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SUZANNE METTLER: --is people who are now ages 25 to 34. So as you can see, the United States has barely moved up, whereas all of these other countries in Western Europe and Poland and Korea have leap-frogged over us.
The next trend that we have to take seriously is that there's rising inequality in graduation rates of four-year college degrees. Now, if you look at people from the top quartile, what you can see here is that now 71% of them by age 24 have completed a four-year college degree. In other words, it's almost a rite of passage for people who grow up in the upper part of the income distribution.
By contrast, look at the bars there for people below median income. It's barely changed since the 1970s. So people who grow up in the bottom income quartile are now only 10% of them receiving college degrees by age 24. And only 15% of those who grow up in the second quartile from the bottom.
And then it's not just a matter of whether or not you go to college and whether or not you graduate, but it's also a matter today of where you go to college, what sector of colleges you attend and what particular institution, because we're seeing increasing stratification of colleges and universities. So inequality emerges through what particular college people go to. And that affects how much they're going to pay, whether or not they're going to need to take out a student loan and if they do, how much they go into debt. It will affect the quality of the degree they obtain, the quality of their experience in the process, and then once they graduate, their likelihood of being able to gain employment that allows them to pay back those loans.
And it's worth just stepping back for me to-- I've given you a lot of data here. Let me just talk about this for a moment. So let's see-- does this have a pointer? OK.
Well, if you look under first on the left-hand side the column Tuition and Fees, obviously private nonprofits charge the most, and everybody knows that, although this doesn't quite tell you enough, because in fact there's a very high discount rate at private nonprofits. It's now about 45%. So the average student is really paying something more like $14,000 in tuition, not $29,000. Publics, by contrast, are not able to provide that kind of support. So in fact, often the price given is different, as you might think, between those two levels.
But look at the for-profit colleges, which are like the University of Phoenix and ITT and DeVry and so on. These charge $15,000 in tuition. But now look at the next column of the graduation rates within six years, currently low graduation rates, about 22% for the for-profits. Much higher graduation rates for the publics and highest for the private nonprofits.
Then if you look at the percentage of students who take out loans in order to attend, there's a great contrast, with it being almost all students at the for-profits who need to borrow to attend them, and a much lower rate at the other traditional universities and colleges. And then the amount they borrow is also pretty striking, almost $33,000 for those at the for-profits, and much lower rates at the other traditional universities.
And then finally, the default rates. It's very hard for these students who attend the for-profit colleges to gain employment that allows them to pay back, having borrowed on average $32,700 in loans. One of the things that's really striking if you look at the associate's degrees is, compare the publics, which are community colleges, where students are borrowing about $7,000, and it's only 33% of them who borrow, whereas it's so common for those who go to the for-profits, often getting training in the same kind of thing, and yet they end up with, on average, almost $19,000 in debt. They're very likely to default later on, because employers don't give as much respect to those degrees.
So the question is, why has this occurred? Now, conversations about the crisis in higher education are really going on now at quite a great rate. And the most common thing that people talk about is the cost of tuition. Now, I've already kind of highlighted here that I think that's too simplistic an explanation, because when you go to a private nonprofit while tuition, the sticker price is higher, it may be well worth the degree and it might be a very sound investment compared to lower tuition at another type of university.
But even aside from that, first of all we need to say it's undeniable that tuition has increased at all types of universities and colleges over time much faster than inflation. And economists like Cornell's Ron Ehrenberg can explain why education costs continue to rise even when the cost of some other goods and services, consumer goods. has grown cheaper over time.
But what I want to emphasize is that what students actually pay to attend college is not determined in a vacuum. Rather, throughout American history, government has borne some of the costs of higher education, and thus affected what students actually pay. From the time of the American founding and up through the creation of the Morrill Act, the federal government provided land grants to states that helped them to develop institutions of higher education. And then they responded in turn and invested more to improve that system of higher education.
So here you have a picture on the right. That's Congressman Justin Smith Morrill of Vermont introducing the Morrill Act, which President Abraham Lincoln signed into law. And of course, as you know very well, this legislation fused so neatly with the vision that was articulated by Ezra Cornell, "I would found an institution where any person can find instruction in any study." And it permitted Cornell to become the first and only land grant private Ivy League university.
Then in the 20th century, the federal government provided student aid. And the states followed in turn and they redoubled their efforts and invested all the more in their public universities and colleges. So how much students pay for college continues today, as it always has, to be affected by what government is doing as well.
