Rising education costs and student loan debt is hard for many, but harder for black students
On Sunday, May 19, 2019, Elijah Nesly Dormeus graduated from Atlanta’s Morehouse College. Four years and $90,000 later, Dormeus walked across the stage – his mother is happy, as he is the first of nine kids to graduate college. This moment is a culmination of his mother working minimum-wage jobs and taking out an additional loan to help pay for his schooling.
In an ordinary world, Dormeus’ graduation celebration would soon fold into the real world of internships and searching for a job. On this day, the ordinary world became extraordinary: Dormeus found out that his college tuition debt along with the entire graduating class of 2019 would be wiped out by a billionaire.
The billionaire, Robert F. Smith, chairman and CEO of Vista Equity Partners, a software and technology investment firm, pledged during his commencement speech at Morehouse on this extraordinary Sunday in May, that he and his family would shell out $40 million to wipe out what many economists and other financial experts say is a big reason why many Millennials are waiting to do the things that represent their arrival into true adulthood: buying a home, investing and starting a family.
Average 2018-19 Tuition and Fees at Public Four-Year Institutions by State and Five-Year Percentage Change in Inflation-Adjusted In-State Tuition and Fees
Sources: College Board, Annual Survey of Colleges; NCES, IPEDS Fall 2016 Enrollment data.
The Beginning of Student Loans
College tuition costs have gone up in the past few decades. Going back to 1940, the number of U.S. college graduates was only 186,500. This was less than 5% of adults age 25 and older. During this time, Yale University cost $450 each year (this would be about $7,200 in 2013 dollars). In 1944, the Servicemen’s Readjustment Act, also known as the GI Bill, was passed. This helped balloon the number of college graduates to 432,058 by 1950.
The first real student loans backed by the Federal government were made available in the 1950s under the National Defense Education Act. This act was created to encourage students to pursue STEM degrees, which was deemed more important considering the launch of Sputnik by the U.S.S.R. By 1970, 839,730 college graduates received bachelor’s degrees and 68% of federal aid to college students were grants. Even at this point, college tuition costs hadn’t gone up too much and a Pell Grant could cover nearly two-thirds of tuition at many schools.
Tuition Costs Rise
College tuition costs started increasing in the late 70s and have continued going up steadily each year through the present. Below are tuition costs for a four-year degree in 1980 and 2013 in three categories: public college, private college and average total college costs.
Sources: Student Debt Relief
In the last ten years, the cost of education has surpassed the general cost of living and medical expenses. It’s easier to get a student loan and for many to attend college, and this easy lending is fueling rising tuition costs. At one time, getting a degree had a big impact on the financial life of the graduate. Because of a higher number of college graduates, a college degree is less valuable but is much more expensive to attain.
College Tuition Costs from 1968-2018
Source: National Center for Education Statistics and The College Board
At Morehouse College, for the 2018-2019 school year, tuition for an in-state student without room and board was $25,055, an out-of-state student paid $48,500. This compares to $9,716 (the average cost to attend a public, in-state school), $21,629 (the average cost to attend a public out-of-state school), and $35,676 (the average cost to attend a private school).
According to the U.S. Federal Reserve, student loan debt is a staggering $1.52 trillion spread across 44.2 million students. This debt monster is increasing $29 billion every three months. The only other debt that exceeds student loan debt is mortgage debt. This makes perfect sense why this generation whom bloggers and social experts claim is “killing” many industries, services and products, are keeping their signatures off mortgages and marriage licenses – they might be a bit smarter than previous generations in seeing that too much debt is not good.
Especially when many members of the very generation that is touted as the ‘most educated’ is questioning the value of their own educations. This is underlined in a Freelancing in America 2018 survey: freelancers place more value on skills training – 93% of freelancers with a four-year college degree say skills training is useful compared to 79% who say their college education is more useful to the work they were doing.
Student Loan Debt is Getting Worse
Student loan debt was $830 billion in 2010, this was the first year that credit card debt was eclipsed by any other form of debt. Just three years later, student loan debt would reach $1 trillion. It would rise an estimated 10% each year. Over half of all recent graduates are unemployed and the graduates who are employed, they are largely employed in retail (the main employers being Walmart, Target Starbucks and Best Buy) according to a recent Facebook survey of 4 million profiles. These recently employed graduates are earning less (in terms of purchasing power) than what comparable graduates earned 20 years ago.
If you are graduating soon or in a year or so, you can look forward to (using the average student loan debt) $25,000 at 6.8% interest for a Stafford Loan with a 10-year repayment plan. You’ll most likely not pay it back in the prescribed 10-years, but say, if you pay it back in 18-years. You’d have to pay a minimum of $200 a month and the interest on this loan can get up to $18,000, which is 60% of the original loan amount. Eighteen years is a lot of time to be in debt, and this affects you when you’re ready to borrow to buy a car or home.
