Elizabeth Warren Calls for Affordable College Education

We criticized Elizabeth Warren at the time she proposed her first bill, a one-year interest rate reduction on student loans. While letting the current rules expire and having interest charges shoot up would have been a bad outcome, Warren presented her interest rate reduction as a meaningful remedy, when it was a band-aid over the gunshot wound of out-of-control higher education costs putting many young adults into debt slavery.

Warren has finally stepped up and has taken on the problem of college education, calling for much more affordable college education:

And while not every college needs to graduate every student debt-free, every kid needs a debt-free option—a strong public university where it’s possible to get a great education without taking on loads of debt.

As an aside, “debt=free” bothers me as rhetoric, but Warren’s aim is clear. She fingers how the cost inflation in higher education has perilous little to do with delivery of learning, and how the schools themselves have become debt pushers, winning from getting students to borrow to pay more for their “product” and suffering no consequences when students become delinquent. She also takes aim at predatory student loan servicing.

One noteworthy lapse is Warren fails to finger the rise in number and compensation of the college adminisphere, which lards on expenses and contributes not a whit to teaching. However, she gets at them indirectly in her proposal. Here is the meat of the “get rid of gold plating” part of her plan:

First, force colleges to put some skin in the game on student loans. Right now, when borrowers default on their loans, students and taxpayers pay the cost – not colleges.26 That means colleges reap all the benefits of student loan funds, while students and taxpayers bear all the risk. If we want colleges to pay attention to rising costs and failing students, then they need to bear some of that cost too.

There is bipartisan support for the idea of more college accountability. Senators Reed, Durbin and I have worked on it together for the last few years and we’ve introduced legislation to force colleges to have some skin in the game.27 Conservatives at the American Enterprise Institute have endorsed similar ideas,28 and Senator Alexander has indicated his interest in including a risk-sharing program in the Higher Education Act.29 If done right – not just window-dressing, but with a real and robust accountability mechanism – this could create meaningful incentives to cut costs and boost graduations. Skin in the game could also be paired with reducing overly burdensome reporting requirements and regulations, replacing them with astreamlined set of meaningful measures. Of course, the devil is in the details – if done wrong, the accountability problem in higher education just gets worse.

Second, require schools to spend a minimum proportion of their federal financial aid revenues on expenses directly related to education. Call it the rule against “taxpayer waste.” Right now, taxpayers invest about $164 billion a year in colleges.30 That money is supposed to help support affordable education for our young people, not pay for exploding numbers of administrators or elaborate college marketing departments. If colleges want access to that taxpayer money, then they should commit to investing that money in an affordable education for their students.

Third, give colleges an incentive to cut costs by establishing “shared savings.” When colleges help more students graduate in four years instead of five or six, for example, the students save money on tuition and the government saves money on Pell Grants, work-study, and other aid. If colleges can share in the savings, they will have an added incentive to keep down costs.

I’ve embedded the speech below and urge you to read it in full.


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  1. Larry

    I was highly involved in higher education for some time, including looking for a facutly position focussed on teaching at a liberal arts college. Through that process, I learned that there are colleges that really do not care about the quality of the student they take in and what their outcome will be. Once school that I interviewed at graduated about 50% of the students they admitted through the door. No word on how much debt those students took on to partially finish an education, but it was quite clear to me that the school was admitting students that were not up to the challenge of finishing a degree. And it was quite clear that the school was on a strategy of building their brand and reputation on the backs of students like these and continuing education students. And there is no doubt that the administrators are guiding this strategy. They’ve taken on debt to get sports teams and build new facilities from what was formerly a mostly commuter college for local area students interested in becoming teachers and nurses. The administrators don’t just manage a good thing, they must show that they took a good thing and made it “better”. In this way they can move on to the next job at a higher reputation institution and fatten their own paycheck. The incentives are all wrong in the higher education market and open discussion of reforms are highly welcome.

    1. Gerard Pierce

      This is a replay of a comment I posted on the Smirking Chimp:

      Reform is going to require some major changes in attitude.

      The faculty were only moderately interested in power and that’s part of the reason why power has been stolen by regents and administrators.

      Power comes from money, and parts of the faculty have the ability to obtain corporate money. If they want the University to become what it once was, they need to insure that part of that money goes to endowments controlled by the faculty.

      If the University president is the primary fundraiser, the money is going to be under the control of the president and Regents. The faculty has less and less say about their own institution.

      Engineering and science can always generate a buck. The history department and the other liberal arts departments need their own fundraisers. They need access to former students who know and respect them.

