James Nguyen H. Spencer
December 8, 2022
In August, the Biden administration released a plan to forgive up to $20,000 of federal student-loan debt per person. The announcement was a welcome development for many graduates struggling with their payments and was widely celebrated by advocates of debt relief.
But now the plan is on ice, blocked by an injunction issued by the U.S. Court of Appeals for the Eighth Circuit. The Biden administration has appealed the decision, and the Supreme Court will hear the case in February. Meanwhile, borrowers who’d hoped to benefit are stuck in limbo. So is a proposed change to income-based repayment plans, which aimed to ease the burden of debt for future borrowers.
The travails of the debt-relief plan illustrate the need to think more creatively about how to finance higher education. In years past, public-college tuition was kept very low by state investment in public universities. But today, levels of investment have in many cases dropped from about half of a university’s budget to less than 10 percent. In some states, these aggregate reductions have been mitigated by the creation of state programs funding individual tuition support for residents, as in South Carolina and Louisiana, yet it’s still clear that states will no longer be the primary source of public-university support. To be sure, it is worthwhile continuing to advocate for increased state funding of public universities, but we needn’t put all our eggs in that basket. We need new ways to finance higher education.
If we are serious in arguing that higher education is a public good, then we should finance it like one; we should take some lessons from my own field, infrastructure planning.
Financing an equitable higher education can be done: The U.S. has near-universal water supplies, transportation, and electricity for even its poorest residents. What would happen if we applied the same principles to the public goods that universities provide?
Public infrastructure is rarely funded fully by upfront subsidies in the way that advocates for “free college” suggest. Instead, infrastructure projects rely on floating debt that is tied to long-term user fees through the life of the infrastructure. Think of your water bill, which over 30 years helps pay down the debt associated with building your local water system. According to the National Association of Counties, government investments in transportation infrastructure, for example, total substantially less than half of the actual costs, with bond-market investors covering the bulk of the upfront costs. Over time, individual users collectively pay back that debt through costs like gas taxes, transit fares, or tolls. Whatever the repayment mechanism, end users never take on that personal debt the way we now expect college students to do.