One of the most remarkable aspects of the recent regents’ discussion of the future of the university was the lack of discussion of the quality of instruction. While there was some statements that students are still happy with their education and the university is doing a good job at graduating students in a timely fashion, the quality of education was rarely brought up. Instead, the main focus was on how the UC can continue to do what it is doing by moving money around and engaging in some creative financing.
Some possible solutions suggested are to sell off parking and lease it back and reduce the university’s support for healthcare for its employees. There is also the idea to increase nonresident enrollments significantly and to charge different tuition rates for different degrees. The most creative and threatening suggestion was “Eliminate some or all State funding for a few campuses and socialize savings to others, resulting in no restrictions on tuition or nonresident enrollment for campuses with reduced State funding.” The final suggestion means total privatization for the elite campuses, while the other campuses are left to fight over diminished state funds. In reality, the current policies of letting campuses keep their tuition dollars and distributing state funds according to a formula that favors the campuses with medical students and doctoral students moves the UC in the direction of the privatization for the elite campuses and socialization for others model.
While the regents stressed the decreases in state funds, we have recently learned that UC payroll has gone up 29% in the last six years, so the loss of public support has been coupled with a major expansion of the university, especially in the medical area. In fact, there are now many more high-paid employees, but there are fewer faculty and more students. According to the retreat PowerPoint, the state now funds just 11% of the budget, but 97% of the faculty are supported by core funds. This would appear to mean that faculty now are only supported by state funds and tuition, which begs the question of where does all of the money generated from grants, endowments, medical services, and auxiliaries go?
Thursday, September 13, 2012
Thursday, August 30, 2012
Pension Politics
It looks like the legislature and the governor are close to a deal on pensions. While they have decided to exclude the University of California from the reforms, everyone inside and outside of the UC system should be concerned about the politics behind this move to rein in public pensions. First of all, one of the main motivations to make this deal now is that many Democrats feel that the best way to coax voters to support the governor’s tax initiative is to show citizens that the Dems are serious about controlling future governmental expenditures. Also, many Democrats in the legislature believe that they can win a super-majority in both houses, and so they are going after seats in swing districts.
However, there are several broad issues concerning this pension reform that we should consider. First of all, what does it say about unions and the Democratic party when they lead the way in reducing benefits for future workers. In the proposed new system, many workers will have a hard time waiting until 65-67 to retire, and the change in retirement age will reduce their retirement checks by a large amount (during a time when retiree healthcare costs will continue to increase). While it looks like the Dems are being responsible, who is protecting the most vulnerable workers? Another major problem is that the deal undermines collective bargaining and the ability of workers to trade wage increases for retirement security.
What the current discussion of pension reform fails to mention is that the major cause for the underfunding of pension plans is investment losses, and this reform puts all of the blame on the cost of benefits. What we need is real Wall Street reform, which would protect pension funds against huge losses. It also does not help that the Fed is keeping interest rates so low that pension funds have to move almost all of their money from bonds to stocks and other higher risk asset classes. Moreover, the recent Libor scandal shows that pension funds have lost significant value because banks have manipulated interest rates.
History may remember this period as a time when all of the major liberal institutions—unions, the Democratic party, and public employees—accomplished the goals of the conservative revolution. While it may seem that we are only trying to show the public that we are fair and rational, we are actually feeding the Romney-Ryan rhetoric that the only solutions to our problems is to cut the benefits of the next generation.
However, there are several broad issues concerning this pension reform that we should consider. First of all, what does it say about unions and the Democratic party when they lead the way in reducing benefits for future workers. In the proposed new system, many workers will have a hard time waiting until 65-67 to retire, and the change in retirement age will reduce their retirement checks by a large amount (during a time when retiree healthcare costs will continue to increase). While it looks like the Dems are being responsible, who is protecting the most vulnerable workers? Another major problem is that the deal undermines collective bargaining and the ability of workers to trade wage increases for retirement security.