Now, people will also often say that the problem of higher education today is that there are not enough qualified people to go to college, and that too many students are going to college who don't have the credentials, don't have the aptitude for it. Now certainly we can't discuss this problem without thinking as well about K-12 education in the United States and the need to continue improving that.
But what's really striking to me is that we've dramatically increased our high school graduation rates over the past few decades, while college graduation rates have been almost stagnant. It's also the case that if you look at why people who enroll in college subsequently drop out and don't finish, the most common reasons have to do with affordability, that they can't pay the price or related to that that they're working in jobs on the side and they don't have time to be students. They can't do it all, balancing trying to make enough money to pay their tuition and be students at the same time.
So neither of these explanations is sufficient, either tuition or aptitude. Rather, a large part of the problem is that the political system is not generating new ways to improve our college graduation rates and to maintain the quality of degrees that are available to students today. So why would this be? What has changed in our politics?
Well, I started on this project eight years ago, very glad to be finally wrapping it up. But I proceeded like a detective and I thought, what could the causes be?
And so first, I looked at public opinion. The idea is perhaps the public is no longer as supportive of aid to college students as it was some time in the past. And I found that that's not the culprit. In fact, if anything, there is even higher support today for aid to college students than in the past, and it certainly hasn't dropped off.
What I've come up with is that the policies of the past still exist. They've not been eradicated. But to the contrary, today we live in what I call a policyscape. This is a political terrain that is dense with policies that were created at earlier points in time, including the landmark laws as the mid-20th century.
But policies don't just unfold automatically, as if they were preprogramed by DNA. And they don't necessarily continue to function the way they did in their early days. It's not just because circumstances in the environment change, although that's certainly important too. It's also because policies themselves over time generate effects that can reshape their development and the kinds of consequences they have.
So let me give you some examples of these kinds of dynamics. One set of policy effects I call those emanating from policy design features. Some policies have features that allow them to continue to be expanded and to grow almost automatically. And we'll see that this was the case for student loans.
Once you have a student loan policy, it's relatively easy for lawmakers to say, let's just allow more students to borrow more money. And that's not that difficult politically for them to agree to that. What is difficult is for them to agree to increase grants, where they have to go through multiple committees and a really complicated budget process on an annual basis. And so those design features can destine policies toward different kinds of outcomes.
Another kind of policy effect is that of unintended consequences or in the language of economists, externalities. This occurs as, for example, policies might create some incentives for particular businesses to start providing some service to a greater extent than they did previously and to make handsome profits off of students. And this has happened quite a
Bit. It happened until recently through bank-based lending, which now no longer exists because of the change to direct lending. But we'll see it also happened because of the for-profit colleges managing to take advantage of available student aid dollars. The third sort of policy effect that I'll talk about are what I call lateral effects, where policies in other areas can displace, in this case, higher education policies, particularly through the budget process.
But the existence of all of these policies and their complicated effects doesn't mean that we're doomed to forces beyond our control. To the contrary, much of the task of contemporary governance is for lawmakers to act as superintendents of the policyscape. Now, this is a very different challenge than being a policy entrepreneur in a more wide open landscape. That was what Justin Morrill was able to do and Lyndon Johnson, for example.
Today, the challenge for lawmakers is to maintain public programs, to update and renovate them, to trim back in appropriate areas of growth, and to nurture areas that have fallen behind. It's more like taking care of an old house that has to be renovated and kept up with changing times and needs. The extent to which that happens, however, is contingent on politics. And we can see change over time in policymakers' capacity and their willingness to do this kind of policy maintenance.
A major finding of my book is that the rise of partisan polarization in Congress has been a disastrous combination with the policyscape. It makes it extremely difficult to engage in basic policy maintenance. And making matters worse in this very polarized environment, the only interests that are reliably responded to are those with the deepest pockets, as money talks and vested interests benefit. In short, partisan polarization, combined with elected officials' responsiveness primarily to wealthy, powerful interests, or what I call by shorthand plutocracy, has stood in the way of reform of higher education policy.
Now, the rest of my talk is going to be about how political failure has occurred predominantly in three major policy areas, federal student aid, state support for public higher education, and the regulation of the for-profit college industry. And I'll show you how these policy dynamics have played out in each one.
Now, first turning to federal student aid, today we're spending more than ever on federal student aid, and yet it's inadequate in terms of managing to expand college graduation rates, particularly in low- to moderate-income Americans. Now, what this graph is showing you is that, first of all, the dotted line is the cost of tuition at your average four-year public university. And this is in real terms. So as you can see, it's gone up very dramatically over time from the 1970s.
