Postsecondary Student Debt Bondage - A Case for Public Ethics

HIGHER EDUCATION AS A PUBLIC GOOD

[1] At the 2014 Laurier University Governance Dinner, Andrew Newman, an Audit Partner with KPMG's Public Sector Audit Practice in Ottawa, described how his grandfather had gone to school through to grade eight and then went out to work.  He then recounted how his father went to school through to high school and then went out to work.  When his time came, Andrew had gone to school through university and then went out to work. Each of them spent twenty-five percent of their lives in school. Newman pointed out that today an undergraduate degree is what a high school degree was fifty years ago and what grade eight was 100 years ago.

[2] By Newman's twenty-five percent measure we should think of postsecondary education as a public good, much like primary and secondary public education, rather than a private good. Today more than ever, we need information and knowledge to say nothing of wisdom, yet our public investment in higher education, the engine of this information and knowledge, is not keeping pace. Worse, we are transferring much of the cost to students through higher tuitions, increased fees, and larger personal debt. Student debt bondage is symptomatic of a larger ethical dilemma.  It will have long-term impacts.[1]

THE STUDENT DEBT CHALLENGE

[3] The amount of outstanding postsecondary educational loans in the United States is estimated to be $1.3 trillion dollars. There are 40 million borrowers in the U.S, which is larger than the entire of population of Canada.[2] This means that the average student loan debt in the United States is US$37,172.[3] Bloomberg's Janet Lorin writes, "No other country imposes the kind of costs on college and university students that the U.S. does, and nowhere else do loans cover so much of those costs. This may be more than the rest of the world combined." [4]

[4] The Canadian picture while different has some similarities. According to the 2015 Graduating Student Survey, the average student "who borrows for their education expects to graduate with about $27,000 in debt."[5]  The amount of money owed to government loan programs has been fairly stable but the level of private borrowing from private financial institutions, family, and friends, as well as credits cards has seen major increases. There are a significant number of students who leave their undergraduate program as highly indebted people, some with $80,000 or more. In 2015 Bilan Arte, the national chairperson of the Canadian Federation of Students said that her generation "is one of the most indebted generations in Canadian history."[6]

[5] All students do not share this debt burden equally. There are many factors affecting the ability to repay these loans. For example, two years after the financial crisis of 2008, many graduates were earning 14% less than graduates in 2005.[7]  A lot of students fail to complete their program.  Two strong predictors of default are "degree completion" and attendance at a for-profit institution.[8] As Arizona State University President Michael M. Crow has said, "Tens of millions of people in the U.S. are saddled with student debt and have no degree to help pay it off."  There are other barriers to completion of programs.

[6] Both countries have made it difficult for students to declare personal bankruptcy.  In the U.S. students can go to court if loans present "undue hardship." Recently New York Judge, Jim Pappas, said that the criteria (the 1987 Brunner precedent), used  “to determine the existence of an undue hardship is too narrow, no longer reflects reality and should be revised.”[9] In Canada students have to wait five to seven years and the law is more punitive to student debt as compared to general consumer insolvency.[10] 

[7] Many students do manage the costs of their education. Nevertheless, a significant number of people don't.  They have a very difficult time escaping their virtual bondage to these debts. Of the 40 million U.S. borrowers, 7 million have defaulted, 2% of the U.S. Population.[11] In Canada, the Canadian Federation of Students claims that 400,000 students borrowed to cover the costs of their education.[12] The sacrifices to pay loans can have a high secondary impact on spouses, children and families.

HOW DID WE GET HERE?

[8] How did we get to this point?  There are many global forces weakening government’s capacity for support. In Canada and the U.S., governments have been cutting taxes and spending which in turn means reduced support to postsecondary institutions. A Canadian Centre for Policy Alternatives (CCPA) study found that in Canada, "Government support for postsecondary education declined notably, to 55 percent of university revenue in 2015-16 from 77 percent in the 1990s."[13]  In Canada, in the 1960s and 70s government contributed 90 percent of the funds.  Similar trends are occurring in the United States.  At the same time, governments are being more assertive and regulating educational policies and practices within the institutions themselves, which can increase costs.  There are additional cost drivers such as senior administrative costs, faculty and staff salaries that normally are the largest share of any university budget, and increases in scholarships and financial aid.

[9] To cover costs, Universities and colleges have been increasing their tuition and fees beyond the rate of inflation. Another CCPA study found that "university fees had tripled between 1993-94 and 2015-16."[14] Universities and colleges have become more tuition-dependent. In Canada in 2012, 37 percent of their revenues came from tuition compared to 20 percent in 1990.[15]  The costs of a two-year or four-year degree programs in private and public schools in the U.S. rose on average from $10,820 in 2000-2001 to $18,497 in 2010-2011, an increase of 70%.[16]  As well, more people are pursuing educational opportunities further raising demand and putting upward pressure on student costs. 