What the current discussion of pension reform fails to mention is that the major cause for the underfunding of pension plans is investment losses, and this reform puts all of the blame on the cost of benefits. What we need is real Wall Street reform, which would protect pension funds against huge losses. It also does not help that the Fed is keeping interest rates so low that pension funds have to move almost all of their money from bonds to stocks and other higher risk asset classes. Moreover, the recent Libor scandal shows that pension funds have lost significant value because banks have manipulated interest rates.
History may remember this period as a time when all of the major liberal institutions—unions, the Democratic party, and public employees—accomplished the goals of the conservative revolution. While it may seem that we are only trying to show the public that we are fair and rational, we are actually feeding the Romney-Ryan rhetoric that the only solutions to our problems is to cut the benefits of the next generation.
Wednesday, August 8, 2012
The state of UC
The stakes have gone up for Prop 30, the governor's tax initiative, which will cost the UC $375 million in state funding if it does not pass. In turn, the UC will discuss at the next regents meeting a plan to raise tuition by 20% in case the voters do not support the proposition. It should be clear to the citizens of California that a small tax increase will help protect higher education in California; however, the proposition is only polling at 52%.
A related issue is how the UC spends the money it does get from the state. As last year's state audit showed, state funds are distributed to the campuses on an unequal basis, and the result is that the smaller campuses without medical schools and law schools are poorly funded. Also, the campuses with the highest number of under-represented minority students receive the lowest funding.
In order to correct this problem of unequal funding, a task force has been working on increasing campus equality, but they have run up against several hurdles. First of all, UCOP refuses to provide an estimate of how much it costs to educate undergraduates versus graduates versus medical students. Instead, they have helped to develop a weighted system where each resident undergraduate and masters level student counts as 1, each doctoral student counts as 2.5 and each medical student counts as 5. The current level of state funding per campus is then divided by the student enrollment level for each of these student groups. Even when we take into account the fact that some campuses have more medical and doctoral students, there is still an uneven distribution of funds.
The major problem with this whole methodology is that it does not prevent some campuses from simply increasing their number of highly funded medical and doctoral students. Moreover, campuses are now able to keep their tuition dollars, and the same campuses with medical centers and/or high levels of doctoral students are also the ones with the highest number of out-of-state students. The end result will thus be that rich campuses will get richer, while the poor campuses will get poorer.
While the task force does recommend a slow process of increasing the funding of some of the campuses to keep up with the weighted average of UCLA per student funding, the task force failed to justify its calculation of the weighted averages. Since no one is even trying to estimate how much it actually costs to educate different types of students, it is unclear how the task force is making its calculations. While it is very possible that we will see a growing inequality of funding among the campuses, it is not clear that the campuses with more funding will increase their support for undergraduate education. For example, if a campus brings in more medical and doctoral students to increase their share of state funding, and these students cost much more to educate than the assumed weighted averages represent, then the wealthier campuses will have to continue the process of using undergraduate tuition to subsidize expensive graduate and professional program. Until UCOP decides to actually estimate the actual cost of education, all of the decision makers will be making important choices in the dark.
A related issue is how the UC spends the money it does get from the state. As last year's state audit showed, state funds are distributed to the campuses on an unequal basis, and the result is that the smaller campuses without medical schools and law schools are poorly funded. Also, the campuses with the highest number of under-represented minority students receive the lowest funding.
In order to correct this problem of unequal funding, a task force has been working on increasing campus equality, but they have run up against several hurdles. First of all, UCOP refuses to provide an estimate of how much it costs to educate undergraduates versus graduates versus medical students. Instead, they have helped to develop a weighted system where each resident undergraduate and masters level student counts as 1, each doctoral student counts as 2.5 and each medical student counts as 5. The current level of state funding per campus is then divided by the student enrollment level for each of these student groups. Even when we take into account the fact that some campuses have more medical and doctoral students, there is still an uneven distribution of funds.
The major problem with this whole methodology is that it does not prevent some campuses from simply increasing their number of highly funded medical and doctoral students. Moreover, campuses are now able to keep their tuition dollars, and the same campuses with medical centers and/or high levels of doctoral students are also the ones with the highest number of out-of-state students. The end result will thus be that rich campuses will get richer, while the poor campuses will get poorer.