While graduating with a degree can lead to a higher income over a lifetime, constantly rising tuition, and with some saying is predatory lending, is making college attendance impossible for many. The ones that can attend, 60% of them must take out student loans. Recent efforts to rein in interest rates are not influencing colleges to address spiraling tuition costs as much.
When Morehouse students along with the students of other Historically Black Colleges and Universities (HBCUs) come into this conversation, the numbers get even more interesting. Black college students typically borrow more. This is due to a few reasons: 65% of black students are independent, meaning they are not fully immersed in college because they must balance school with working and helping with family expenses, second, black families generally have lower household incomes and assets, which limit how much they can contribute toward college expenses, and third, only 57% of black students have taken the math and science courses necessary for them to be ready for college, black college students are more likely to be required to take remedial college classes than other student groups. Remedial classes add additional tuition costs and more to future student loans.
While Morehouse College yearly tuition can range from $25,055 to $48,500, the average cost of attending an HBCU is 28% less than attending a comparable non-HBCU. Because of lower tuition costs, 40% of students at HBCUs report that they are not stressed about their finances. This is compared to only 29% of black students not feeling stressed at non-HBCUs. HBCUs comprise 3% of the nation’s colleges and universities, but they enroll 10% of all black students and produce nearly 20% of all black graduates. An HBCU grad will earn $927,000 in their lifetime.
College Degrees, Financial Stability and Race
Feelings of financial stability varied by race. A Fed survey found that whites and Hispanics with a college degree found increasing levels of financial stability. Whether blacks had a high school degree or less or attended college, the percentage was the same, 61% say they are financially stable. This compares to 68% for whites and 75% of Hispanics saying they are financially stable. The differences among the racial groups came closer when asked how financially stable they were after graduating from college: 80% for blacks, 89% for whites, 81% for Hispanics.
If we want to understand racial gaps in income and wealth at the household level, we must not only look at education and earnings at the individual level but also how each racial group’s marriage and family formation rates. Well-educated individuals that are affluent, tend to be married. The racial differences are that white women with an undergraduate degree are nearly likely to be married today as in 1960. Marriage rates are declining for black women across all levels of education. A black woman with an undergraduate degree between ages 35 and 45 is 15 percentage points less likely to be married than a white woman without an undergraduate degree.
The differences in marriage rates might be because of a shortage of “marriageable” black men, as a result of high incarceration rates and early death. Intermarriage doesn’t address this because blacks (especially black women) are least likely to marry someone of a different race. ‘Marriageable men’ might mean something else altogether. Generally, people with similar educational attainment get married. In other words, college graduates tend to marry college graduates. Black women with an undergraduate degree are less likely to marry a man with an undergraduate degree, wherein white women are slightly more likely to be better educated than their husbands.
One thing becomes clear: black family prosperity along with the prospects of black children, is intricately tied to the educational achievement and subsequently the economic status of black men. In other words, ‘it takes two to make it happen’ in America. Considering increasing tuition, ever-growing student loan debt and a feeling of less financial stability, the recent gift to the 2019 graduating class at Morehouse is one that should give each graduate a head start with their second phase of life. Some graduates’ families cosigned on loans, now they won’t have this debt. Some want to go on to medical school, now they can start fresh…and with no student loan debt.
So what should we do about all this?
To the Morehouse College class of 2019: in the spirit of ‘paying it forward’ as requested by Robert F. Smith. Consider your head start in the great race of life and how you can matter to others. While there are factors you can’t control such as making someone who doesn’t like or want to hire you for whatever reason, you can’t force an employer to pay you what you think you’re worth based on your educational attainment, experience and knowledge – even if others may benefit from the same rules, you can’t make an employer promote you or not fire/lay you off based on a fair/real reason. There are factors you can control or become an active participant in.
Here are my proposals to address what the data spelled out (things you can control that can help close the social and economic gaps).
- Encourage a young man (and woman) to challenge themselves by taking more math and science classes starting in middle school on up through high school. Set up tutoring sessions to help them with these classes. This can help address the low college readiness in science and math. Set up a non-profit to provide additional learning in these areas.
- Become a mentor to a young college student (especially young men). Give them encouragement to study hard, use as many resources to get the best grades and get their degree. This is to address the low rate of college completion by black men, the lowest among all groups.
- Work with/mentor at-risk youth at the middle and high school levels. Show them that they can achieve what you have achieved. Show them possible spin-off achievements (financial stability, starting a family, productive lives with respect from others) from being productive and constructive.