Because the price of tuition grows faster than personal income, it’s rapidly becoming unaffordable to average families without reliance on their retirement savings, an inheritance or loans, University of Tennessee Professor Glenn Reynolds pointed out in a lecture last week to Federal Reserve Bank Board members.
Reynolds, who is also author of The Higher Education Bubble, said college loans are just a temporary solution because graduates often don’t earn enough to pay them back. He describes the situation as a slow-motion train wreck.
“You’re not doing families a favor by loaning them money when they can’t earn enough money to pay it back,” he said.
For students pursuing degrees with limited earning power, they might as well spend the money on a sports car, he said. College is a consumption item rather than an investment for them.
“If you have to borrow into the six figures, it has to improve your life a lot to be worthwhile,” Reynolds said.
Others are sounding the alarm as well, warning of both the short-term economic dangers of a collapse in the $1 trillion student-loan bubble of outstanding debt nationally as well as the long-range impact of workers unprepared for the increasingly complex jobs of the future.
“We are at a financial tipping point,” wrote Bonnie Kerrigan Snyder, author of The New College Reality, published last year. “Most middle-class students and their families see no way to meet growing tuition costs other than to assume student loans.”
Georgia’s public colleges and universities defend raising tuition, saying they have to make up for the General Assembly holding back on taxpayer funds.
Critics point out, however, that even in years when the Legislature has fully funded the University System of Georgia’s requests, the Board of Regents still boost tuition.
“One of the main reasons that many colleges today charge such high prices is simply because they can,” Snyder wrote.
Families haven’t postponed college education because of high prices the way they do with vacations, restaurant dining or electronic gadgets -- even though Reynolds says they should.
Georgia Tech, the University of Georgia and a few other state schools turn away thousands of qualified applicants each fall because they are at capacity. The other schools have enjoyed steady enrollment growth until this year when admission standards shut some out.
In the coming weeks, the University System will prepare its recommendation for the board’s next round of tuition increases for the April meeting.
Last April, the first year under the leadership of Gov. Nathan Deal’s Chancellor Hank Huckaby, the increase of 2.5 percent for the average student was the smallest in a decade. Those at UGA and Tech felt a 5 percent bump.
“The board and I are very sensitive to the present economic realities facing our students and parents,” Huckaby said at the time.
Deal has made it a state goal to get 60 percent of working adults to complete a four-year or technical-school degree. He convinced private companies and all the state schools to contribute to a needs-based scholarship, and he is shifting the funding formula for colleges to reward those like Tech and UGA that have high graduation rates.
He hasn’t gone as far as other governors like Rick Perry in Texas and Rick Scott in Florida who have challenged colleges there to reduce a college degree to just $10,000.
“I think it will put a lot of downward pressure on tuition,” Reynolds said.