While the task force does recommend a slow process of increasing the funding of some of the campuses to keep up with the weighted average of UCLA per student funding, the task force failed to justify its calculation of the weighted averages. Since no one is even trying to estimate how much it actually costs to educate different types of students, it is unclear how the task force is making its calculations. While it is very possible that we will see a growing inequality of funding among the campuses, it is not clear that the campuses with more funding will increase their support for undergraduate education. For example, if a campus brings in more medical and doctoral students to increase their share of state funding, and these students cost much more to educate than the assumed weighted averages represent, then the wealthier campuses will have to continue the process of using undergraduate tuition to subsidize expensive graduate and professional program. Until UCOP decides to actually estimate the actual cost of education, all of the decision makers will be making important choices in the dark.
Tuesday, June 5, 2012
Student Loan Debt Collectors
According to a report from the National Consumer Law Center, “The U.S. Department of Education (the Department) relies on an increasing number of private contractors to collect the approximately $67 billion in defaulted federal student loan debt.” Moreover, not only is the government on the hook for an increasing number of student loan defaults, but it is paying outside collection agencies huge sums of money to collect these debts: “The Department paid contractors almost $1 billion in commissions in 2011.” Thus instead of providing free public higher education, the federal government is lending students huge amounts of money that they can never pay back, and the result is that the feds have to hire expensive private contractors to collect the cash.
One reason why the federal government spends so much on debt collectors is that these outside agencies receive bonuses for their aggressive handling of student debt: “using a metric called the Competitive Performance and Continuous Surveillance (CPCS) score. The percentage of dollars collected on federal student loan accounts determines the majority of a contractor’s CPCS score, with a maximum of 70 possible points. The second metric is Account Servicing Percentage which calculates the percent of federal student aid accounts awarded to the PCA that have activity as a result of the PCA’s efforts, either through litigation, an administrative resolution, or actual payments. The top performer for this metric will receive 20 points. Finally, PCAs may earn up to 10 points for their Administrative Resolution Percentage which tabulates how many federal student aid accounts the PCA referred back to the Department for a non‐cash administrative resolution (i.e. disability discharge, death of borrower, etc.).” In this system, outside agencies are given an incentive to harass students and force them to hand over all of their money to the collectors.
Furthermore, since these private agencies increase their earnings if they collect more from students, they do not pursue other forms of reconciliation, like writing down the principle or extending the payments. In fact, borrowers in default are subject to the government’s extraordinary collection powers that last a lifetime: “The collection agencies hold the keys to the borrower’s future because the government hires collection agencies not only to collect, but also to act as the front line “dispute resolution” entities for financially distressed borrowers.” In other words, the private collectors act as judge and jury, and they use the power of the national government to garnish wages and public benefits. This situation has gotten so bad that many people have had their social security checks garnished in order to pay back decades-old student loans. As a society, we have created a system of indentured student servitude as our tax dollars are used to pay profit-seeking loan collectors to further abuse former students.
Making matters worse, when people are late on their loan payments, they often are subjected to huge penalties that make it even harder for them to pay off their debt, which transforms them into prime targets for aggressive for-profit debt collectors. This problem will only worsen if Congress does not stop student loan interest rates from doubling next month.
One reason why the federal government spends so much on debt collectors is that these outside agencies receive bonuses for their aggressive handling of student debt: “using a metric called the Competitive Performance and Continuous Surveillance (CPCS) score. The percentage of dollars collected on federal student loan accounts determines the majority of a contractor’s CPCS score, with a maximum of 70 possible points. The second metric is Account Servicing Percentage which calculates the percent of federal student aid accounts awarded to the PCA that have activity as a result of the PCA’s efforts, either through litigation, an administrative resolution, or actual payments. The top performer for this metric will receive 20 points. Finally, PCAs may earn up to 10 points for their Administrative Resolution Percentage which tabulates how many federal student aid accounts the PCA referred back to the Department for a non‐cash administrative resolution (i.e. disability discharge, death of borrower, etc.).” In this system, outside agencies are given an incentive to harass students and force them to hand over all of their money to the collectors.
