“Making Higher Education Affordable Again”
Remarks As Prepared For Delivery
February 10, 2014
The American Dream is a term that is often used but also often misunderstood. It isn’t really about becoming rich or famous. It is about things much simpler and more fundamental than that. It’s a happy home and the ability to live without fear for your safety and that of your family. It’s the freedom to worship the way you want. It’s the chance to get a good education and a job that allows you to achieve financial security and retire comfortably. And it’s about leaving your children better off than yourself.
The America my parents came to almost sixty years ago was one where you could find a middle income job even if you didn’t have a higher education. That is how they made it to the middle class, working as a bartender and a maid. But they desperately wanted their children to have even more than that. Giving us the chance at a better life was their American Dream.
For them, it meant giving us the chance to have what they didn’t: a college degree. That is why from a very early age, they would tell me tu tienes que estudiar: “You have to study.” And so growing up I never considered not going to college.
My parents did not make enough to save for our education. But I was able to use Pell grants, student loans, work study and summer jobs to pay for a four-year degree and eventually law school.
The loans I took out for my undergraduate degree were manageable. But my legal education was more expensive and I paid for it almost entirely through public and private loans. Each semester I would sign the promissory note borrowing more money. I never sat down to calculate how much I could expect to make once I graduated and whether it would be enough to afford my loan payments. There was no source to provide me with that information either.
Finally, in 1996 I graduated from law school. I had a Juris Doctor in one hand and over $100,000 in loans in the other. Then a few months later, the bills began to arrive.
My first job paid well for a young attorney. I was making over $50,000, which was more than either of my parents had ever made. I thought I was rich. But I was living with my parents and paying them rent. I was trying to save for my wedding and hopefully to buy a house. And when the $1500 monthly bills for my loans started coming in, I realized I couldn’t pay them.
So I did deferment. And forbearance. I paid only interest for a while. But the loans quickly became my single largest expense. I remember looking at the coupon book for one of them and realizing that at the pace I was paying these things, I wouldn’t pay them off until I was over 50.
In the time since I took my last exam – and certainly in the years since my parents arrived in America – our country has changed tremendously. Our economy has undergone the most rapid and disruptive structural transformation since the industrial revolution. Before that economic revolution your ability to make a living depended greatly on your ability to do the physical labor required by farm work. But with industrialization, you could suddenly make a living operating a machine our building things with your hands.
This created jobs and opportunities for people once trapped in the poverty of their birth. It pulled millions into the great American middle class and transformed this into a nation of exceptional upward mobility.
But now we have entered a post-industrial era. The middle class workers who once earned their living making things saw their jobs leave to places with cheaper labor and fewer restrictions. And many middle class careers have been replaced by automation and technology.
This new era comes not just with challenges, but also with great opportunity. It creates new jobs and new careers that can actually pay more than the ones they are replacing. But the higher paying jobs of this new era require advanced skills and education.
Those with the right advanced education are making more than ever. But those that do not are falling farther and farther behind. The result is a growing opportunity gap between haves and have-nots, those who have advanced education and those who do not. And if we do not reverse that trend, we will lose the upward mobility that made America exceptional.
In the last century, education became a viable option for millions of Americans like me. But in this new century, the right education is no longer just an option, it has become a necessity for nearly everyone.
The problem is that we are trying to prepare people for the new economy using a higher education system built for the old economy. As a result, many high-skilled, high-paying industries suffer from a shortage of labor, while too many low-paying industries suffer from a surplus. In the coming decade, 63% of jobs will require postsecondary training. But if current education trends continue, we will fall short of filling these skilled positions by 300,000 people per year.
Our single most important domestic priority should be to put in place policies that foster dynamic economic growth. Policies that make this country the easiest and best place in the world to innovate and create jobs. But ultimately, these jobs will not be created here if our people do not have the skills and the training they require.
So among the most pressing challenges before us today is to transition to a new model of delivering higher education that equips Americans for the better paying careers of this new economy.
One of the central problems of our outdated higher education system is that it has become increasingly unaffordable for those who stand to benefit the most. Tuition rates have skyrocketed at a rate far exceeding the rise in inflation. Even when the Great Recession took hold 5 years ago and Americans had less to spend, the rise in tuition only continued to accelerate. Between 2006 and 2012, the cost of college increased by 16.5%.
This has forced a growing number of students from low and middle income families to choose between taking on large amounts of student loan debt or giving up on their dreams of an advanced education.
Today, college graduates in America have more than one trillion dollars in combined student loans. And keep in mind this is borrowed at interest rates far above home-mortgage rates. This unaffordable debt is more than just a number on a piece of paper. It has a real life impact that affects our economy from top to bottom. It delays the ability of young Americans to get married, buy a home and start a family. It keeps them from saving for a rainy day or investing for retirement.
