When tuition increases at public colleges gained steam in the early 1990s, I worried that no one seemed to take the astronomical price hikes seriously. Now there is a new crisis upon us: The very politicians who jacked up rates at our public colleges have bold, dangerous plans to “save” us.
Former Republican Governor of Indiana and now Purdue President Mitch Daniels recently received national praise with his “Back a Boiler” initiative, ostensibly meant to address the skyrocketing student debt load. On the face of it, the plan seems far more humane than the policies of the private credit collectors who service the nation’s $1.2 trillion student debt burden. Unlike credit card debt, this student debt cannot be erased through bankruptcy protections.
This, unfortunately, is the portrait of the new university: low-wage faculty teaching students who have mortgaged their futures to loan sharks.
In exchange for an education loan of say, $15,000, the lender would require a percentage of a student’s future earnings in return. Let’s say the borrower’s interest is the lowest 4.23 percent rate charged to engineering majors on the assumption one earns around $60,000 a year with such a major: The graduate would pay more than $25,000 back over the span of 116 months. The best part, say supporters, is that if a student remains unemployed or under-employed, the loan repayment will adjust accordingly. Of course, if a student hits it big, then it’s a bonanza for the lender. If this sounds like a Milton Friedman libertarian fantasy, it is. Proposed by Friedman in the 1970s, “Back a Boiler” is less like a student loan and more like an investment in a stock portfolio or piece of flesh-and-blood real estate.
It’s debatable whether this plan will do anything to control costs of higher education, given the reasons why tuition at colleges and universities has gone up in the first place. The culprit is usually not faculty salaries, climbing walls, fancy dormitories or even the ever-swelling administrative bloat (which is a consequence, rather than a cause of privatization, as money must be managed from multiple and often conflicting sources). It’s quite simple: in the last 10 years, state funding for higher education dropped by 30 percent. In the last two decades, the share of public funding at state research universities went from an average of 70 percent (and even higher at public colleges), to often less than 30 percent. Many research universities now rely on less than 10 percent of their operating costs from the state. Some of that is made up by private foundations and grants; most of it is made up by raising tuition and fees.
Purdue President Daniels is no stranger to slashing budgets or increasing tuition. During his term as governor of Indiana, he slashed $150 million from higher education. Tuition at Purdue increased nearly 100 percent due to those cuts, inflating the student debt burden to an all-time high of more than $26,000. As Dr. Harry Powell, faculty liaison to the governing board of the University of California system, summarized one legislature’s views: “The student is your ATM. They’re how you should balance the budget.”
Daniels’ previous mission as governor of Indiana included waging war on teachers’ unions, denying them collective bargaining rights, pushing non-union charter schools and even banning books — demanding in 2010 that Howard Zinn not be taught in any public school or university school of education.
Higher education is a social good, not something to be engaged in solely for private gain.
Like students, faculty have borne the brunt of these budget cuts. Faculty at public universities were once nearly all tenured or tenure-track — now on average, fewer than 25 percent of university faculty are tenure-track. This means that between one-half and two-thirds of university instruction is done by lecturers and adjuncts: faculty with no free-speech protections, often on short-term contracts. Most adjuncts are paid between $2,000 and $5,000 per course — often making just above minimum wage. One adjunct in my own department said she calculated her hourly pay at under $3.
This, unfortunately, is the portrait of the new university: low-wage faculty teaching students who have mortgaged their futures to loan sharks. It is a crisis indeed. After years of attacking public higher education, has Daniels finally seen the light?
I would suggest that Daniels’ new plan has little to do with lowering student debt burdens, just as attacking teachers’ unions has little to do with accountability. It is about turning a public resource into a private source of investment. To Daniels, not all human stock portfolios are created equal. If you are engineering student, according to his plan, then your interest rate is 4.23 percent. Major in something deemed more risky, such as English, and a student would look at a whopping 10 percent interest rate. Should an English major make a yearly income equivalent to an engineering major, the additional charge could come out to an extra $4,000 per annum.
Of course, the point is not only to make more money for investors — it is to signal what kind of education is valuable to the market. That research has shown English majors actually fare about the same as engineering majors on long-term income trends is beside the point: The plan is to use finance capital as a tool of educational policy.
The idea of tying future earnings to interest rates may sound rational to a banker, but it raises the question of what higher education is for. Do we need more people who can read and teach literature, think critically through important social problems or find solutions for our fossil-fuel economy? To answer that question, Daniels would have us ask what the returns each activity will yield for investors.
Colleges are more than just collections of buildings and content-experts. They are public institutions in which the exchange of ideas, public debate, civic engagement, creativity and critical thought are designed to flourish. While public universities are engines of economic growth, they are purposely designed not to adhere to market efficiencies. Writing papers, reading literature, learning differential equations, speaking foreign languages, engaging in long discusses about history and philosophy — these are not activities that generate revenue. Nor are they designed to. While knowing Russian or reading Hegel may sharpen one’s critical faculties, and in the long term be good for economic growth, that’s not their purpose. They are designed to turn students into thinking people, and more importantly, into critical citizens. In other words, higher education is a social good, not something to be engaged in solely for private gain.
And because of decades of disinvestment, financial schemes such as “human capital contracts” (as these income-sharing agreements are referred to in the hedge fund industry) are on the rise. Human capital contracts have become a major talking point in conservative policy circles as a way to further privatize and incentivize risk in the public education sector. They were a central part of presidential candidates Marco Rubio and Chris Christie’s educational plans, and the Oregon state legislature has worked for years to develop a program called “Pay It Forward.”
In general, these human capital contracts are part of a larger trend to use the soaring price of higher education to further political goals. In North Carolina, tuition reductions are being deployed as a means to dramatically cut funds for historically Black colleges. President Obama’s higher education plan, announced last year in his State of the Union address, also used the crisis of student debt and rising tuition to introduce a “rating system” that would rank college graduates’ salaries as a means to award or withhold public university funds. Like Daniels’ plan, President Obama’s rating system would emphasize the role of college as a financial investment, rewarding students who were able to maximize profits from their increased human capital.
What if market logic is the problem? Markets can’t tell us much about what makes a good life or how to be a critical citizen.
President Obama’s plan, like these “human capital contracts,” would not only warp the mission of colleges and universities, they would exacerbate already stark inequalities in higher education. Universities with low retention rates tend also to be universities with higher numbers of first-generation college students. And as economist Mike Konczal points out, a white man born rich who attends a less selective school will make far more money than a poor woman of color who attends an Ivy League. If auctioning oneself off to a hedge fund based on future earnings actually hews to the math of the capitalist marketplace, these “human capital contracts,” much like President Obama’s plan, will reward those who are already financially well off.
Daniels, who is an advocate of Milton Friedman’s doctrine and other free market orthodoxies, believes that all problems are to be solved with market logic. But what if market logic is the problem? Markets are efficient at cutting costs and distributing resources. But they can’t tell us much about what makes a good life or how to be a critical citizen. This is why Bernie Sanders’ plan for “free tuition” is not just about “free stuff.” Sanders recognizes the fundamental truth that students want less economic vulnerability from the market, not more.
It’s no accident that public higher education, like health care, has become the site of struggle within the Democratic Party. It has become symbolic for a wider struggle over a vision of the United States — one in which we are private consumers, maximizing our rational self-interest in a competitive market place, or part of a larger social fabric built on solidarity and principles of broad, inclusive democracy.
Which in the end, is likely why Daniels wants to do the public university in for good — at least a university that does anything other than train people, in George Carlin’s words, to be just smart enough to run the machines and do the paperwork, but just dumb enough to passively accept the status quo. In other words, be a good return on someone’s investment.
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