Furthermore, since these private agencies increase their earnings if they collect more from students, they do not pursue other forms of reconciliation, like writing down the principle or extending the payments. In fact, borrowers in default are subject to the government’s extraordinary collection powers that last a lifetime: “The collection agencies hold the keys to the borrower’s future because the government hires collection agencies not only to collect, but also to act as the front line “dispute resolution” entities for financially distressed borrowers.” In other words, the private collectors act as judge and jury, and they use the power of the national government to garnish wages and public benefits. This situation has gotten so bad that many people have had their social security checks garnished in order to pay back decades-old student loans. As a society, we have created a system of indentured student servitude as our tax dollars are used to pay profit-seeking loan collectors to further abuse former students.
Making matters worse, when people are late on their loan payments, they often are subjected to huge penalties that make it even harder for them to pay off their debt, which transforms them into prime targets for aggressive for-profit debt collectors. This problem will only worsen if Congress does not stop student loan interest rates from doubling next month.
Tuesday, May 22, 2012
How Higher Ed Tax Breaks Serve as Welfare for the Wealthy
As I wrote in a previous blog entry, we may be able to make all public higher ed free, if we just use all current available resources in a more efficient manner. One thing I discovered in my research is the way that tax breaks for higher ed have been used as a form of welfare for the wealthy. As shown in the study, “Moving On Up: How Tuition Tax Breaks Increasingly Favor the Upper-Middle Class,” what has been occurring is that help for poor students is being reduced as support for wealthier students is being increased: “From 1999 to 2009, the government spent $70 billion on tax breaks aimed at subsidizing higher education for families . . . about 13 percent, or $9.4 billion, of that total went to families making more than $100,000 a year. At the same time, only 11 percent went to the neediest families, those making less than $25,000. Families in the middle—those making between $25,000 and $99,999— received the lion’s share of the aid, taking in slightly more than three-quarters of the benefits.” While this research makes it sound like middle-class parents were getting most of the benefit of these tax breaks, we are later told that the movement of the funding has continued to shift to the wealthiest Americans: “nearly 83 percent of the higher education tax benefits distributed from 1999 to 2001 went to families earning less than $75,000 per year. No benefits went to those earning more than $100,000. By contrast, in the last three tax years alone, families making between $100,000 and $180,000 received nearly a quarter of the benefits. The share going to middle-income families sharply declined.” This tax system for higher education is a great example of how so many of our governmental policies end up subsidizing the wealthy as poor and middle-class citizens are left paying more and getting less.
If we made all public higher education free, not only could we do away with this unjust tax system, but we could also stop the movement of public funds to expensive private and for-profit universities and colleges. What people do not notice is that the use of financial aid and tax subsidies for individual students has resulted in a system where much of the governmental support for higher education ends up going to private institutions that cater to the super-rich or to low-achieving for-profit schools. In fact, during a 2012 Congressional investigation of for-profit colleges, it was discovered that up to a quarter of all federal Pell grant money is now going to these corporate schools that charge a high tuition and graduate very few students. What this investigation did not uncover, however, was the amount of state and federal tax breaks that go to support for-profit institutions.
While recent research has been done on how much the federal government has spent on tax deductions and credits for higher education, as far as I can tell, no one has examined how much states are spending on these tax breaks for colleges and universities. However, it is safe to estimate that the total subsidy by the states is at least the same as the total federal level of support ($40 billion) since many of the states have tax deductions that exceed the national tax breaks for tuition, and most states have tax-advantaged 529 college savings plans. For example, in New York state, the tuition tax credit goes up to $5,000 per year per student, and the tuition tax deduction is $10,000 for each eligible student. It is important to point out that tax deductions favor the wealthy since so many low-income families pay little if any federal income taxes.
