Student Debt: Ripe for Comedy, but No Laughing Matter

October 2, 2014

In a recent segment, Last Week Tonight with John Oliver took on the subject of higher education in a hilarious rant on some rather serious topics, such as state disinvestment in public colleges and universities, skyrocketing tuition, and rising student loan debt. Injecting his signature brand of comedy, John Oliver touched on a number of important issues that we also highlighted earlier this year in From State to Student, the CBP report on higher education funding in California.

Oliver noted that in recent years, states have slashed funding for higher education by an average of 23 percent per student, according to a Center on Budget and Policy Priorities report. In response, public higher education institutions have raised tuition significantly. This is definitely true in California, as the state’s support for the California State University (CSU) and the University of California (UC) has deteriorated in recent decades and remains near the lowest point in more than 30 years on a per-student basis, after adjusting for inflation. This is even after accounting for the small state funding increases both CSU and UC have received in the last couple years. At the same time, tuition and fees have risen dramatically as state support has dwindled, remaining near historic highs at both CSU and UC, even after adjusting for inflation.

As Oliver points out, one of the consequences of state cuts for higher education and increased tuition is that students are being forced to take out ever-larger student loans to pay for school. The total amount of student loan debt now exceeds $1 trillion nationally after tripling in the past decade, surpassing all other forms of household debt except home loans. Shining some comedic light on the increasing pervasiveness of student loan debt, Oliver quipped that “it has surpassed Bob Marley’s greatest hits album as the thing seemingly every college student has.” Unfortunately this broader trend has not bypassed California, as a growing share of CSU and UC students are graduating with increasing amounts of student loan debt. This is a strong indicator that public four-year higher education is becoming less affordable and less accessible for many high school graduates in California.

As we discussed in From State to Student, these trends have fundamentally altered how higher education costs are shared between the state, on one hand, and students and their families, on the other. Whereas the state once paid most of the cost of public higher education in California, years of budget cuts and tuition hikes have shifted more of the costs to students and families, especially at CSU and UC. This cost shift potentially puts the state’s economic future at risk, as a well-educated workforce is critical to California’s future prosperity. At current rates, California will not produce enough college graduates to meet the demands of the state’s economy in the years ahead.

In his concluding remarks, Oliver commented that “our leaders have decided that, while [higher] education is incredibly important, it is not important enough to actually pay for.” Stay tuned in the coming months as we issue further analysis and commentary that explore these issues — and what they mean for public policy in California — in greater depth.

— Phaelen Parker


Transparency Still Missing in the New K-12 School Funding Formula

September 3, 2014

Once again California’s new funding formula for K-12 schools — the Local Control Funding Formula (LCFF) — will be the focus of the State Board of Education (SBE) meeting tomorrow in Sacramento. As at its prior meeting in July, the SBE will review proposed changes to regulations they adopted this past January that govern LCFF spending. These include changes to what school districts must report in their Local Control and Accountability Plans, or LCAPs. All California school districts were required to adopt LCAPs by July 1 using a template the SBE approved earlier this year. In response to comments made by students, the SBE improved the LCFF regulations since its last meeting by specifically calling for greater student participation in the development of school district LCAPs. However, key issues remain, including whether school districts will be required to transparently report how much they spent to support disadvantaged students in 2013-14.

As we have blogged about previously, it is critical that the SBE adopt regulations that require school districts to clearly report a baseline spending level so that stakeholders can gauge the extent to which school districts are increasing or improving services to support disadvantaged students. While the regulations adopted by the SBE in January do require school districts to use prior-year spending on disadvantaged students as a starting point for estimating the level of support going forward, they do not require transparent reporting of this baseline level of spending. Unfortunately, the SBE rejected requests for this basic level of transparency in its most recent responses to comments submitted by education advocates.

The SBE is likely to adopt permanent regulations later this year, and those rules, as well as the LCAP template, will determine what LCFF spending school districts are required to report — and how they are required to report it — for years to come. After tomorrow’s SBE meeting, the public will have through September 22 to submit comments on proposed changes to the regulations and the LCAP template. All concerned about transparency in LCFF spending should use that period to engage in the process and let their voices be heard.

— Jonathan Kaplan


An Opportunity to Improve Transparency in the New K-12 School Funding Formula?

July 9, 2014

Tomorrow’s State Board of Education (SBE) meeting in Sacramento will focus on California’s new funding formula for K-12 schools — the Local Control Funding Formula (LCFF). The SBE will review proposed changes to the regulations they adopted this past January that govern LCFF spending and stipulate the information school districts must report in their Local Control and Accountability Plans, or LCAPs. All California school districts were required to adopt an LCAP by July 1 using a template that was developed and approved by the SBE earlier this year. Tomorrow’s meeting will review changes that the SBE is proposing to both the spending regulations and the LCAP template in response to more than 2,000 written comments the State Board received this spring. The SBE plans to adopt permanent regulations later this year and those rules, as well as the LCAP template, will determine how school districts are required to report LCFF spending for years to come.