The green line is showing you the real value of Pell grants over this time period. And as you can see, when they were first created in the 1970s, they spiked up pretty quickly. And they were worth more than the cost of attending one of these universities. And in fact, a student could pay their tuition, room, and board, and 80% of it was covered by a Pell grant in the mid-'70s. Today, that's got down to about 35%.
And that's even with recent increases. If you look at that green line way over to the right, it's increased quite a bit in the last several years in real terms. But it's still way behind as a percentage of the cost of tuition relative to the 1970s.
Meanwhile, as I mentioned, much easier for lawmakers to increase students' ability to borrow more and more in loans. So the red line shows you what the average student has borrowed over time. And that's gone up and up. So a student on financial aid back in the 1970s received much more in grants than they borrowed in loans. But now the reverse tends to be true.
So the question is, why is there a lack of innovation around student aid? And here I would point directly to the rise of partisan polarization. Now, given what was on full display in Congress over the last few weeks with the government shutdown, I don't think I need to tell you that partisan polarization exists. But what you might not know is how this is a trend which has grown over time since the 1980s.
And what the red and green line are showing you here is the degree of partisan polarization in both the House is the green light and the red line is the Senate. And this is the gap in the voting records between the average Republican member and the average Democratic member over time. So whereas like when I was working in Washington, DC, after college in the mid-1980s and on any issue that my grassroots lobbying group was working on, there was always a large list of potential swing voters, people who would go either way. And it was those moderates who often helped to meld compromise in the system and bring people together.
Today, they barely exist. And it has been, scholars find, political scientists find, an asymmetric polarization, with the Republican Party, particularly in recent years, moving further away. The Democratic Party has moved as well, but not as dramatically from where it was a few decades ago.
So what I want you to notice about this graph is that as polarization has grown, we've been less likely to enact major landmark higher education policies. Those landmarks that I identify down at the bottom, the GI Bill up through Pell grants, were created at a time of relatively low partisan polarization. And in the book I tell the stories of each of their creations. And it was pretty striking, because while Democrats were in the leadership in Congress at that point in time, there was quite a bit of bipartisan activity around higher education laws, and not the kind of polarization we see today.
What those bars are showing you is the partisan gap in votes on higher education laws. And notice how much larger it's become in recent years. And that's particularly striking because those votes in recent years are usually just on the re-authorization of the Higher Education Act, so really matters of policy maintenance. And yet, there's really sharp polarization around them.
Now, as I said, we're spending more. And a lot of this is now happening through the tax code. Republicans had wanted some kind of tuition tax credits from way back in 1965. And Democrats were against it again and again.
All Democratic presidents were against it until you got up to Bill Clinton, who found that it polled well. And then he introduced these tuition tax credits in 1997, and that was the beginning of them. They took off like wildfire. And George W. Bush expanded upon them, and then Obama did quite dramatically in the American Opportunity Tax credit that was part of the stimulus bill in 2009.
And over time, they've been made more upwardly redistributive, so families that are upper middle income, between $100,000 and $180,000, received the largest percentage of the benefits from these tuition tax credits. They failed to expand access to college, economists who study them find, and yet they're costing quite a large percentage of what Pell grants cost, 44%. So we could have spent the same amount by increasing Pell grants and I believe having made quite a great difference in expanding access to college by contrast.
Now, turning to state-level investment in higher education, this has diminished over time. And this is really the elephant in the room in many respects, because these are the colleges and universities that 73% of American college students attend. And state spending on higher education in real terms has declined by 26% from 1990 to 2010.
And meanwhile, tuition rose in real terms-- and this is actually from 1980 to 2010-- by 244%. And we've also seen declining graduation rates. So these trends are really important. And what it means is that while we call these public universities and colleges, in fact the cost of them is increasingly being borne by students and their families.
Now, tuition, of course, remains much cheaper in terms of the sticker price at the publics than at the private non-profits. But nonetheless, these increases in the cost of public universities and colleges hit a sensitive price point for low- to middle-income families. They can make the difference between students going to college or not in the first place, and whether once there they're able to stay and graduate.
And this graph tells that story pretty well, I think, by showing the difference as a percentage of family income for families in different income quintiles to pay the cost of attending a four-year public institution between 1971 and 2011. Notice for people in I would say the bottom 3/5 of the income spectrum, that's a pretty dramatic increase and percentage of income. And these are family incomes that in the meanwhile have been pretty stagnant, have grown at a pretty modest rate over this period in time.