One of the great secrets in higher education funding is the role played by 529 College Savings Plans: “In 2000 a total of $2.6 billion was invested in 529 plans. This grew to $14 billion in 2001 and more than $92 billion in mid-2006. The student aid resource Finaid.org projects that total investment in 529 plans will reach $175 billion to $250 billion by 2010, with a total of 10 million to 15 million accounts opened.” Not only do state governments lose billions of dollars in tax revenue each year due to these 529 plans, but the wealthy have figured out how to use these plans as all-purpose tax shelters. For example, if a couple puts $26,000 a year for each child into account, and then decides later to use the money to buy a yacht, only the investment gains will be assessed a 10% penalty and taxed as income. Also, contributions made to a 529 are removed from a family's estate, and 529 plan owners can name a successor to the account when they die, which enables the plans to shelter money for multiple generations.
One way that wealthy people use these accounts to avoid paying taxes is by giving each other gifts. In this structure, gift taxes can be avoided if contributions into the plans over a five-year period do not exceed $65,000 for single taxpayers and $130,000 for married couples. Clearly, it is only the wealthiest Americans who are able to profit from this type of plan. In fact, according to a recent Department of the Treasury report, "Currently there are effectively no limits on Section 529 account balances. Because 43 states offer plans open to residents in other states, a beneficiary can have accounts in as many as 44 states, each state with a limit exceeding $224,465." It is obvious that only wealthy people can afford to save and invest this type of money. Moreover, the same study of 529 plans details how the richest families are using these plans for tax shelters: "data from the 2007 Survey of Consumer Finance found that among households in the top five percent of income — average income, $548,000 per year — those with education savings plans held an average balance of $106,250. That’s more than triple the average for households in the 90th-95th percentile, more than ten times the balance for the 50th-75th percentile, etc. Second, among households in Kansas who took a state income tax deduction for 529 contributions, the average deduction for households making over $250,000 per year was $10,323. For those in the $100K-$250K range it was less than $5,000, for everyone else, less than $3,000.” As this federal government report indicates, 529 plans have now become an effective way to subsidize wealthy people; meanwhile, states are forced to cut their higher education budgets due to their lack of tax revenue.
If we took all of the state and federal money that is lost each year due to these tax credits, deductions, and shelters, we could make public higher education free for millions of Americans; however, the tax code is rigged to provide aid to wealthy people, and one side-effect of this system is that private universities are able to charge higher tuition because they know that the parents of many of the incoming students will only pay a fraction of the full price due to merit aid, institutional aid, and tax breaks. Furthermore, once the private universities increase their tuition, they raise the bar for everyone else, and this makes tuition increases at public universities appear to be more tolerable. Furthermore, since the top public universities compete with the top private universities for star faculty and administrators, the more the privates are able to increase their tuition, the more the public institutions have to pay their star faculty.
To contain the rising tuition at private universities and the subsidization of high-cost, low-value for-profit schools, the government needs to move away from the current emphasis on tax breaks and tax shelters, and this can be done in part by making all public higher education free. Instead of relying on a mix of financial aid, institutional aid, tax subsidies, and grants, direct funding for public institutions could give the government a way to control costs at both public and private universities and colleges. The federal government could also require states to maintain their funding for public institutions in return for increased federal support, and once we stabilize funding and make higher education free, then we can eliminate the need for so many students and institutions to go into debt.
Thursday, May 17, 2012
UC, the State, and the Post-Stimulus Blues
In his End this Depression Now!, Paul Krugman argues that the best way to get the U.S. economy out of its current slump is for the federal government to provide direct support to the states to stop the loss of public workers. Krugman and others have pointed out that while there has been an increase in private sector employment, there are about two million public sectors workers who have lost their jobs or about to lose their jobs. These job losses not only depress consumer demand, but they also hurt state revenues.
In the case of California, Governor Brown’s latest revised austerity budget calls for an additional reduction of the UC budget of $38 million with another $250 million cut if his tax initiative does not pass in November. In the best case scenario, the UC will receive $2.5 billion in state funds, and if the tax initiative does not pass, the figure goes down to $2.2 billion, which means we are down $1 billion from the funding level of 2007-8.