      Once the faculty has control over it’s own funding, they are in a position to point at the “administrators” and ask them how much money they bring in — along with a suggestion that the administrators paychecks should be closer to the secretarial staff.

      It’s too bad it has to be based on this kind of economics, but without control over the money, the faculty might just as well hang it up.

      1. washunate

        I’m all for administrators being paid like secretaries. I would just add that professors also should be paid that way.

        That’s the thing about inequality – it’s not just at the very top. It’s at every level in our supposedly public service, not for profit institutions.

        If every job had similar working conditions and wages, there would be far less of the internal maneuvering to direct the spoils to oneself and the crap to others.

        1. sleepingdogmatist

          From the perspective of this graduate instructor/adjunct, I would love to be paid what an academic secretary takes in. $28k-ish (maybe even more!) plus health insurance is almost a dream for me and a good number of my peers.

            1. jrs

              Pay those at the bottom more and everyone and their brother wouldn’t need to chase after a college degree, now they might still choose to and that’s fine, but it wouldn’t be an existential necessity. So mostly higher minimum wage. $15 an hour exceeds 28k.

        2. Gerard Pierce

          My interest is mostly theoretical at this point. I did 2 years as an adjunct (at a state University) while working on a masters in math. I was also an independent contractor / software engineer and for that gig I was making better money than most of the tenured faculty. That was a lot of years ago.

          It took me two hours of prep for every hour in front of a class. At the end, I had finally learned all of the math that I didn’t learn as an undergraduate. When I finally learned what math was all about, my reaction was “thank God, I don’t have to put up with any more of this crap”.

          My original point was that administrators are being paid $250k when most of the faculty are adjuncts with no chance of tenure.

          It’s not going to change until someone cares enough to force a change. I didn’t see any signs here that anyone cares enough. Instead of adjuncts being paid a fair wage and having a shot at tenure we could pay everyone secretarial wages. Might just as well have the secretaries teach the classes.

          So I anticipate a more and more crapified University system. At some point, the students recognize that their diploma is not worth the paper it is printed on and we wind up with a system where eighth grade becomes higher education.

          1. washunate

            You might like this link. According to the government’s own numbers, there are about 1.5 million postsecondary teachers who make mean annualized compensation of $75,800. By comparison, the mean annualized compensation of all occupations is $47,200. Engineering, health, economics, and law all have mean figures over $100K.

            It’s not just the extremes of top of the heap administrators and bottom of the pile adjuncts. There are an awful lot of positions in between making significantly higher wages than an average worker, never mind the millions upon millions of crap jobs where even being a graduate teaching assistant is cushy in comparison.


            1. Yves Smith Post author

              It is not representative of the total, but business school and law school profs make vastly more on the side consulting than they do from their day jobs. This is super dated, the #s are way higher now, but in the 1980s an HBS full prof I knew made $150,000 in salary and other goodies from HBS and $800,000 a year from consulting to JP Morgan. Just imagine what they rake in now.

              1. washunate

                It’s amazing how academics find time for all those travel conferences and consulting gigs when they’re so busy teaching.

  2. rusti

    First, force colleges to put some skin in the game on student loans

    Isn’t this just going to result in even fewer admissions for students from low-income families? It seems like an extremely backwards way to fight the idea of universities as profit centers. So is all the rhetoric about universities being job factories so Americans can compete against impoverished factory workers in Vietnam. As far as “shared revenues” and “education related spending”, I’d be salivating over these ideas if I were a University administrator. Then again, university administrators are a Preferred Donor for Team Blue.

    I think the right sort of regulatory and enforcement framework with things like a tuition caps and regulations on professor pay / working conditions would allow fewer opportunities for creating another hideous Obamacare-lite money printing machine. But it still doesn’t address the issue of college degrees being increasingly worthless, just less expensive.

    1. Yves Smith Post author

      When you get outside the for-proft college sector (if you read the speech, Warren’s big aim is to make public colleges affordable again), my impression is the bigger issue is students taking on debt out of proportion relative to incomes for graduates from their schools and majors. The college recruiters wave generally don’t talk at all about what it would take to cover debt loads, and when they do, they give misleading average stats re incomes (as in not adjusting for academic performance, major, how long it took to get a job, what happens if you get a McJob instead, etc). If the schools were at risk, they’d need to start underwriting loans, not just selling them.

