Education Secretary Addresses Rising College Costs
GUY RAZ, host:
This is ALL THINGS CONSIDERED from NPR News. I'm Guy Raz.
There's one thing that's almost certain about getting a college degree nowadays. More than half of those who do will end up with debt, sometimes crippling debt. And with rising tuition rates and cutbacks, students across the country are screaming for help.
(Soundbite of protesters)
RAZ: Students from the University of California at Berkeley protesting a recent decision by the governing board to raise tuition by 32 percent.
We begin the hour with a look at the skyrocketing costs of higher education and whether the government has any solutions. In a moment, we'll hear from Education Secretary Arne Duncan. He's hoping that next week, Congress will vote on a proposal to change the way the government offer student loans.
First, though, to the University of the District of Columbia, where we stopped by this past week to talk with some students.
UDC is by no means one of the most expensive universities in America, but the school recently decided to double its tuition fees for four-year students. Soon, it'll cost about $7,000 a year to attend and it doesn't account for books or housing or other related costs.
TIM(ph): My name is Tim. I'm 20 years old from Washington, D.C. I am paying for college with financial aid and loans. I will absolutely have debt at the end of college.
Ms. JESSICA MORIA(ph): I'm Jessica Moria, I'm 28 and I'm from West Virginia but I'm living in D.C. I have a lot of debt because I've been in school for seven years because I have two kids, but I'm only going to be graduating with an associate's degree.
Mr. MATTHEW BREADLEY(ph): Matthew Bradley, 27, from Ohio. Total combined debt, I just added it up today, it's approximately $90,000 and I'm not a doctor.
RAZ: The voices of students from the University of the District of Columbia. Next week, Congress may take up the administration's education bill and in it is a proposal to broaden the government's direct lending program.
Right now, taxpayers subsidize a system, where private for-profit lenders, like banks, offer student loans that are backed by the government. The lenders make money off interest. And if the student's default, well, the government picks up the tab.
On Friday, I sat down with Education Secretary Arne Duncan and he argues that that system is a waste of money. And he wants to cut out the middle man, in this case, private lenders.
Secretary ARNE DUNCAN (Department of Education): It doesn't make any sense whatsoever for us to continue to subsidize banks at a time when there's so much unmet need out there around the country.
RAZ: And you say this will save taxpayers' money, but there is data, as you know, from several sources that says this plan will increase future deficits by billions of dollars.
Sec. DUNCAN: This bill would not increase taxpayers on hook for now. We have to educate our way to a better economy. That's the only way get there. And by making a significant investment, again, tens of billions of dollars, Pell Grants, Perkins Loans - tax credits. So many great folks who worked hard, who are committed to going to college, maybe they're 18-year-olds, graduate from high school, maybe they are 38-year-olds and 58-year-olds who have been laid off and need to go back to school to be retrained and retooled. There's nothing more important that we can do than invest in education. We can do this now today without going back to taxpayers for another dime.
RAZ: The question is why not just encourage universities to use the existing direct loan system instead of mandating it? I mean, does it doesn't it open you up to accusations of a government takeover of the student lending industry?
Sec. DUNCAN: Yeah, far from it. There's actually been two points. There's been a huge migration into direct lending as the private markets are dried up well before we got to Washington. Three years ago, I think there are about a thousand universities using direct lending. That's about 2,300 now. And so, that's happening anyway.
The second point is we're just talking about who originates the loan, so we can do that. The servicing of the loans, which is where the action is, there should be no government involvement. This should be a hundred percent private sector. It's not our skill. It's not our sweet spot. And what we want to do is let the private market play there, the free market. Good actors will get more business. Providers that don't do a good job with servicing loans will lose business. And so, that will always stay in the private sector.
The difference is we simply stop subsidizing banks at the front end, on the origination of loans. This has been a sweet deal for banks.
RAZ: How much money do you think this could save the federal government?
Sec. DUNCAN: Literally tens of billions of dollars. And the first calculation by the CBO was $87 billion. There's a more recent calculation of about $57 billion. People say why are you fighting this battle? Let me tell you, if there were if this was $400, this is the right fight to fight.
RAZ: For years, Americans were told that the best path to financial freedom was through home ownership. We now know that this may not be the case because of foreclosures. You have written that the best path to financial freedom is also through a university degree. I'm wondering if that is something we can say with certainty given the job market.
Sec. DUNCAN: The job market's very, very tough. But I can say with certainty that there are no good jobs out there for high school dropouts. There are almost no good jobs out there for students with just a high school diploma. Every study will tell you that college graduates make significantly more money than non-college graduates.
RAZ: But that doesn't take into account the current unemployment statistics. And I'm wondering if the only guarantee today from college, from having a college degree, is you will have debt. Is there argument to be made that not everybody should go?
Sec. DUNCAN: I think everyone should have some form of higher education. So, again, whether it's four-year universities, two-year community colleges, trade, technical and vocational training, if all you have is a high school diploma or if you don't even have that, your prospects are that much more limited.
RAZ: As you know, over the past two decades, higher education costs have increased about 250 percent. The loans that are being made available have caps and they don't necessarily match the rise in tuition.
Sec. DUNCAN: Right. So we're trying to do everything we can do to help. Obviously, we share that concern about rising tuition costs and what we want to do is continue to provide great amounts of information, transparency to students who are thinking about college.
One of the huge strengths of our country is we have this world-class educational system. We have literally thousands of school of education, community colleges and higher ed to pick from. And I think where you see escalating costs, people are very smart, they're going to vote with their feet and they're going to go other places.
And what you're actually seeing, while some universities continue to escalate costs at ridiculously high levels, you see others going to three-year programs. You see others going to no-frills campuses. And folks are going to continue to vote with their feet and go to places where they can get a great education at a reasonable price.
RAZ: Let me ask you finally about that. There are more and more of these for-profit universities cropping up - the Kaplans, the University of Phoenixes -and the number of students attending them, as you know, is on the rise. I mean, do you think these schools could create the kind of competition that would force traditional universities to lower their tuition?
Sec. DUNCAN: We need more great options. Great for-profit actors can be part of the solution. You know, bad for-profit actors are part of the problem. Great traditional universities can be part of the solution. Traditional universities that are, you know, have way escalating costs way more than the rate of inflation are part of the challenge. So it's not really a question of for-profit versus not for-profit, it's are these schools doing a great job of educating students at a reasonable cost.
RAZ: Arne Duncan is the secretary of Education. Thanks so much.
Sec. DUNCAN: Thanks so much for having me.
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