[10] As tuitions and fees increased so too has the debt burden on students. "Canadian student debt levels jumped 44.1 percent from 1999-2012. One in eight households carried some student debt, with a median value of $10,000."[17]  In the U.S., student debt increased by 110 percent between 2005 and 2012. 

INDENTURED SERVITUDE OR FREEDOM FOR SERVICE TO OTHERS?

[11] Ethics is about making choices that enhance life's flourishing. Student debt forecloses those choices.  Students and their families are trapped by these debts in a system that maintains their indenture to the financial institutions and their own governments. Jeffery Williams has asked, "Are students the new indentured servants?"[18]  There are some specific consequences to this indenturing.

[12] "Failure to Launch”- In 2006, "Failure to Launch" wasn't a particularly good movie.  But it was a good description of a thirty-year-old still living at home, unwilling to move out and into the next chapter of his life.  Many of the issues with student debt bondage can be summed up as a failure to launch.  Unlike the movie, this failure to launch is imposed upon young people by their debt servitude to these loan obligations.

[13] Many young people will be "delaying life's milestones" while they attempt to pay off their debts. They may put off getting married or starting a family.  They may not be able to rent their own apartment.  They may forgo further education to pursue their life's work and their dream job because it is just too expensive. Seminaries have been mindful of the dampening impact of educational debt on enrollments of students pursuing a low paying vocation as clergy.  For many their student debt lingers for years eclipsing their dreams.  Julia Handel wanted to go to culinary school but had $75,000 in loans from her education at Ithaca College in New York, which put that dream on hold.  "Whenever I do anything, loans are always on the back of my mind," she says, “It controls what I do every day and what I spend my money on."[19] Will debt bondage make students unable to assume their adult and leadership roles in society?

[14] Mental and Spiritual Health - One consequence of student debt bondage is the increasing concern for the mental health of students. Mental illness is increasing on campuses. There are a variety of factors, but they do include debt and finances.   At York University in Toronto, the director of financial services, after a troubling encounter with a student, had her staff undergo training to be able to "identify students in distress, listen to them and provide proper referrals."[20]

[15] There may be longer-term consequences as well. Katrina Walsemann authored a study of 8000 youth in the U.S. "to determine if debt load and psychological well-being were connected."[21]  She noted, "Students who took out more student loans were more likely to report poor mental health in adulthood."[22] A University of Toronto law student on the dean's advisory committee on financial aid summed up the impact, "A lot of students suffer silently."[23]  Will such suffering eclipse their social contribution in the future?

[16] Economic Service to Neighbour - Student debt affects the economy too. Economic participation is about contributing to the economic well-being of others and society through work, consuming, charitable support, investing and paying taxes to support the common good. Between 2000 and 2014, student debt has increased 500% while salaries have decreased 10%.[24] 

[17] Defaulting on student loans can affect your ability to secure a job.  Employers often check the personal credit of employees.  If you owe money, schools often withhold transcripts. Ironically this makes it harder to get a job to pay off the debts.

[18] Student debts can prevent a person from qualifying for a mortgage and purchasing a home or a car.  One estimate is that student debt in the U.S. results in a "$6 billion lost in automotive sales."[25]  Consumption is an important driver of the North American economy.  Economist Wilbert van der Klaauw with the Federal Reserve Bank of New York says, "My personal belief is that the increasing reliance on student loans for financing college education is going to be a drag on consumption for some time."[26] Will student debt bondage cripple their economic contribution to the well-being of their communities?

 [19] Citizenship-Service to Community - For Jeffery Williams debt is a pedagogy reshaping colleges and universities. Williams describes "a shift in the idea of higher education from primarily a social good to an individual good."  Students see themselves as educational consumers purchasing their own personal ticket to success and less like citizens committed to the public purpose. There is a "civics lesson" here Williams continues, "Democracy is a market...." Government's role is to simply facilitate the functioning of markets and not interfere.  "Each citizen is a private subscriber to public services, and should pay his or her own way." [27]

[20] An educational consumer view impoverishes the educational experience. Andrew Delbanco's  In College: What It Is, Was, and Should Be, makes the claim that university or college is "where (18-25 year-old) people learn to be people" and "a place where young people learn to be democratic citizens."[28]  We may not know the effect of this shift for some time to come.  Will Robert Putnam's "Bowling Alone" become a new normal?[29] Will the isolation that comes with student debt accelerate this process?  What will this consumerist orientation mean for more civic-minded citizenship-service to our communities?