So why has this happened at the state level? Well, there's quite a large literature on this. And I also did a lot of my own analysis. And what scholars have found and what my research also showed is that there has been lateral effects, lateral policy effects here, where higher education is the largest discretionary item in state budgets, and it has to compete with these other mandatory items, which have been growing over time, K-12 education, Medicaid, and incarceration. All of these things have been growing. Lawmakers have to find some way to pay the bills, and they turn to higher education, which has been reduced in real terms over time.
There's also, I found, a real impact of tax policies. Now, I found that states that have been willing to increase what they collect in revenues have not had a trade-off between those other kinds of policies and higher ed. They've continued to invest in higher ed at the kinds of rates they were previously.
But many states since the 1970s had adopted policies that make it particularly difficult for their legislatures to increase revenues. For example, they require super-majorities to do so. And that's had the effect of deteriorating investment in higher ed as well.
The third major trend is the rise of the for-profit colleges. And here I'm going back to the table I already showed you earlier to begin highlighting this. Now, here I'm referring to the University of Phoenix, which is the largest one, and Corinthian and Kaplan and so on.
These are colleges that were previously called trade schools or proprietary schools. And they now comprise the most rapidly growing sector of higher education. As recently as 1993, they were only 1.6% of all college students attending these schools. And today it's 10%.
Now, these schools have worked hard over this time period to recruit students. They do so quite aggressively. And they attract students through the flexible schedules that they offer them. Their students tend to be a little older. They're often already employed and they often have children, so they have a lot of obligations.
And so they're attracted by the flexibility that these schools offer them, and also the fact that these schools were really out in front in terms of offering online courses. And since 2005, Congress has permitted them to give 100% online degrees. And then they really took off after that point in time.
Now, at first blush, these schools appear to represent a promise of expanded access to college, because of the students who are recruited to them. And yet those who attend such schools often end up terribly indebted. So 94%, as you can see here, of the students who attend them to get a bachelor's degree borrow, and they take out $33,000 on average. And then 23% of them end up defaulting on those loans just within three years. And so many students end up financially worse off than if they'd never gone to college if they go to a for-profit.
So for-profit colleges are also defended in Congress. Democrats like them because they say they're for low-income people. Republicans will defend it because they'll say they're the private sector. But I have to show you the data to test this claim about the private sector.
As I mentioned, they're attended now by 10% of college students. They utilize almost 1 in 4 student aid dollars under Title IV of the Higher Education Act, student loans and Pell grants and so on. They also use 37% of all the Post-9-11 GI Bill money and 50% of all of the Department of Defense tuition assistance programs. They account for 47% of student loan defaults in the United States today.
So on average, 86% of their funds come from revenues from the federal government, and then it's costing the federal government extra in addition beyond that to pay for the students who defaulted on their loans. So they're quite expensive for taxpayers, particularly given the outcomes for students.
And this table shows you for the largest of the for-profits, all of which are now publicly traded on Wall Street, the percentage of their revenues that comes from Title IV of the Higher Education Act, the additional percentage from the military education programs. And adding that together, you get their total revenues from the federal government. They're not allowed to get more than 90% of their revenues from the federal government. That's the law as of 1998.
So this is all an example of the policy effect of unintended consequences. And interestingly, all of this started right after the World War II GI Bill. That's when a lot of these schools-- they were called by lawmakers at the time fly-by-night schools. They were growing up to take advantage of student aid money. And Congress became very concerned and had all sorts of hearings about them and investigations in the late 1940s, early 1950s. And they tried to do a better job to regulate them for the Korean War veterans.
And this has happened time and again. They then gained access to civilian student aid in 1972. And then more problems started to emerge. So in the 1980s, lawmakers were beginning to try to regulate them.
But there's been a real change in how the politics of the for-profits plays out. What I noticed as I looked at this history over time is that the for-profits have always been trying to take advantage of available student aid money. They've been very entrepreneurial about it.
But what's happened in the past is that after this goes on for a while, then lawmakers across the aisle grow concerned. They investigate. And they come up with some kinds of regulations to rein in the extent to which this happens. And that happened after World War II and on up until the early 1990s.
Now, when we got to the 1980s, you know, there's a major change. Reagan gets elected. And then the Congress becomes divided government between the Democrats and Republicans. And for some period of time there, both on student aid and regarding the for-profits, lawmakers didn't quite know what to do when and problems kept percolating and not being addressed.
But what really interests me in my research is that by the end of the 1980s, you saw bipartisan efforts for reform in both student aid and particularly in student aid for the for-profits. And Republicans were the source of many of these ideas. For example, Secretary of Education William Bennett in the Reagan administration was the first person I came across who said these for-profits, these trade schools as they called them then, are milking the federal government. We need to rein them in.