While some may say that we have faced bigger cuts in the past, what few people understand is that a lot of the past state reductions were replaced by federal stimulus money, which is now all gone. As I pointed out a couple of years ago, when the UC administration called for furloughs and layoffs, it often failed to mention that the state reductions were being replaced by federal dollars; however, now, the UC is really struggling with increased costs and decreased revenue, and tuition increases and out-of-state students can only fill part of the hole.
Recently, I have shown how we could fund free public higher education, and while this is a long-term goal, we have to also think about the short-term and the medium term. Right now, we are pushing to increase UC funding to stop tuition increases, but we will have to make our arguments during a time when the poor and the needy are facing tremendous cuts. One possible solution is for the UC to lend the state a large amount of money on the condition that the state increases UC funding. Another medium-term solution is to either push for a new initiative guaranteeing higher ed funding, like the one that that exists for K-14, or to tie a reduction of prison spending to an increase in higher ed funding (if we got rid of the three strike rule and we decriminalized drugs, we could free up money to be spent on our universities and colleges).
What should be clear is that the current political class is not proposing any comprehensive solutions, and instead, we are suffering from a thousand cuts. What we need to do is to organize around a set of propositions that would modernize our tax system and replace spending on incarceration with funding for instruction while controlling healthcare costs and improving the quality of public services. In short, we have to formulate a workable program that will inspire people to counter the agenda of the ruling class.
In the case of California, Governor Brown’s latest revised austerity budget calls for an additional reduction of the UC budget of $38 million with another $250 million cut if his tax initiative does not pass in November. In the best case scenario, the UC will receive $2.5 billion in state funds, and if the tax initiative does not pass, the figure goes down to $2.2 billion, which means we are down $1 billion from the funding level of 2007-8.
While some may say that we have faced bigger cuts in the past, what few people understand is that a lot of the past state reductions were replaced by federal stimulus money, which is now all gone. As I pointed out a couple of years ago, when the UC administration called for furloughs and layoffs, it often failed to mention that the state reductions were being replaced by federal dollars; however, now, the UC is really struggling with increased costs and decreased revenue, and tuition increases and out-of-state students can only fill part of the hole.
Recently, I have shown how we could fund free public higher education, and while this is a long-term goal, we have to also think about the short-term and the medium term. Right now, we are pushing to increase UC funding to stop tuition increases, but we will have to make our arguments during a time when the poor and the needy are facing tremendous cuts. One possible solution is for the UC to lend the state a large amount of money on the condition that the state increases UC funding. Another medium-term solution is to either push for a new initiative guaranteeing higher ed funding, like the one that that exists for K-14, or to tie a reduction of prison spending to an increase in higher ed funding (if we got rid of the three strike rule and we decriminalized drugs, we could free up money to be spent on our universities and colleges).
What should be clear is that the current political class is not proposing any comprehensive solutions, and instead, we are suffering from a thousand cuts. What we need to do is to organize around a set of propositions that would modernize our tax system and replace spending on incarceration with funding for instruction while controlling healthcare costs and improving the quality of public services. In short, we have to formulate a workable program that will inspire people to counter the agenda of the ruling class.
Tuesday, May 8, 2012
How to Make All Public Higher Ed Free in America (Version 2)
Flagship public universities across the nation are asking for more autonomy so that they can increase tuition and set their own enrollment targets. Meanwhile, student loan debt has surpassed a trillion dollars as states continue to cut their support for higher education. It is clear that the funding model for public higher education in America is broken, but no one appears to be coming up with a coherent plan to address the problem.
In my research for my upcoming book, I have discovered that we could make all public higher education free in America if we just used our current resources in a more coordinated way. Looking at higher education enrollment patterns in 2009-10, we find that 6.4 million full-time equivalent undergraduate students were enrolled at public universities and 4.3 million were enrolled in community colleges. In the same year, the average cost of tuition, room, and board for undergraduates at public four-year institutions was $14,870, and for 2-year public colleges, it was $7,629. If we multiply the number of students in each segment of public higher education by the average total cost, we discover that the price for making all public higher education free was $127 billion in 2009-10.