      1. rusti

        I can understand the logic, but it seems like schools establishing underwriting criteria at all creates an incentive for them cull the (already large pool of) candidates to reject the poor ones rather than lowering tuition prices. It will also put even more squeeze on liberal arts programs.

        1. washunate

          Yeah, I really wonder if people are thinking this through, or if that’s the desired outcome?

          Let administrators do the cost allocation, and guess what gets the axe? All those lower return liberal arts programs. Why not just make the entire college curriculum be engineering/computer science, business/economics, law/criminal justice, and medicine/healthcare? Maybe a few specialized programs at the top schools for architecture, social work, and some other niche areas survive in consolidated form.

          This isn’t speculation. This is what we’ve done to public K-12 education in this country. Character education and DARE and security and common core and testing and all the crap has pushed out music and theater and speech and foreign language and all the things that we used to think of as ‘education’.

      1. susan the other

        I disagree a little bit. Since I’m mostly liberal arts and arts myself, I love the idea of educating the whole person. I’m convinced that world full of creative weirdos would be more successful than the soul-crushing one we’ve got now. But when rubber meets road, you need to be trained for a job. If you are a professional, just coming out of college, you need to be trained in all the requirements for your prospective job. The only free education that is cost effective (sorry) is training. And I think public schools can do this more efficiently than any other institution or fake institution. Public universities can do TV and internet courses for very little expense. First train students for the specific job. Then give them an elective or 2. And always offer an answer to the need for ever higher levels of training. And it should be totally free.

        1. washunate

          I would strongly push back against that. Train for what? This notion of linking training with education is exactly the kind of neoliberal public-private partnership that is all about socializing costs and privatizing gains.

          1. Kurt Sperry

            Yes, making universities glorified trade schools is just cynically externalizing the businesses’ cost of training their workers onto the workers themselves. The deleveraging of labor extends beyond the debt peonage too, not being invested in their labor force’s training, combined with engineered high unemployment makes employees a demoralized, disposable and fungible resource. Cogs in the proverbial machine. Businesses should be more heavily invested in their work forces, not less.

    2. MLS

      If colleges have skin in the game (and why stop at “some”? Why not have them own all the risk of student debt?) then the price of tuition will fall dramatically so that students aren’t forced to borrow as much. This will make it more affordable in general for the population at large. Yes, there may be some folks that still can’t afford to go to college, but what favors are we doing them by having a higher tuition and then allowing them to go deeply in to debt they can never possibly repay?

      Don’t make the mistake of projecting today’s pricing environment into Warren’s proposal where it would be vastly different.

  3. jabawocky

    No university I know has the means to measure risk of defaults on loan repayments. These defaults may be influenced by external factors, temporally removed from student’s education. The article critisizes the size of university admin budgets but then actually proposes more admin! And not just random stuff but actuarial and risk management departments which will necessarily be staffed by people on high salaries.

    The main result will be the potential for systematic instability and further bloating of the admin required to navigate the marketplace.

    1. Yves Smith Post author

      Well, they need to start! Credit card companies give students credit cards, so they can figure out how to score the risk. This is admittedly a longer term exposure. If they can’t figure out how to underwrite the risk, they should not be making the loan.

      It does not take a lot of people to screen loans once you’ve figured out the underwriting criteria.

    2. Sammy Maudlin

      What default risk? First, the university generally isn’t the party making the loan, it’s the federal government or private creditors. Why would universities be concerned with default rates? They just get the money and spend it.

      Second, unless undue hardship can be proven (good luck with that) student loan debts cannot be discharged in bankruptcy. The student (+/or co-signer) is forever on the hook. Payments may be delayed, and you cannot get blood from a stone. But until the student dies, the loaning party can (and does) try to collect on them from anyone they can.

    3. Kurt Sperry

      Funny isn’t it how public primary and secondary education somehow manages without tuitions, debt and such? It’s almost as if all that weren’t strictly necessary to educate people well.

  4. Jesper

    The crappy job-market forces more or less anyone and everyone into college -> increased demand from students for college education -> prices of college education goes up.
    I’m not sure if tinkering around the edges of the outcome (as opposed to the actual problem) will be more than a cosmetic change.

    A similar example in Sweden: In Sweden there are now courses to become cleaners, janitors etc etc. The training providers are making profits out of it and they’ll continue to make profit out of the poor job-market until politicians decide to deal with the actual shortage of paid positions.

      1. jrs

        Yes I know, my jaw just drops when I hear stuff like:

        “this alternate universe doesn’t actually produce tangible goods or services, rather it offers people with unpaid positions that foster a sense of routine, structure, and personal connection. ”

        oh good heavens western culture doesn’t deserve to survive in that case! If people sell themselves to bosses just to have structure in their life, then just cut the cord, nearly every culture on earth is better and most have worked less.