And then Bob Dole and Phil Gramm in Congress were calling for similar kinds of reforms. Then Democratic Senator Sam Nunn from Georgia held a series of hearings and an investigation of the for-profits. And Democrats and Republicans in his committee all endorsed these hearings and all were ready to take some action.
Now, finally by 1992, there were a few beginnings of such regulations enacted. And they came about from both Democrats and Republicans. That's the end of that story. Everything changes in Congress, 1994 on, where things become much more polarized.
But it plays out in a really interesting way surrounding the for-profits, because in my analysis, the for-profit industry has benefited both from polarization and from plutocracy, interestingly. They managed to get all of the Republicans in Congress lined up on their side. You will now struggle to find a single Republican on Capitol Hill who thinks that we need to regulate the for-profits more.
But they've also gained support from Democrats. Now, many Democrats had always liked them, because they thought they helped low-income people and expanded access to college. But what's happened in recent years is that these for-profits, who have done so well on Wall Street, have invested a lot of money in their political capacity. And they've made big campaign contributions and do a lot of lobbying and they especially hire former Democratic lawmakers and Democratic staffers from Capitol Hill. So they've tried to make this a democratic issue. So even in this era of sharp polarization, when there are votes on the for-profits, what you see in the House of Representatives is Tea Party Republicans voting together with Democratic leaders like Nancy Pelosi and Deborah Wasserman Schultz. It's quite striking to me.
The Obama Administration engaged in rule-making through the Department of Education. These were called the gainful employment rules in 2010 and '11. It was a very contentious process. What ended up emerging was very watered-down after all of these lobbying efforts went on.
And then a year later, a judge threw them out entirely. So now they're back to the drawing board and trying again. But given all indications of what happened the last time around, which I've looked at quite in an in-depth way in my book, I'm not really optimistic that change is going to happen quickly.
So to sum up, the fact is that our system of higher education, which was not very long ago associated with opportunity and the American dream, is contributing increasingly to rising inequality in American society. The nature of this crisis is fundamentally political. Existing policies require maintenance, reform, and updating. But partisan polarization in Congress means that lawmakers are not even managing to perform these basic tasks. Making matters worse, the major players that do manage to break through the gridlock and to have their voices heard are not those who are out to represent the interests of American families and students, but rather to make a profit for their shareholders and top management. And ironically, they enjoy bipartisan support.
As a result of these trends, both at the federal level and the state level, we are squandering one of the United States' finest accomplishments and historic legacies, a system of higher education that was long characterized by excellence and accessibility to what seemed to be an ever wider and more diverse group of citizens. We are producing too few highly educated workers to provide the innovation and creativity that our economy requires. Our international competitiveness is fading. The ranks of those who participate intensely in the political process is growing more unequal. And the American dream is increasingly out of reach for most citizens.
With our system of higher education in crisis, the core values and identity of the United States are at stake. The time is right for a clarion call for a renewed commitment to our historic legacy of promoting higher education for more Americans. Thank you.
[APPLAUSE]
Great. I'll take your questions. Yes.
AUDIENCE: I have a question that I've wondered about for a long time, and I've never known anyone, I think, who would know the answer except you. Why is it that so many more women are seeking higher education? And then going the other way, it must mean that fewer men are looking for higher education. Do you know?
SUZANNE METTLER: Yeah. I'm afraid I'm also going to disappoint you. I think that's one of the most interesting questions. And a lot of scholars are trying to look at it. And I haven't yet seen anyone who has a really good answer.
One thing that is interesting about it-- and if you didn't all hear this, the question is, why is it that women, more and more women are gaining college degrees but among men it's really tapered off? It's very striking.
And my student Deondra Rose who I mentioned who wrote the dissertation where she looks at women using student aid in the 1960s and '70s and '80s-- you know, it's really interesting. As soon as women had that opportunity they took advantage of it. And they caught up with men and then surpassed men. And it's quite dramatic.
What I will say is that this is not just in the United States. Other countries are finding this same trend to be occurring, which makes it seem like it's not just a matter of US institutions and public policies, but perhaps something more about contemporary education and the nature of modern work. But I don't really know. Yes.
