Random Thoughts About College Tuition, Student Loans, and Return on Investment

The history of federal and state involvement in subsidizing the cost of higher education has filled books. From the federal perspective, Congress opted to support the students’ cost of college attendance through student loans versus grants beginning in the 1950’s. The need-based Basic Educational Opportunity Grant (now known as a Pell Grant) was initiated for the 1973-1974 academic year. Although it covered a higher percentage of average tuition in 1973-1974 than it does now, it was never intended to replace federal loan programs.

Over the years following authorization of the Higher Education Act in 1965, Congress has mainly created and enhanced student loan programs rather than student grant programs. When college tuition began its inflationary trend in the early 1980’s, Congress added loan programs like the ParentPLUS and GradPLUS programs. It can be argued that the primary beneficiaries of these programs were colleges and universities and not students and their families.

Fast forward to the last decade and a half. The Obama Administration opted to redefine “gainful employment” by analyzing the abilities of for-profit and some community college degree program and certificate graduates to repay their student loans. Claiming that they had no ability to address “gainful employment” to include traditional non-profit institutions, the Obama Administration developed the College Scorecard to shed more transparency on earnings of graduates of four-year degrees at institutions who borrowed federal loans compared to the median loan balances for graduates of those degree programs. The Scorecard does not include data from students who do not borrow because Congress has not allowed the Department of Education to collect and publish student data on all students.

The College Scorecard provides previously unpublished earnings and borrowings data available to researchers and the public. Georgetown University’s Center on Education and the Workforce published the first College ROI calculations in 2019. In 2021, the Wall Street Journal published a series of articles about debt incurred by graduate students. Both products utilized College Scorecard data. There have been other initiatives as well.

Following up on his campaign promise, President Biden forgave billions of dollars of student loans through the Borrower Defense program and has proposed forgiving nearly half a trillion dollars more. The latter recommendation is awaiting a Supreme Court decision on its legality.

In addition to proposing student loan forgiveness, the Biden Administration has also proposed changing the payment terms for income-driven repayment plans that would reduce minimally required payments and increase the percentage of student loans forgiven under those plans after 20 years.

As of this writing, the Congressional reauthorization of the Higher Education Act has not occurred since 2008 thanks to either controlling party’s inability to build a consensus. Regulatory rulemaking has occurred through the Department, and most of that has occurred during Democrat administrations. A total overhaul of the federal financial aid system is unlikely unless Congress initiates it. The federal government continues to provide hundreds of billions of dollars of new student loans each year, and those loan programs continue to enable colleges and universities to charge more than what would be expected in a normal knowledge economy.

Given the current higher education background scenario, I thought “what would I do if I were King for a day and could change the system?” Here are a few of my ideas. As always, I would enjoy hearing yours.

Step 1: Separate the proposed solutions for previously issued student loans from student loans going forward. Prioritize the solutions for student loans going forward.

Step 2: Separate proposed solutions for undergraduate degree and certificate loan programs from graduate degree and certificate programs. Prioritize the solutions for undergraduate degree and certificate programs.

Step 3: Phase out ParentPLUS and GradPLUS loans over three years. Do not replace them. These programs subsidize institutions at the expense of students and their parents.

Step 4: Publish earnings and debt information for graduates of all programs and all students at all Federal Student Aid participating institutions.

Step 5: The database above should include cumulative information for all students stacked by credentials. Evaluations of graduate degree earnings and debt should consider the debt incurred for the required bachelor’s degree. Earnings for graduate degrees should consider total cost and total debt to achieve it. These metrics are no different than the evaluation and decisions made by individuals when they decide to attend graduate school.

Step 6: With data from the unified student and program dataset, institutions should be encouraged to find ways to reduce total costs such as allowing students to earn a bachelor’s in three years and a master’s in four years. Law schools could be encouraged to eliminate the third year of law school. Competency-based programs could be implemented to eliminate time-in-seat requirements.

Step 7: Implement a Gainful Employment rule for all degrees and certificates at all institutions. For degrees and certificates deemed to be important to our economy (i.e., childcare), allow institutions to reduce tuition to match required returns as a first violation resolution or allow students before enrolling in the program to acknowledge that the income earned may not justify the costs incurred.

Step 8: Implement a national classification system for general education courses like the Texas Higher Education Coordinating Board’s Core Curriculum. Institutions that do not agree to accept this will be required to place a prominent disclosure on their website and application. Students will be required to acknowledge reading this disclosure. This ensures transferability of all gen ed courses, another source of added college costs.

Step 9: Provide federal funding or financial incentives for high school and college dual enrollment programs. Courses would be required to map into the core classification system to be eligible for funding. Increased participation at the state and national level should decrease the time to degree as well as improve college preparation.

Step 10: Separate Pell Grants into Pell Tuition and Fees Grants and Pell Cost of Living Grants. Cost of Living Grants would not decline based upon non-full-time enrollment.

There are likely more steps than these 10 that can improve the federal student aid system. I am choosing not to provide recommended steps for resolving the current student loan balances in this article.

There is one more issue worthy of mentioning. Before these or any other changes are implemented, our politicians and Department of Education career employees need to acknowledge that students have choices and make choices independent of institutional persuasion. I know many students who have chosen to attend public two-year and four-year institutions in their home state to lower the cost of college. I also know students who chose to attend private, non-elite institutions instead of their public in-state institutions. These decisions may or may not have different financial outcomes. Before we try to implement single solutions to reduce or forgive student loans, we should acknowledge that if students are free to make financially different decisions, taxpayers should not bear the responsibility of those more costly decisions.

As usual, I am glad to hear your thoughts and ideas.

Subjects of Interest


Higher Education

Independent Schools


Student Persistence