One of the main reasons tuition rates are rising is that colleges know the federal government will continue lending students as much as they need in federally guaranteed loans. These hiked tuition rates effectively form a free subsidy for colleges and universities, which use the funds to finance a myriad of non-academic pursuits ranging from dining options to construction projects to athletics. Many schools use this money to finance various administrative positions that have little, if anything, to do with educating students. In fact, these non-instructional positions were behind a 28% expansion of the higher education workforce from 2000 to 2012.
When I was in the state House, the universities told us every year that they needed higher tuition to retain quality faculty and pursue goals that they called vital to student learning. I understand this argument. It’s important to ensure students receive a quality education for their tuition dollars. But there also has to come a point where quality and affordability meet. We simply cannot continue to price people out of higher education.
Making these rising costs even more burdensome is a federal government that seems to try its best to be confusing and bureaucratic. Even the process of applying for federal financial aid is made unnecessarily difficult. We should examine ways to cut back on the complexity of the federal aid application to ensure students are not discouraged by the process and are able to complete it quickly and accurately.
The federal government also uses a tangled and bureaucratic system of tax policies. What students and parents need from our tax code is simple, so let’s stop pretending it’s so complicated. They need their educational expenses to be tax deductible. That’s why Representative Schock and I have proposed a bill to update and consolidate higher education tax incentives into one simple, easy-to-understand tax credit. Our bill would help millions of Americans pursue higher education, simplify the tax code and save taxpayers money.
Our colleges and universities must do their part by making it among their highest priorities to find the right balance between quality and cost. And simplifying the tax benefits of higher education will help students deal with the cost of higher education as well. But this alone is not enough.
Today, I am grateful for this opportunity to offer three additional ideas aimed at helping Americans earn a practical advanced education at an affordable price and in a reasonable timeframe.
First, we must recognize that it is no longer enough to merely get a degree. If you want to improve your chances of finding a good paying job, it is vital that you get the right degree geared toward the right industry.
Not all college majors have the same success rate when it comes to connecting students with good jobs. Nationally, majors such as business, liberal arts, and hospitality have underemployment rates at or above 50%. There are simply more graduates than jobs in these industries. Meanwhile, engineering, health services and education all have underemployment rates less than 25%.
Students and their families need to be equipped with the information necessary to make well-informed decisions about which majors at which institutions are likely to yield the best return on investment. This is why I, along with Senator Ron Wyden, proposed the “Student Right to Know Before You Go Act,” which aims to give students reliable data on how much they can expect to make versus how much they can expect to owe.
Second, we must make the burden of student loans more manageable. To do so, I propose that we make an “Income-Based Repayment System” the automatic repayment method for student loans. Under this system, graduates would make loan payments in proportion to how much they earn. So the more you make in a given month, the more you would pay back. The less you make, the less your monthly payment will be.
We have various Income-Based Repayment programs already in place, but they are terribly insufficient and replete with unintended consequences. Many graduates don’t even know the programs exist, making them extremely underutilized. And perhaps it’s no great surprise that those who do attempt to use them often get tangled in a slow and frustrating federal bureaucracy. Making income-based repayment the universal repayment method would end this confusion.
And finally, we must create alternatives to our current system of accessing and paying for higher education. And there are several things we can do to foster more choice and more innovation.
For example, what if in addition to traditional loans, we could give students the option of paying for their education without acquiring any student loans at all?
Let’s say you are a student who needs $10,000 to pay for your last year of school. Instead of taking this money out in the form of a loan, you could apply for a “Student Investment Plan” from an approved and certified private investment group. In short, these investors would pay your $10,000 tuition in return for a percentage of your income for a set period of time after graduation – let’s say, for example, 4% a year for 10 years.
This group would look at factors such as your major, the institution you’re attending, your record in school – and use this to make a determination about the likelihood of you finding a good job and paying them back.
Unlike with loans, you would be under no legal obligation to pay back that entire $10,000. Your only obligation would be to pay that 4% of your income per year for 10 years, regardless of whether that ends up amounting to more or less than $10,000.
We also need policies that recognize that many Americans don’t have the money, time or inclination to spend four to six years on a campus. Maybe you are a single parent who needs to work full time to raise your children, so you cannot just drop everything to go back to school. Or maybe you are a high school student who wants to fix airplane engines as a career, but you lose interest in your schoolwork because it seems geared only toward college bound students.
For millions of Americans trapped in low-paying jobs or at risk of dropping out of school, higher education may be the only way they will ever be able to move to a better paying job. What they need is more affordable degrees or career education options that are tailored to their specific needs and talents.
We should make career and vocational education more widespread and more accessible. For instance, here in Miami, the local school district has partnered with a car dealership to create an innovative approach to career education. The students in this program attend traditional high school classes each morning, then go to auto dealerships where they are trained to be certified technicians. When they finish high school, they graduate not just with a high school diploma but with a job-ready industry certification from an automobile manufacturer.
Another example of this is apprenticeship programs, which provide valuable on-the-job training for employees. So instead of having to pay for schooling, an employee can often get paid to learn and work toward a degree while on the job. We need policies that encourage industries to expand apprenticeship programs and work more closely with their local work-force training boards to make these viable options for gaining certification or degree credit.
