America has faced several crises recently, but the greatest could be just around the corner. It's the financial crisis of our colleges and universities, which will shake the nation.
It is common knowledge that the outstanding debt incurred by current and former college students exceeds $1 trillion, and it is growing exponentially. In a recent Wall Street Journal commentary, Dave Girouard, former CEO of Google Enterprises, referred to the trillion-dollar debt and reported that one-third of this debt is in default.
If present trends continue, by 2020, the outstanding debt of current and former college students will exceed $2 trillion, or half of all consumer debt in the nation. And if Americans learn to curb their non-essential spending habits, then the college student debt could be two-thirds of all consumer debt and place a stranglehold on the American economy.
As this danger looms, Moody's has issued two serious warnings to our institutions of higher education regarding excessive non-academic spending, with a strong warning about exorbitant costs of athletics. Much of the sports spending comes from student fees, which in many cases is borrowed money. The sports outlay is driven by competition for more expensive and elaborate athletic facilities and higher salaries of coaches, which have increased more than 30 percent per year in the last 10 years -- at a time when most institutions have lost a lot of money on athletics.
Girouard pointed out that many states are taking measures to address the issue. Oregon, for example, is eliminating tuition for undergraduates but imposing a 3 percent income surtax for 20 years on former students who benefit from the new policy. Other states such as Texas and Florida are planning to implement a $10,000 maximum tuition for a four-year degree via cooperation between community colleges and public four-year colleges.
Some think costs can be reduced by unitization of Massive Open Online Courses (MOOCs). However, this seems to just be a way to curtail spending on instruction by replacing faculty with videos. This is already taking place now in another format -- giant labs of computers where students take courses, with the help of part-time assistants, never meeting a real-life full-time professor. Cost reduction, yes, but is this effective education?
As a student who took trigonometry via a television course offered through New York University in 1956, programmed computers in the 1960s, and served as a professor of engineering later in life, I seriously doubt that MOOCs will either significantly improve or reduce the costs of instruction at American universities. I am certain they will do nothing about excessive administrative costs and activities.
Much of the responsibility for this crisis lies with state legislators across the country. When credit became easy for everyone to obtain, states cut back on funding for higher education, giving institutions the green light to raise costs for students. They have also abandoned state controls, which led to massive cost increases for students, the building of hundreds of billions in non-academic facilities using exotic credit schemes and excessive spending on administration. All of this was built on more and more debt from more and more students, a situation one university president once described as a "higher-education Ponzi scheme."
Most of the reforms being pursued by states such as Oregon, New Jersey, Texas and Florida have merit, but we need more, because almost half of the people who owe this trillion-dollar (and growing) debt never graduated from college, or took general degrees with little academic or economic value. In other words, young people who could not afford to pay for college and who were not really prepared for college have accumulated enormous debt.
The truth is, there is no need for the government to facilitate massive student debt for those whose families can pay or those who are not prepared to secure a bachelor's degree in a specific academic field in four years or less. Incidentally, the bachelor's degree in all other developed countries is a three-year, around-the-calendar path. Summers off is a practice that was born out of our agricultural culture, which has led to a leisurely path to a bachelor's degree, and a costly one at that.
America's community colleges are designed to be, among other things, a path to a four-year degree at a more modest cost and for those not quite prepared to earn a BA or BS degree in a reasonable period of time. Most states have an excellent, cost-effective system of community colleges that is providing this opportunity while reducing costs and future debt for students.
I know that some will criticize this stance as discriminatory against the less-affluent, and some university presidents have already proclaimed that the five- or six-year degree (even at enormous cost) is necessary to stimulate intellectual curiosity.
However, to avoid a national economic meltdown within the next decade, someone must stand up and do the right thing for our youth and for the country. And that means doing what is necessary to curtail the massive spending via easy-to-get student loans that threaten our national economy.Dr. Gilley, former Marshall University president and former Virginia secretary of education, lives in Reston, Va. He has written 16 books on higher education, two of which have been translated into Chinese and Japanese.