It is critical that the SBE adopt regulations that require school districts to clearly report two pieces of information, so that stakeholders can gauge whether districts are increasing or improving services to support disadvantaged students: 1) a baseline level of spending used to support disadvantaged students in 2013-14; and 2) for each year after 2013-14, the amount spent in the prior year to support disadvantaged students. While the regulations adopted by the SBE in January do require school districts to use prior-year spending on disadvantaged students as a starting point for estimating the level of support going forward, they do not require transparent reporting of this spending level.

On Monday’s KQED Forum program, I had the chance to join SBE President Michael Kirst and others in discussing implementation of the new funding formula. President Kirst suggested during this conversation that the State Board may be willing to require school districts to transparently report how much they spent to support disadvantaged students in a prior year. By establishing a clear, easy-to-understand baseline, such a change would be a welcome step toward improving transparency and enabling stakeholders to understand whether LCFF dollars are being used to support disadvantaged students.

After tomorrow’s SBE meeting, the public will have through July 28 to submit comments on proposed changes to the regulations and the LCAP template. All Californians concerned about making LCFF spending more transparent should use that period to engage in the process and let their voices be heard.

— Jonathan Kaplan


Op-Ed: Keeping the Promise of the New School Funding Formula

June 3, 2014

Today, the Sacramento Bee featured an op-ed from CBP Senior Policy Analyst Jonathan Kaplan, which points to the need for greater transparency in California’s new system of K-12 school funding — the “Local Control Funding Formula” (LCFF). Almost one year since the new funding formula was enacted, this year’s budget negotiations could determine whether education stakeholders have access to easy-to-understand information about how school districts use LCFF dollars. As stated in the op-ed:

In the coming days, legislators and the governor will make crucial decisions about transparency. The issue at hand is whether districts will be required to report the amount they receive through the new formula to support disadvantaged students and — more importantly — how they use those dollars to benefit them. If state policymakers do not require this basic level of accounting, it will be very difficult for local stakeholders to answer some key questions about how the new funding formula is working.

The full op-ed is available on the Sacramento Bee’s website.

— Steven Bliss


Increased Student Loan Debt Creates Ripple Effects That Could Hinder Economic Growth

May 29, 2014

Our recent Budget Brief on funding for higher education, From State to Student, shows that a growing share of students graduating from California’s public four-year institutions — the California State University (CSU) and the University of California (UC) — are doing so with higher levels of student loan debt, partly due to an ongoing shift of higher education costs from the state to students and their families. At UC, for example, undergraduates who took out loans graduated with an average of nearly $20,000 in student loan debt in 2011-12 — a level that is almost $3,000 higher than in 2006-07, after adjusting for inflation.

This trend is certainly not unique to California. Nationwide, an increased share of young adults are taking out student loans to help pay for their higher education. Furthermore, the average amount owed in student loans by those who do borrow has also risen. In only a decade, from 2003 to 2013, the percentage of 25-year-olds with student loan debt increased from 25 percent to 45 percent, while the average balance owed nearly doubled from around $10,600 to $20,900.

Of course, student loans aren’t necessarily bad. They can help bring higher education within reach of many low- and middle-income students and are a sound investment in one’s future. Also, some programs, such as federally subsidized low-interest student loans, help provide critical access to higher education for millions of young Americans, including many CSU and UC students. And, we know that college graduates have significantly higher average lifetime earnings and face lower unemployment rates than do those with only a high school diploma. In fact, over the past generation only Californians with bachelor’s degrees, on average, made strong wage gains, providing clear evidence that a four-year college degree is closely tied to economic opportunity and mobility.

However, the high level of student loan debt could actually be stifling the nation’s economic recovery. A new report by the Federal Reserve Bank of New York shows that, with escalating education costs contributing to soaring student loan debt, young adults — particularly those with student loans — are significantly more likely to hold off on purchasing homes, cars, and other big-ticket items than they were a decade ago. Worsening the situation is the high unemployment and underemployment rates that young college graduates continue to face. The combination of economic uncertainty and increased student loan debt burden has reduced the amount of money that many young Americans are willing and able to spend on a variety of purchases — thus creating a drag on overall consumer demand.

It’s not just that declining state support for CSU and UC may be creating ripple effects that threaten California’s economy in the short term. Failing to invest in higher education could put our state’s long-term economic future at risk. California is projected to face a shortfall of 1 million college graduates by 2025. Furthermore, a study last year by the Economic Policy Institute (EPI) demonstrated that states with a well-educated workforce are more likely to have strong economies and foster broadly shared prosperity.  The report noted that:

“(P)roviding expanded access to high quality education and related supports — particularly for those young people who today lack such access — will not only expand economic opportunity for those individuals, but will also likely do more to strengthen the overall state economy than anything else a state government can do.”

To help strengthen pathways to economic opportunity for low- and middle-income Californians, policymakers should rebuild state support for CSU and UC and recommit to providing an affordable, quality higher education that is accessible to all eligible Californians. Last week, both of the Legislature’s budget subcommittees on education voted to significantly augment CSU and UC funding above modest increases in the Governor’s proposal. This would represent a step in the right direction.

— Phaelen Parker