We should also create more pathways for working parents to attain the equivalent of a college degree at the more easily accessible state college level. Our host today, Miami Dade College, is a pioneer in this effort.
Let’s fully utilize innovation and technology to make learning easier to access. To their credit, many traditional colleges and universities now offer online educational opportunities. Some of the best are right here in Florida. My alma mater, UF, has two online courses ranked in the top 5 nationally. Embry-Riddle Aeronautical University in Daytona Beach also has one in the top 5.
These university-offered online courses are a welcomed alternative for many students, but unfortunately the cost of these courses is often comparable to attending physical classes. With all of the resources of the web, most of which are completely free, shouldn’t there be another alternative?
The spread of knowledge through the Internet is one of the greatest technological breakthroughs of our time. So why hasn’t our education system found a way to harness it and allow it to count toward a person’s post-secondary education?
The answer is that we have a broken accreditation system that favors established institutions while blocking out new, innovative and more affordable competitors.
In order for a college or university to be recognized as a degree-conferring institution, it has to be approved – or “accredited” – by an independent regulatory board. The problem is, these regulatory boards are controlled in large part by the institutions that have already been accredited, which are typically the traditional four-year colleges and universities. This means their accreditation status is rarely questioned, while the status of potential competitors – such as free online course-providers – is rarely given ample consideration.
Reforming this biased and broken system is crucial to opening broad, innovative pathways to higher education for all Americans. There are already some unique and powerful proposals for reform out there today. Senator Mike Lee, for example, has proposed allowing states to take control of the accreditation process. Members of both parties are beginning to realize that for every day we delay bold accreditation reform, our education system leaves more Americans behind to languish in a dwindling market of low-skill jobs.
Action on this issue can and should be swift. Free online learning is already a reality, we just need the established system to catch up. Here’s how it could work. After completing a free online course, a student could pay a relatively small fee to take a standardized test that, if passed, would allow them to count the class toward a degree or job certification.
This is the same concept we use to allow students to count AP classes in high school toward college credit. By allowing real-world experiences to count in the same way, we could create what would virtually amount to a debt-free degree.
To make this a reality, Congress could establish a new independent accrediting board to ensure the quality of these free courses and make the credits transferable into the traditional system. The board would factor in input from the private sector and would allow students to qualify for some type of federal aid to cover any potential costs.
In addition to these online courses, there are a nearly infinite number of ways for an individual to learn and master a trade, and it’s impossible to accredit them all.
For example, an aspiring cook may have mastered their craft from books and free online tutorials, or perhaps from the training of a parent who is a certified chef – or who simply cooks up a mean ropa vieja after years of preparing it for their family. Because we all know that if most of our parents or grandparents wanted to go work as a restaurant chef, they wouldn’t need to take a class to prove they can cook. These people should have the opportunity to prove their abilities and gain the certification necessary for employment without spending tens of thousands at a formal culinary school.
We could jumpstart and create private sector confidence in this practice by creating a pilot program to hire such workers in federal agencies. The agencies would identify occupations where employees could have learned skills from non-traditional sources. The pilot program would then systematize the hiring of these individuals over a five-year period, allowing the results to be tracked and reported back to form the basis for future policy.
I suspect that we will find that in many fields, the source of an employee’s education is far less important than many previously thought. That those who have the skills and the aptitude to be successful in a job deserve the opportunity to be considered for employment, even if they learned the trade from a non-traditional source.
In closing, I feel the policies I’ve outlined here – and that we’ll continue to discuss in a moment – are not just about education. They are about our shared and unifying belief that no one should be held captive by the circumstances of their birth. They are about the equality of opportunity that transformed a young and diverse nation into the freest and most prosperous nation in all of human history.
Enacting these and other innovative policies to reform higher education should be among our most urgent priorities. Because what is at stake is our very identity as an exceptional nation.
This new post-industrial economy offers great promise, but it has also created widespread economic insecurity. Millions live one broken-down car, one destructive storm, one serious illness away from financial collapse. People who worked their whole lives in one industry have watched their jobs disappear. Parents are heartbroken knowing their children did everything they were told they need to do to succeed, but now can’t find a job in the field they studied for.
The Great Recession brought about much of this insecurity. But in some ways it only sped up changes that were already happening. And it's left so many feeling as if a better tomorrow is increasingly out of reach for people like them.
Like the economic transformations of the past, the one we are now witnessing is scary and disruptive. But just like the industrial revolution at the turn of the last century, this new era offers the real opportunity to build the great American middle class. Through trade, technology, scientific innovation and 21st century manufacturing, we can create fields and industries that never existed before, and careers and jobs that pay more than the jobs they replaced.
This is the opportunity of our time, and no people on earth are better positioned to seize it. If we can just bring higher education within reach of more of our people, the 21st century – like the one before it – will be an American century.