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Falling college enrollment could lower costs, student loan debt

American higher education is the envy of the world, but it faces challenges. The two biggest structural challenges are student debt, a widely known and discussed problem, and declining student numbers, a trend that gets little attention but is the more important of the two.

Everyone seems to agree that there is too much student loan debt (nearly $2 trillion), but finding good solutions to the problem is very difficult. The high amount of debt is directly due to the high cost of schooling. The cost of education has notoriously risen at rates much higher than wages or inflation over the past half century. This is for several reasons.

One of the reasons is that higher education is subsidized (by many mechanisms, but above all by subsidized loans) in order to make it accessible to as many people as possible. This has the unfortunate but inevitable consequence of making students less sensitive to real costs.

Another reason is the perceived need for a degree to ensure a fulfilling and well-paying career, which, along with the increase in the number of young people wishing to attend university over the years, has essentially produced a seller’s market. Many colleges have been able to charge for almost anything they want and still turn away a large portion of applicants.

Other reasons for the high cost include the vast administrative burden that universities have taken on over the past few decades, with the administrator/teacher ratio increasing dramatically.

Very little success has been achieved in trying to reduce the cost of education, which is the fundamental driver of high student loan burdens. Various politicians and interest groups have backed the cancellation of student loans, with proposals ranging from modest reductions to wholesale cancellation.

Freshman Katlyn Anderson, from Cincinnati, works on the University of Cincinnati campus on Monday, August 23, 2021. Monday marked the start of classes at the University of Cincinnati.

The main problem with student loan forgiveness is that beyond relatively small amounts, it is a regressive policy. The vast majority of degrees confer a lifetime income boost that will pay many times the cost of the degree. College graduates are better off than non-graduates, even with their debt, so why should they get large transfers of wealth in the form of student loan forgiveness?

Paradoxically, the most indebted people are generally the best placed to pay it off since they are mostly holders of a professional degree (doctors, lawyers, etc.) and have a high income to match their high indebtedness. . They don’t need large amounts of loan forgiveness.

Another weakness of loan forgiveness is that you make prospective students more likely to go into even more debt, as they would naturally expect their debt to be forgiven as well at some point, which only makes make the problem worse.

This is where the second trend I mentioned comes in.

The year 2011 recorded the highest number of students enrolled in undergraduate programs, at 21 million. This is the most inclusive number, and only about 18% of them were full-time traditional university students, with most being non-traditional students and adults returning for education later in life. This was the peak both because so many people went back to school due to the Great Recession and because 2011 was the peak year for baby boomers.

In 2019, total enrollment had fallen to 19.5 million, down about 7% from 2011, before dropping even more precipitously during the pandemic. University enrollment has still not returned to its pre-pandemic baseline.

Freshman Nick Telavic, of Cleveland, Ohio, works on his computer at the Lindner College of Business on the University of Cincinnati campus Monday, August 23, 2021. Monday marked the start of classes at the University of Cincinnati .

Largely due to declining birth rates following the Great Recession (2.1 in 2007 to 1.7 in 2019), the number of university students is expected to decline further in the coming decades.

The negative consequences of this decline are many (a less well-educated workforce, poorer socio-economic outcomes, etc.), but when it comes to student debt, there may be a silver lining.

With fewer applicants to the university, each individual applicant will carry a little more weight than in the past. Things will move more towards a buyer’s market, relatively speaking. This should “bend the curve” of the cost of education in the average establishment.

It’s not going to be pretty. Colleges will have to compete more to attract students. Many small schools that are already struggling today will fail. Many will consolidate. Institutions of great prestige will do very well since they have large endowments and will never lack legions of candidates, but most institutions will experience the next 20 to 30 years as painful.

Schools will have to make tough decisions. Choices that seem impossible or unreasonable today may become a necessity in the future.

Schools will have to decide whether they really need an nth vice-dean to control other details of the social and professional lives of their students and teachers. They’ll have to decide if they really need that next shiny new construction project.

The Tangeman University Center on the University of Cincinnati campus, Wednesday, March 11, 2020. After this Friday, the university will move strictly online and stop having in-person classes.

The crisis is an opportunity. Schools that are able to drastically re-evaluate their spending and resources, cut many unnecessary services, and offer a good product at a competitive price, will be able to attract students beyond their region. Many of these people will stay and enrich the local workforce and community. Modest changes that leave the institutional bureaucratic structure largely intact will not suffice.

Americans have tolerated a very high cost of education for too long. This has led to large amounts of student loan debt, with no easy solution. Demographic trends will inevitably lead to a more favorable market for students, which should have the benefit of reducing education costs and the overall burden of student loans. It will take time, but it is certainly a better solution than sending large transfers of wealth to already privileged college graduates in the form of student loan forgiveness.

Christopher Wood is a neurologist who lives in Clifton.

Christopher Bois