AUDIENCE: Something doesn't quite add up in the discussion of the for-profit universities, which is given the great disparity-- what appears to me doesn't add up for the discussion on the private universities is given the disparity between the tuitions charged by private, for-profit universities and the tuitions charged by public universities, and that there are public institutions that are doing the same-- that are including in their mission the same role as these for-profit institutions. For example, where I live, University of Maryland has what they call University College, which is really internet courses designed for people in the workforce who have to take their classes at weird times. They do internet courses. They don't see each other. In fact, my former secretary completed her bachelor's degree doing that, where the tuition is a lot lower. And it seems as if for an economic perspective, it would make more sense for people to enroll when this is done through state university systems. Why are the for-profit institutions getting the enrollment they're getting?
SUZANNE METTLER: Yeah. No. That's a great question, and a kind of obvious question. If the tuition is so high and the outcomes are so poor at the for-profit colleges, why are they attracting so many students and why aren't the community colleges attracting more?
And it does-- I mean, what I would say is it does seem to be a story of their superior ability in marketing. They actually invest predominantly in marketing, so they invest money in marketing and then they have profits, whereas community colleges don't have that kind of marketing budget. But they are doing more to pay for all sorts of other things and they're keeping their tuition really low, so they're not charging students that extra amount.
Over the past decade, there was a lot of deregulation of the for-profits after some of these rules about how they recruited students-- there were some new rules created in the early '90s. But then the Department of Ed in the years 2002 to 2006 really stepped away from implementing those. And so it was like being approached by someone who wanted you to buy a time share, really aggressive marketing. And that's the only way to explain it, I think.
They also-- I mean, to their credit, they were out in front in trying to accommodate students through online learning and making it easier for people. And again, I think the public universities and colleges lacked the budgets to be as innovative on that front. Yeah. That's what I would say. Yes, up here.
AUDIENCE: These public schools or public for-profit institutions- are the for-profit institutions regulated and go through accreditation similar to like what Cornell does?
SUZANNE METTLER: Well, they do have an accreditation system. It's through a different set of institutions. It's a national organization as opposed to the regional procedures that are used by traditional universities and colleges. And I would say that there are some calls in Congress now for accreditation for both kinds of universities and colleges to come under greater scrutiny, because there's a lot of variation about it and it's not very transparent exactly what happens in either process. Yes, in the back.
AUDIENCE: I have a two-part question. You mentioned that the for-profit schools have marketing budgets and they can reach out and that the junior colleges, these poor schools don't have these budgets. But it seems to inherently the established schools had an advantage just because they were there. They reach into the schools. They have the structures. But could another view be taken that the fact that the reasons these for-profit schools, however good or bad they are, that they've effectively filled a void, that there was a population out there hunger for an education that these schools either were not reaching or were not taking, because they certainly have had many, many years advantage to just make themselves available?
Secondly, let me take an opportunity to ask this question. It's going to sound laden, but it's not. I just want an answer because it's something I've heard over and over again.
What is the American dream? No one's defined it. Everybody talks about it. I mean, people say I want a sunny day. I know what that looks like.
But everybody wants an American dream. I don't know what that means. And does it mean the same thing to everybody? Just answer any way you'd like.
SUZANNE METTLER: Right. The American dream. Well, you know, I'll give you the answer that we give actually when we conduct surveys, when any social scientists conduct surveys. And you would ask the person on the other end of the phone something about the American dream. And then they would say what you just said. What do you mean by the American dream?
And the answer is always supposed to be, whatever it means to you. So I'm using that term-- I'm using it because I think that it means many things to many people, but that it encompasses a lot of what for several decades in the middle of the 20th century these landmark higher education policies were about. When you read the language of those who created them and signed them into law, it's about the language of social mobility and opportunity. Part of that is economic, but part of it is also having one's world expanded, one's mind expanded by the experience of education. And so it's many things to many people.
But in terms of back to the earlier question, you know, I think it's a really fair question. Why didn't the traditional universities reach out more? And I would say that in higher education, I think traditional universities and colleges have been conservative in the sense of trying to keep doing what they're doing, what they've been doing, and haven't been really good at thinking outside of the box. And I think that now higher education is really being challenged to do that. And so the for-profits, one way to look at it is they've been entrepreneurs who are now going to push their traditional universities and colleges to have to think more creatively and inventively. Yes.
AUDIENCE: I have two questions. The first one is we seem to be heading towards adding one degree-- we seem to be heading towards adding a pre-kindergarten program and spending money on that in public institutions, which theoretically would make high school perhaps get into the college area if the kids start learning earlier and let's say the curriculum would move to a higher level by the time you get to high school. You might need less college degrees to do the jobs that we have, most of which that have been like sewing machine operators exported, which doesn't require a college degree, the business I was in, so the whole picture is changed. So there's reason, perhaps, for the changes you're talking about that don't sound good but that maybe are practical in terms of government spending and debt loads and all the things that you talked about.