        But it’s possible people could be doing it for slightly more tangible things (ie looks good on the resume/CV, thus improves the chance of getting a real job with actual money someday). Sad and pathetic, but at least not completely insane like going to fake jobs for a sense of routine and structure.

    1. ErnstThalmann

      Interesting how the limousine liberals in Sweden can find a way of applying the screw to sucked-in working class folks just as well as the filth that run the large banks in he United States and Europe. The only difference is that they are quartered in universities rather than on Wall Street. And this con has actually worked well for years. The “need” for advanced education is created by off-shoring, the loans are provided working class stiffs who can’t afford the costs and who are dragged into a slavery not dissimilar to that imposed on Africans forced onto crime ships during the 17th, 18th and 19th centuries. These “educators” and their accomplices in finance need to be tried in ad hoc peoples’ courts and their sentences left to mobs. More importantly, workers need to organize in such a way as to bring about this kind of an outcome. That way, social fascists like Warren will have the time to think through the futility of their complicit reformism and to find ways of making adjustments to their repellant support of Israeli aggression and its related ethnic cleansing.

    2. Cynthia

      If affordable college education is anything like Obama’s affordable healthcare, no one should want it. Not at all. Anytime the government subsidizes just about any product or service being sold by Corporate America — be it bombs, pills, colonoscopies, or sheepskins — the cost of these items or services is bound to go up. It’s as predictable as the Sun rising in the East.

      Oh sure, throwing more federal subsidies at college education may make you better educated, just as ObamaCare may make you healthier. But I have my doubts about that. Lots of doubt. As far as I can tell, ObamaCare has made corporate healthcare vastly more profitable, but I have yet to see any evidence that ObamaCare has made us any healthier. The focus is simply not there. Look at it this way, ObamaCare has done to healthcare what QE has done to the workplace. Most of the gains from ObamaCare are stuck up at the top in the form of higher overhead costs. Very few of these gains have trickled down to the front lines of care, which means that the chances of ObamaCare improving your health is next to none. ObamaCare has created a lot of high paying jobs in the healthcare sector, but very few of these jobs are geared towards improving your health. Applying anything akin to ObamaCare to the higher-ed industry will lead to similar results. I’ll bet the farm on it!

      Even if implementing something akin to ObamaCare to higher ed were to somehow make you better educated, this won’t amount to much if being better educated can’t land you a better paying job. Which is what will happen.

      Perhaps we should seriously consider returning to a time when being highly educated had nothing to do with how much money you made. It was not that long ago when you went to college to expand your mind and NOT to expand your paycheck. If corporations want workers with specific skill-sets, let corporations pay for this without seeking handouts from Uncle Sam.

      If we really want to put an end to fascism in America, we can’t do so without first putting an end to our corporate welfare state. We can start by cutting off the corporate-welfare gravy train which feeds healthcare, and then make sure that a corporate welfare gravy train is never built to feed high ed.

      1. jrs

        ” It was not that long ago when you went to college to expand your mind and NOT to expand your paycheck”

        not that long ago, if such a time ever existed, everyone who remembers such a time is dead, considering people even took the GI bill because they knew it would help them economically

  5. sd

    Whatever happened to vocational schools? Not everyone needs a degree to work. There are many trades that just require practical on the job training.

    In the end, how many professions really require a college degree to perform the tasks?

    1. NotTimothyGeithner

      Given the availability of knowledge and modern communication, sending a kid to directional state doesn’t add up especially with the rise of part time professors.

    2. washunate

      Yep. Virtually no job requires a college degree. And from the other direction, virtually all of the oppression and injustice in our society is inflicted by people who have a college degree.

      The college degree credential checkbox in formal employment is what our society uses to enforce racial and class disparities without being so crass as to ask if you are black or poor.

      After all, that would be ‘wrong’.

    3. FluffytheObeseCat

      Vocational programs are often taught via certificate programs at community colleges today. I.e. Welding, aircraft mechanics, HVAC mechanics…..
      Student loans can pay for some of the training obtained thru programs like these, that are college affiliated.

      Bloated admin staffs & overpaid, over-titled administrators are the biggest problem today in higher education, hands down. I’m not saying that tenured professors are without fault, however they are subject to far greater oversight and attention generally, since they are on the front line, and interact with the paying public regularly. Also, they are the preferred whipping boys of ideologicallly driven ultra-rightists, despite the fact that most of the Big Ed financial grift they claim to despise….. occurs at the administrative level in umiversities.