STUDENT DEBT BONDAGE - PERSONAL ETHICS, SOCIAL ETHICS, OR PUBLIC ETHICS?

[21] There has been a lot of discussion about student debt over the past twenty-five years at universities and colleges but things seem to be getting worse.  There have been at least three ethical approaches - personal, social and public - taken to these issues. The approaches of Donald Trump, Hillary Clinton, and Bernie Sanders in many ways personify these responses.

[22] A Personal Ethical Approach - There are those who argue postsecondary students should pay for the experience themselves because they will earn more than a million dollars more over their lifetime and enjoy greater job security. The problem of student debt is a question of individual responsibility and personal ethics. Individuals and their families should support the educational journey and deal with debt by making responsible choices.

[23] To help with these better choices, some universities and colleges have instituted financial literacy programs to help students manage their financial commitments.  Others have begun asking for a financial plan at the time of admission. Governments have considered debt repayment schemes to expand the repayment options for individual borrowers.  Still, others argue for caps on the amount student's can borrow.  These are important but not enough to address the problem.

[24] Traditionally, Republicans have not been keen to increase government spending. Their approach to postsecondary education has been mostly to cut funds.  For those reasons the personal ethical approach is attractive to them.  Lanhee Chen, Mitt Romney's policy director during the 2012 election said the answer is to ensure graduates get well-paying jobs that enable them to repay the loans and not just to "throw free education at them.[30]   Some will also argue that universities and colleges should be more accountable for the outcomes of their students that make them valuable to employers.  The Trump University fiasco reflects this self-improvement approach where education is about acquiring information and job skills and the onus is on the student to pay for the presumed personal benefits they will receive.

[25] A Social Ethical Approach - There are those that argue the system seems stacked against students. Jeffery Williams makes this point, "the banks bear no risk, and the structure of federal loan programs provides a safety net for banks, not for students."[31]  Social ethics recognizes that injustice can arise within structures and institutions with outcomes that are unfair and unjust even with the best of intentions.

[26] An example of a social ethical approach is the plan offered by Hillary Clinton during her presidential campaign.  Her proposal was to refinance student loans, implement income-based repayment programs, ask employers to contribute, recognize entrepreneurial initiative by recent grads and reward public service.[32]  Clinton's "New College Compact" could have ensured that costs would not be a barrier and debt would not be a burden on graduates. "Clinton's plan requires everyone (all parts of the system) to do their part."[33]  State governments, colleges and universities, businesses, families and the students themselves would all have had to contribute. 

[27] Social ethical strategies aim to tweak the system to make it fairer.  Schools are dramatically expanding their financial aid programs. The Canadian government and others have expanded the grant portion of their financial aid to students. Noah Smith suggests that private schools are using "headline tuition increases" to make the "rich students pay" while lower income students get this additional assistance.  Canadian journalist Jacob Serebrin points out that while U.S. "sticker prices are much higher than the Canadian average ... (U.S. students) receive much more student aid" in effect equalizing the costs.[34]  

[28] Social ethics includes personal ethical considerations as well.  All those who have a stake in our common future have a responsibility to financially support institutions of learning through taxes, donations, and tuition. Nevertheless, a social ethical approach is insufficient given the unresponsiveness of the systems to change. Governments remain wary that their increased financial help for students will only fuel further tuition and fee increases, pay senior administrative or ancillary costs, or faculty salary increases, cover unfunded liabilities of faculty pension plans and in the end not help students.  Universities and colleges work hard to raise money for student aid but seem incapable of changing the institutions themselves.

[29] A Public Ethical Approach - Many people today believe their leaders are not looking out for them, the system is rigged, or the system itself is the problem.  What happens when the presumed systems and grand narratives for organizing information, knowledge, and wisdom are fraying and unraveling? What happens when you face the consequences of institutional atrophy or what Niall Ferguson calls the "great degeneration?"[35]   You need to begin again by creating or re-creating publics and narratives. 