While $127 billion seems like a large figure, we need to remember that in 2010, the federal government spent $35 billion on Pell grants and $105 billion in new student loans, while the states spent $10 billion on financial aid. Furthermore, looking at various tax breaks for higher education, we can add billions to the public support for universities and colleges.
Here is a list of some of the current federal tax breaks and how much each one cost in 2010 (this list does not include state tax breaks): student loan interest rate exemption ($1.4 billion), the exclusion of employer-provided educational assistance ($1.1 billion), exclusion of interest on student-loan bonds ($0.6 billion), exclusion of scholarship and fellowship income ($3.0 billion), exclusion of tax on earnings of qualified tuition programs: savings account programs ($0.6 billion), the HOPE tax credit ($5.4 billion), the Lifetime Learning tax credit ($5.5 billion), parental personal exemption for students age 19 or over ($3.4 billion), state prepaid tuition plans ($1.75 billion), American Opportunity Tax Credit ($14.4 billion), and part of the deductibility of charitable contributions (education) ($4.9 billion).
To the almost $40 billion of federal tax breaks listed above, we also need to add the numerous state tax subsidies; in fact, many states offer tax credits and deductions that exceed the federal tax breaks. Moreover, there is currently over $100 billion in 529 College Savings Plans, and if we made all public higher education free, we could do away with these tax shelters, which mostly benefit the wealthiest families.
When we add the cost of tax breaks to the current level of state and federal financial aid for higher education, not only could the government pay for the full cost of undergraduate education for public universities and community colleges, but we could also make most of graduate education free at these institutions.
In my research for my upcoming book, I have discovered that we could make all public higher education free in America if we just used our current resources in a more coordinated way. Looking at higher education enrollment patterns in 2009-10, we find that 6.4 million full-time equivalent undergraduate students were enrolled at public universities and 4.3 million were enrolled in community colleges. In the same year, the average cost of tuition, room, and board for undergraduates at public four-year institutions was $14,870, and for 2-year public colleges, it was $7,629. If we multiply the number of students in each segment of public higher education by the average total cost, we discover that the price for making all public higher education free was $127 billion in 2009-10.
While $127 billion seems like a large figure, we need to remember that in 2010, the federal government spent $35 billion on Pell grants and $105 billion in new student loans, while the states spent $10 billion on financial aid. Furthermore, looking at various tax breaks for higher education, we can add billions to the public support for universities and colleges.
Here is a list of some of the current federal tax breaks and how much each one cost in 2010 (this list does not include state tax breaks): student loan interest rate exemption ($1.4 billion), the exclusion of employer-provided educational assistance ($1.1 billion), exclusion of interest on student-loan bonds ($0.6 billion), exclusion of scholarship and fellowship income ($3.0 billion), exclusion of tax on earnings of qualified tuition programs: savings account programs ($0.6 billion), the HOPE tax credit ($5.4 billion), the Lifetime Learning tax credit ($5.5 billion), parental personal exemption for students age 19 or over ($3.4 billion), state prepaid tuition plans ($1.75 billion), American Opportunity Tax Credit ($14.4 billion), and part of the deductibility of charitable contributions (education) ($4.9 billion).
To the almost $40 billion of federal tax breaks listed above, we also need to add the numerous state tax subsidies; in fact, many states offer tax credits and deductions that exceed the federal tax breaks. Moreover, there is currently over $100 billion in 529 College Savings Plans, and if we made all public higher education free, we could do away with these tax shelters, which mostly benefit the wealthiest families.
When we add the cost of tax breaks to the current level of state and federal financial aid for higher education, not only could the government pay for the full cost of undergraduate education for public universities and community colleges, but we could also make most of graduate education free at these institutions.
Subscribe to:
Posts (Atom)