  6. Yankuba

    We should stop insisting that every high school student go to college. When you look at the monthly job numbers you see that two thirds of the jobs that are created are low wage and/or part time (home health aid, retail, hospitality, food service, construction). Teaching and nursing are the only two high growth jobs that require college. A large percentage of college graduates are underemployed but all everyone wants to discuss is how it’s really important to go to college and how we need to make higher education more affordable.

    Going to college works on a micro level – you will probably earn more with the degree than without it (mainly due to signaling) but it’s a huge failure on a macro level. All we’re doing is raising the bar. Most admin assistant job openings require a college degree even though the majority of current admin assistants do not have a college degree. So everyone rushes off to college even though the jobs being created are largely jobs that don’t require college level skills.

    Methinks that if college was $100K per year then fewer people would go and job requirements would fall and we would all be better off. Then people won’t have to go into debt to become secretaries and cops. And maybe you won’t need a Phd to become a physical therapist or 150 course hours to become a CPA.

    1. Gerard Pierce

      The problem with your comment is that you don’t seem to recognize the difference between education and job training. That’s OK, since most of the people paying for an “education” are really looking for job certification.

      Way back in ancient China, one of the Taoist masters suggested that the “enlightened” people should leave the common people alone and let them determine for themselves what was important in their lives.

      His comment was something like: “If the wise man speaks of the value of gold, the common people will knock themselves out trying to acquire gold”.

      “If the wise man speaks of the value of education, the common people will knock themselves out pretending to be educated”.

  7. Sammy Maudlin

    The fact that student loans are not dischargeable in bankruptcy is one of the greatest distortions in the American economy and is the single biggest factor in the student loan crisis and the inflation of college costs. These loans are relatively easy to get (credit is generally not a factor), and hard (given the state of wages) or impossible (given they are not dischargeable) to get rid of.

    Unlike when a person takes out a loan on a home or car, for the vast majority of students, there’s no reliable way to value the diploma you receive in exchange for entering into a contract to repay an often vast sum of money. In exchange, the student is forever saddled with often crippling debt. Primarily, money used servicing that debt is simply taken out of the economy in that it’s just returned to the government. It’s just an alternate-form tax on college students.

    1. Yves Smith Post author

      Yes, my bad for not stressing that, and pointing out that of all people, ex top US bankruptcy professor Warren knows that. She could at least use BK reform as a threat to get what she wants, and if she gets enough traction on her campaign, she might get that too.

  8. CP

    Politicians are being disingenuous with regards to public university costs. State funding for public universities on an inflation-adjusted per student basis has been slashed since universities do not have the same lobbying power as prisons, fireman/police, or other state interest groups. The situation is especially dire in states like Wisconsin and Louisiana where the governors would like nothing more than to destroy the state university systems and have been making aggressive movies; but even in states like California funding has decreased (even in absolute terms) while public and politician demands on the number of students served by the university has increased. For instance, the University of California system (including schools like Berkeley, UCLA, UCSD, Davis, etc.) used to receive about 80% of its inflation-adjusted per-student funding for undergraduate education from the state, but because of cuts and enrollment growths now only receives around 30% of its inflation-adjusted per-student funding for undergraduate education. And this is even after the University of California has implemented austerity and subsequent cost reductions.

    If politicians were serious about lowering the cost of public universities, they would restore funding to be equal to the budgetary levels of past generations. However, it is politically easier to play the neoliberal game and blame “profligate” faculty and then funnel budgetary money to unproductive uses like private prisons.

    1. washunate

      restore funding to be equal to the budgetary levels of past generations

      But that’s the thing. In past generations, higher education was for a much smaller subset of the population, and it was primarily for intellectual pursuit (and networking in the more prestigious bubbles). What college has turned into – mass market credentialing – is a completely different phenomenon.

  9. washunate

    Our higher education system does four completely unrelated things: organized sports leagues, research & publication, specific professional training, and general teaching/education.

    It seems we have to develop some common definition of what is ‘college’ before we can realistically talk about the cost structure or whether it’s even a good idea to have young people en masse spend a considerable amount of time there.

    Or to say it differently, if K-12 isn’t enough time on general education, what difference will K-14 or K-16 make?

  10. tongorad

    “Affordable” education sounds a lot like affordable health care: more skin-in-the-game neoliberal looting of the working class.

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