[30] Many think of public as relating to government.  I use the term public to refer to those voluntary associations of individuals who gather with others around an idea or a cause.  In the process of coming together people are changed and in turn, they can effect change.  In the midst of unraveling and fraying social systems and structures, one of the main responses has to be that of gathering and sustaining these voluntary associations or in effect, public-making.[36]

[31] It is worth noting that not all publics have noble ideas or benevolent causes to promote.  In fact, some can be downright diabolical.  Nor is there just one public.  The body politic is made up of multiple publics.  We can be part of a variety of different publics with varying aims and purposes all at the same time.  The U.S. and Canada have many publics jostling, competing and coopering to advance support for their causes and ideas. This all takes place in what I have described as the public commons.[37] 

[32] Public ethics is that process of discerning and pursuing the nobler opportunities for common good.  It can take place in the public commons within a public and among publics. Public ethics enlists personal ethics and social ethics.  Like social ethics, it too provides an overall architecture for various ethical methodologies. Public ethics,

"... creates “public(s)” that encourage a community-based process of moral engagement to addresses a compelling personal and social ethical dilemma(s) or paradox(s) that enlists our ultimate convictions and deepest values as global citizens to address or resolve an issue or life question(s) in our world."[38]

[33] Public ethics is aspirational and missional, always seeking the good of the other. As such it requires a coherent worldview that helps people understand their world, why it is the way it is and what they can do to improve it. In short, it is a way of being and doing that has a clear direction.

[34] The "Feel the Bern" Campaign was extremely successful in gathering and energizing a public of young adults on the issues that mattered to them. Sanders "dominated the youth vote" in the primaries, winning 80% of the youth vote in some states.[39] He spoke to their issues. 57% of those under 30 feel student debt is a major problem for young people, possibly even more than issues of war and peace so important to the boomer generation.[40]  The Sanders' campaign illustrates in many ways how public ethics is done.  Hillary Clinton adopted some of Sanders' ideas in her platform but she was never able to fully enlist his young energized public.

[35] Sanders understood higher education as a "public good" and proposed free tuition, eliminating government profit from loans, cutting interest rates, refinancing options, increasing financial aid based on need, and making Wall Street speculation pay for it all. Sander was able to articulate a worldview that resonated with the reality of many young people including the reality of student debt. Therefore, his ideas should not be too quickly dismissed but rather carefully explored and reconsidered.

POSTSECONDARY EDUCATION, PUBLIC ETHICS, AND THE PUBLIC PURPOSE

[36] Postsecondary education today is a public good.  Our economies are becoming more advanced with greater levels of global integration, competition, and complexity.  Technology presents challenges and opportunities.  Rising extremism and climate changes pose existential threats to human life.  Family and social institutions are changing, as are our politics.  Christopher Lasch has observed,

"If elites speak only to themselves, one reason for this is the absence of institutions that promote conversation across class lines.  Civic life requires settings in which people meet as equals, without regards to race, class or national origins."[41]

[37] Canadian Kate Lawson, president of the Confederation of University Faculty Associations writes, "Universities are important ways of building fairness and equity in our society."[42]   Lasch argues that democracy requires a level of "public intelligence" and critical thinking.[43]  The emergence of democracy in the United States and Canada was possible because both countries had an educated population. Higher education equips people for civic life as well as their own personal and economic life.

[38] Student Debt Bondage is a "canary in the coal mine" offering a warning for the future.  Higher education in North America remains excellent but is the issue of student debt an early indication of potential challenges coming?  The increasing attention to research versus teaching, the reliance on part-time contract teaching faculty, technological advances in the classroom that reduce contact with faculty, the commuter school that limits the campus experience, skills training at community colleges with fewer opportunities for an apprenticeship, unpaid internships and community placements, and other developments have caused students to ask questions about the "troubling priorities" of schools, administrations and faculties. Access, fairness and equity are at risk on campus these days.

[39] Student debt bondage is the immediate issue.  It cannot be redressed by personal ethics or social ethics alone. Most, if not all of the policies noted above will be necessary for a concerted strategy to help borrowers in trouble. However, as Sanders' campaign demonstrated the student debt crisis will only be addressed by creating publics that understand and support higher education as a public good.  Publics will demand more accountability from governments and educational leaders for promised outcomes.  More investments will need to be made that directly help students rather than the institutions.  Equal and fair access to higher education as a right will be an increasing demand.  Free tuition is only a placeholder for this demand for access.  Governments will need to safeguard this right to fairness and access. Business will need to return to supporting the teaching side of higher education and to creating employment for graduates.  Civil society with it impetus for collaboration and its not-for-profit nature will play an increasing role in higher education.  Churches and faith groups will need to stake out their unique niche in helping to humanize postsecondary education. In short, it will take many publics to do this work.  Addressing student debt is just a first step.

David Pfrimmer is Professor of Public Ethics and Co-director of the Centre for Public Ethics at Waterloo Lutheran Seminary on the campus of Wilfrid Laurier University in Waterloo, Ontario and an International Fellow at the Chester Ronning Centre for the Study of Religion and Public Life at the University of Alberta.