SUZANNE METTLER: Right. Yeah.
AUDIENCE: We moved the education earlier.
SUZANNE METTLER: Yeah. Well, so there are economists who look at where is your education dollar best spent. And there are many who argue that pre-K-12 level is really important, and that it's critical for people to receive sufficient education then, particularly if they're growing up in less advantaged circumstances, so that they are able to then really benefit from the education that follows it and if they don't have something before kindergarten, that they're really disadvantaged from the start. So I think that's very important.
But I also think that we do need to look at the other end of the educational experience and be expanding our college graduation rates. So you know, it's interesting. I mean, in the past few years this has become a matter of great debate. And many have said, maybe we've overdone this college thing and too many people are going to college and so on. And I think that's really wrong. I'm not saying we need college for all Americans, but I think we are very much under-performing from where we should be, and that there's great inequality in who is able to gain access to college.
AUDIENCE: Let me answer my question. My company was in the apparel business and we were the largest employers in the state of Alabama, Tennessee, and the second or third largest in the state of Maryland. Those jobs are all overseas now. Of course, you don't need a college education to work on a sewing machine. But there are no jobs. In other words, you don't need a college education if you can't get employment.
SUZANNE METTLER: Well, OK. So here's the really important point. So in recent years during the recession, I think the Occupy Wall Street Movement actually began to articulate this message, that here there where people who were part of that movement who had college degrees and they were unemployed. And so people started to question, what's the value of a college degree?
But when you look at all of the indicators, people with college degrees are so much better off than not having a college degree. So in the worst part of this recent recession, unemployment rates went up for everybody. And they were 6.8% for people with college degrees. They were 24% for people with only high school degrees.
So there's no comparison. I mean, certainly it makes sense for people who got college degrees in these recent years and have had a tough time getting started in the labor market, and they may be underemployed and not employed in whatever they were trained for. We've been a tough spot economically. But they're far better off than those who have less education. So I mean, I think our future as a country has to involve higher rates of higher education. Yes.
AUDIENCE: You've gotten through this entire presentation without the mention of race or ethnicity with the for-profits, or incarceration with respect to the population of men that are not seeking college. Could you comment on them?
SUZANNE METTLER: Yeah. Yeah. Well, going back to the question that was the first question, which was about gender and where are the men, it could be that part of that story in the United States is about growing incarceration rates, which have quadrupled in the United States since 1980 and we now have the world's highest incarceration rates. And so, you know, there are potential people who could be in college and they've had very different life outcomes. So that might be some piece of it.
It's also the case that Pell grants used to be available to people who were incarcerated. And that change was made. They're no longer accessible to them as they were in the past. And that change happened I believe sometime in the 1990s.
And then the story with race and ethnicity really dovetails onto the story about economics here. And I looked at this and I talk about it through the book. So students who are-- students who are belonging to minority groups are much more likely to be attending public universities and colleges.
And one of the trends that's happened over time as the stratification has occurred among colleges and universities is that white students who are upper income are no longer going to those public universities and colleges. They're increasingly going to more selective, nonprofit, elite universities, private universities and colleges. And so really left behind are low- to moderate-income people, including most minorities who are attending college. And the circumstances that those students are confronting are reduced resources. So it's on top of bringing about greater economic stratification, it's also reinforcing divisions of race and ethnicity. Yes, up here.
AUDIENCE: What is the-- what is the admission process for the private universities? Is it the same?
SUZANNE METTLER: Do you mean the for-profit colleges?
AUDIENCE: Yes. The DeVrys and the Phoenixes and the like.
SUZANNE METTLER: Yeah. So I believe that their admissions process has been until the last couple of years completely open. And the idea was if you've got a student loan, we'll take you. And soon as students signed up, then they might drop out, but the college got to pocket their student loan money and they were on the hook.
Because of the pressure that's come about on them in the last few years as the gainful employment rule-making process proceeded in the Department of Ed, they have made some efforts, I believe, to be a little bit more strict in their admissions, because it helps them for their data to look better. But I don't know much beyond that about it. Yes.
AUDIENCE: I have a question, but I want to start with just a very quick anecdote which a little bit will maybe answer Charlie's question. And that is that I went to Cornell 40 years ago. I've raised money for Cornell for most of those 40 years since I graduated. And it's like taking candy from a baby. Cornell alumni love Cornell, love to write checks.
