Wednesday, January 12, 2011

Meister Strikes Again

In the Bay Guardian's new article on student debt. First, here's some of the data on debt:
Today, the majority of college students take out loans to finance their education. Around 62 percent of public university students graduate with student loans, as do 72 percent of students attending private nonprofit institutions, and 96 percent of students attending for-profit institutions such as the University of Phoenix or the Academy of Art University, according to TICAS. Nationally, students graduate owing an average of $24,000, not counting debt associated with advanced degrees.

While young people must invest more than ever before to obtain higher education, the return on investment isn't showing signs of improvement. The expected median income for UC graduates has stayed the same over the last decade, even as the cost of tuition has ballooned.
And now, Meister:
While diminished public funding has been used to explain the need to raise tuition, Meister has published numerous essays suggesting that the root cause of rising tuition costs at UC goes deeper than that, and he has gone so far as to publicly encourage students not to accept higher tuition without first demanding financial information.

Meister previously served on the UC budget committee and has observed the institution's evolving financial policies for years. He doesn't seem surprised that tuition is going up, regardless of what condition the economy is in or what amount of public funding is available because, as he puts it, "the universities will cost as much as they can." UC had long sought to boost revenue by raising tuition, he noted, yet its leaders feared a rollback in state funding in response. But that changed under Gov. Arnold Schwarzenegger, who agreed to increase state support only on condition of that UC in turn require students to contribute more.

Around the same time that Schwarzenegger provided this new incentive to raise tuition, UC pooled its various revenue streams into a consolidated general revenue fund, Meister said, a departure from the old way of keeping separate accounts. This new fund, which included all non-state revenue and funding that wasn't legally required to be used for certain purposes, could be pledged entirely as collateral for bonds for new construction projects, greatly increasing the institution's borrowing power and boosting its revenue with the addition of new facilities.

To maintain its stellar bond rating, UC had to ensure an increase in revenues, according to Meister's explanation, and to do that, UC ratcheted up the one source of revenue it had full control over: tuition. Meister laid bare this financial play in a 2009 open letter to students, titled "They Pledged Your Tuition." Since it was published, a small corps of student activists has become deeply engaged in studying campus finance documents and airing criticism of financial policies.

Just before the Nov. 17 protests at UCSF Mission Bay, Meister published another open letter, this one addressed to UC President Mark Yudof. This one contemplated, "Why they think they can increase revenues regardless of how fast the economy grows ... and regardless of whether the income of graduates is stagnant."

His answer is somewhat surprising: "Their ability to raise tuition is a function of the growth of income inequality," he told the Guardian. In the letter, Meister charges, "In the 21st century, when almost all income growth has been in the top 1 to 2 percent of California's population, UC is still marketing income inequality to students as its most important product. It now expects all students to pay more for an ever-shrinking chance of reaping the ever-growing rewards that our economy makes available to the few. Your plan to increase revenue through tuition growth is feasible, of course, only because the federal government still allows students to borrow more for education despite the greater likelihood that they will not be able to repay -- student loans may be the last form of subprime credit available in our economy."

His theory highlights a paradox. "Being in the have-not category is increasingly worse," he explains, "and so they are willing to take on more debt, which actually dampens their prospects for income growth."

The question now is what will happen under Gov. Jerry Brown, who is likely to take a different stance toward rising tuition than Schwarzenegger but nonetheless is expected to unveil harsh cuts to education as a way to address a $26 billion budget deficit.

1 comment:

  1. While it is true that the Academy of Art University is a for-profit institution (like most art schools of the past couple thousand years), mentioning it in the same breath as the University of Phoenix in the context of student debt is, I think, misleading. A good reason why the two schools are not comparable: The Academy's student loan default rate of 5.5% is the same as the average for all nonprofit colleges and 23% below the average at for-profit schools.