The high price of higher learning

Recent public debate has highlighted young Americans’ frustrations with the high cost of college tuition. With $1.1 trillion in total outstanding student loan debt in the United States, American college education is among the least affordable in the world. Americans who attend institutions of higher learning tend to pay more than their global peers, graduating on average $24,301 in debt. Today’s students are paying more compared with previous generations – higher education costs have risen 500 percent since 1985.

Nowhere better typifies this dilemma than here in New York, where in 2010 graduates held 11.2 percent more debt than the national average, and $1 billion has been cut from higher education over the past 15 years. New York-based institutions are also unsurprisingly some of the most expensive in the country – in a 2014 Brookings ranking, New York University placed first among nonprofit universities in student-owed debt.

All this begs the question: Why is student loan debt so high, and can attending a nonprofit educational institution help to ease that burden?

Mark Kantrowitz, a nationally recognized expert on student aid and publisher of the free college search site Cappex.com, believes that student debt has grown incrementally for decades, only coming to the forefront of our national dialogue when it surpassed credit card debt and reached the $1 trillion dollar mark. He has watched as continued state and federal government cuts have increasingly shifted the burden of payment to families. From the perspective of the schools, the rise in tuition is necessary, with anticipated negative returns on endowments and investment portfolios reported for this fiscal year. The combination of government cuts and a volatile market has forced schools to search for revenue, often through increasing tuition – which in turn leads to a surge in student borrowing.

This creates real concerns when those that have taken on student debt neglect to complete their degree, failing to receive the kind of lifetime earnings and career benefits that might help them shoulder their financial burden. Kantrowitz has found that people who drop out of college are four times more likely to default on their student loans than those who do not.

Interestingly, data from Brookings revealed that the current crisis appears to be concentrated on students who attend for-profit and two-year colleges – the same students who do the majority of borrowing and have nearly triple the default rates of their four-year peers. With nearly double the unemployment rate of their counterparts, this for-profit and two-year cohort tends to fare worse in a job market still recovering from the recession.

To determine how things are different for students at nonprofit institutions, we have to first determine what exactly the difference is between nonprofit and for-profit educational institutions.

Nonprofit universities are responsible to their students. They have a vested interest in their students’ degree completion and future success. They have an ability to boast a network of accomplished alumni to help build university prestige and incentivize prospective students to apply. 

For-profit universities are a business, responsible to shareholders with a focus on high returns, resulting in more expensive classes and no incentive to see their students graduate in a timely fashion. The difference in motivation is also seen with accreditation. For-profit schools are nationally accredited and unable to attain the regional accreditation that nonprofit schools hold. Students who attend for-profit schools in the hopes of career advancement are more often than not duped. A study by the National Bureau of Economic Research found that for-profit vocational certificate students made $900 less annually after attending those schools, whereas students who attended the same classes at nonprofit community colleges made $1,500 more.

In this current economic climate, making the transition from degree to career is vital. It has become a growing focus at several New York nonprofit institutions, including Columbia University’s School of Professional Studies, which is led by Dean Jason Wingard. Its mission is simple: to provide a rigorous education, informed by rapidly evolving global market needs, that supports the academic and professional aspirations of its student community. The school offers degrees in growing professional fields, including its sports management program, which was ranked No. 2 globally by Sports International in its 2016 Postgraduate Sports Course Rankings.

In addition, for those with student debt who choose to work in the nonprofit or government sectors, hope also comes in the form of the Public Student Loan Forgiveness Program (PSLF). Under this program, the remaining balance on direct loans is forgiven following 120 qualifying monthly payments. Students can also opt for an income-driven repayment plan and make payments based on a percentage of their discretionary income, meaning that students can trade lower debt payments per month for a longer repayment period. Importantly, any remaining balance on the loan that is not paid off within 20-25 years will be forgiven, although the vast majority of borrowers will pay off their loans well in advance.

According to Kantrowitz, this program is a great deal for the public for three reasons: it removes debt as a disincentive to public service, gets good people in good jobs that need to be filled, and is less expensive than raising wages for those in these positions. (More information can be found here: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service.)

Students have a lot to consider when exploring how their choice of a nonprofit or for-profit institution will affect their future employability. Location is a strong factor to weigh as well. Studying in New York has its advantages. 

According to Dean Wingard, Columbia University’s School of Professional Studies programs reflect the marketplace. “We are always keeping our educational programs in step with what today's workers need, and we aim to layer on top of whatever educational foundation they already have. We make sure that we are working with the best practitioners from industry as well as researchers from academia and that the two feed each other in a virtuous cycle. Because we are based in New York City, we often have easy access to highly accomplished practitioners who have worked at some of the best known and respected institutions in the world.”

Christina Taler holds an M.S. in nonprofit and fundraising management from Columbia University and is an associate director at CCS. For more nonprofit tips, follow her on Twitter at @stinafsays.