Families are worried. They know that a college degree is key to success in today's economy, and that the unemployment rate for college graduates is less than half of what it is for those with only a high school degree. They are worried as they watched the price of a college degree skyrocket while their incomes stagnated: Over the past 10 years, tuition and fees at public and private four-year colleges have increased more than 20 percent while average incomes have declined by eight percent.
And they are right to be worried. The only option for many of these families is to take on debt to pay for an education. Total student loan debt has more than doubled over the last 10 years from around $500 billion in 2005 to over $1 trillion in 2015. That's more than the total amount of credit card debt. And students are struggling to pay these loans back. There are currently seven million borrowers in default. Even those who do not default outright on their debts may be struggling. At least 40 percent of borrowers in the federal student loan portfolio who should be making monthly payments are not current on their loans. Borrower protections, like tying payments to income, have done little to alleviate the worry.
They are right to be worried because the way the federal government funds higher education is broken. And our elected officials cannot fix the system until they acknowledge this fact.
Something needs to change. Parental anxiety has gotten the attention of the politicians running for president. There has been more attention on the cost of college in this presidential election campaign than any other in recent memory. This is perhaps in part because states are pulling back on their higher education investments. Tuition as a percentage of total public higher education revenue has jumped from 25 percent in 1989 to 47 percent in 2014. Bernie Sanders' plan for free public college and Hillary Clinton's plan for debt free tuition would both require the federal government and states to significantly increase their spending on higher education. Republicans, on the other hand, have focused on fostering innovation in higher education and simplifying the federal loan system.
The way the federal government funds higher education is broken. And our elected officials cannot fix the system until they acknowledge this fact.
Although these plans include worthy ideas, they overlook the fundamental problem: The way the federal government funds higher education is broken. The system is currently made up of a set of vouchers, loans, and tax credits that follow the student to the school of their choice. That structure rewards colleges that charge students more and allows states to cut public higher education. All of this results in low- and middle-income students taking on more debt.
And costs aren't the only problem. Many colleges are not serving students well. The average six-year graduation rate for those seeking a bachelor's degree at a four-year institution is only 59 percent. And according to a recent survey of more than 1,000 public and private four-year colleges, only 51 percent of low-income students who receive federal Pell Grants graduate in six years.
All of this means that we have a complicated system that hurts the very students it is meant to help. And the presidential plans this election cycle, however well-intended, only double down on a fundamentally broken system.
The only way to both improve student outcomes and contain college costs is to start over and create a new partnership between the states and the federal government. In a new paper entitled "Starting From Scratch," New America's education policy program offers a proposal outlining how this new partnership should work. The plan would change the allocation of federal higher education funding from a voucher to a formula-funded grant program, eliminating federal loans, Pell Grants, and tuition tax credit programs; lower the cost for students to eliminate unmet financial need for tuition but also for living expenses such as room and board, transportation, and child care costs; hold colleges accountable for student outcomes; and strengthen the federal and state partnership by encouraging states to invest in both public and private higher education.
These proposed changes would create powerful incentives for state governments to end the financial disinvestment that has been hollowing out America's great public higher education system. They would hold all colleges–public, private, and for-profit–equally accountable for enrolling low-income students and giving all students a good education at an affordable price. They would also ensure that every single college student in America would have to pay only what they can afford for college, halting the spread of indebtedness once and for all.
First, though, these changes would acknowledge that the current system is broken. And that it is time to change how we fund colleges and ensure an affordable, high-quality education for all students. And that, until we do that, we are not doing what we need to assuage families' worries.
This story originally appeared in New America’s digital magazine, New America Weekly, a Pacific Standard partner site. Sign up to get New America Weekly delivered to your inbox, and follow @NewAmerica on Twitter.