is wrong. It is morally wrong. That is obscene. The government should not be making profits off the backs of our students. Period.
However, the larger problem facing education costs is the continuation of states to cut education funding in their state budgets. Over half of the states in this country cut spending per student for this year. And while some states are slowly edging education spending back up, we are still not where we were before these drastic cuts. In the state of Florida, where I live as well as attend and work for a public university, I am glad that our state's most recent budget restores "the $300 million in recurring funding to our university system with performance measures." The new budget also includes some other important improvements to our state's education funding, but it is difficult to be too ecstatic about these increases when compared with the numerous, repetitive, and drastic cuts over the last few years.
To focus on the areas over which states exert the most control, Colorado, Florida, Maine, Missouri, Nevada, North Carolina, North Dakota and Virginia received a grade of “D” or “F” on both State Effort and Funding Distribution. So not only do these states dedicate a low proportion of their fiscal capacity toward their education systems, they also have allocated that money in a way that does not systematically ensure that districts with higher poverty levels get more funding. . . . Three states — Florida, Missouri and North Carolina — received low ratings in each of the four indicators. These are low-effort, regressive states receiving a grade of “D” or “F” on both indicators, and ranking in the bottom half in terms of the overall level of funding provided and Coverage.
My point is that what President Obama is talking about is a good start to addressing educational costs, but the reality is that addressing student loan borrowing rates doesn't actually deal with the cost of education, but rather with how much it costs students to borrow money to pay for their education. The "soaring cost of higher education" must be addressed at all levels and with a multi-faceted approach that addresses all the factors involved in the significant rises of late.