Last year I was asked to contact people from my public University of California law school and raise money. And I called about 15 people that I hadn't spoken to in 30 years. Every single one of them told me how much they loved the school and how well they've done in their career, how some of them have become judges, et cetera, et cetera. Not a one of them wanted to give a penny, because it's a public school. So I don't know if that factors into your research at all, but it's a very interesting observation for me.
My question is-- and it relates to something you told us about and something that Provost Fuchs told us about this morning about the amount of money that students now borrow on average at private universities. And I was quite surprised and encouraged by how little a person would have to on average borrow to go to Cornell for four years. But one of the things that I think has changed in the 40 years since I was here is that-- and correct me if I'm wrong. When I borrowed money, it was deferred until after graduation and then re-deferred until after law school graduation. The interest did not run while I was in school, and the interest was quite a bit lower. So one of my questions is, as encouraging as that number that Provost Fuchs gave us this morning, what's the real burden of the amount borrowed versus the actual amount borrowed?
SUZANNE METTLER: Oh, yeah. Good questions. I'm really thankful to you for pointing out that issue about fundraising and how that's different for private non-profits and for public universities and colleges. And you know, that's why the sticker price is so misleading for private non-profits, because they have endowments and they're able to provide more financial aid for students, whereas publics don't have that advantage. And it's interesting hearing about your experience in doing that.
Then in terms of student loans, we have now both unsubsidized and subsidized student loans. The traditional student loans are subsidized. But then students can also borrow beyond that loans that are where they do have to start paying more quickly. And then what's also become very much in vogue is private loans that are not federal loans at all. And a lot of the students attending for-profits are borrowing a lot of these as well, which have really onerous kinds of burdens in terms of repayment. So all of these have different kinds of rules about when one starts re-paying and interest rates and so on.
AUDIENCE: If I could just add one thing, just for you benefit because I'm friendly with the dean at my law school. That school in 30 years has gone from being 90/10 publicly supported to 10/90. And it is now facing the fact that [INAUDIBLE].
SUZANNE METTLER: Yeah. Right.
AUDIENCE: It will not have caught up with them.
SUZANNE METTLER: Yes. So you know, there are-- some of the most prestigious, flagship public universities are able to raise private funds. And so in fact, they're really more like private universities and colleges.
AUDIENCE: [INAUDIBLE].
SUZANNE METTLER: Yeah. But what's happened, though, at most public universities and colleges is that government used to pay the lion's share of their costs and now it's students and families themselves who are paying. OK. One more?
AUDIENCE: Yeah. Hi. I just want to explore the concept of the disparity in unemployment between college graduates today with non-college-graduates, quite a big disparity, but exploring that both historically here in this country-- because the democratization of going to college, as you pointed out in one of your slides, over the last 50 years has changed dramatically and we are a young country-- both historically and across other cultures, specifically European cultures that have been around for a long time, that people do go to trade schools. And is there the same sense of disparity there across college-educated, non-college educated?
SUZANNE METTLER: Oh, yeah. Yeah. Wow. The comparative question. I wish I could give you a good answer for this and I really can't. You know, that for me will have to be a future project, I'm afraid. But the other piece of what you're asking about is historically in the United States?
AUDIENCE: Yeah.
SUZANNE METTLER: Say more about that.
AUDIENCE: 1930s, 1940s, when people were less likely to go to college, because there was much disparity.
SUZANNE METTLER: Oh, right. OK. So there's an economic historian named Claudia Goldin at Harvard and her co-author Richard Katz who look at this. And that's precisely their interest. And they've written a wonderful book about it.
And they find that in the middle of the 20th century, we had really low economic inequality in the United States. And at that point in time, we had very few college graduates. And as college graduates began to increase, then economic inequality was increasing. And we now have such a college-wage premium, you know, extra amount that people are paid for going to college relative to a high school graduate. So I'd refer you to her for more on those trends. OK.
[APPLAUSE]
Suzanne Mettler, the Clinton Rossiter Professor of American Institutions, examined the effects of the American higher education system on social and economic inequality, Oct. 25, 2013 as part of Cornell's Trustee-Council Annual Meeting.
Since the 1980s, says Mettler, the United States has abandoned its role as the international leader in college graduation rates and its historic legacy, from the creation of the GI Bill up through Pell Grants, of expanding access to college across the income spectrum.
Today, by contrast, our higher education system is exacerbating social and economic inequality, by leaving many of the least advantaged students sequestered in for-profit colleges that leave them indebted and often worse off financially than if they had never attended, and many low- to middle-income students in public universities and colleges where resources are increasingly scarce and graduation rates have plummeted as a result.
