The affordability of higher education in the United States has become a major social and political issue of late, and was the subject of Jordan Matsudaira’s recent address, “Understanding the Fight over How Americans Should Pay for College,” here at the University of Utah’s David Eccles School of Business.
Matsudaira, currently a professor in the School of Public Affairs at American University, drew on his background as the Deputy Under Secretary and Chief Economist within the U.S. Department of Education at one point in the Biden administration to detail the problems Americans face paying for higher education. He also presented solutions that he and his Department of Education colleagues proposed to the administration.
Matsudaira stressed that higher education is important for the financial well-being of those who earn degrees as well as the economic stability of the nation: “Broadly, there are huge financial gains associated with attending different levels of higher education that accrue to the person acquiring that education.” As the nation benefits from its populace making more money, Matsudaira advocates for some government funding of the higher ed system, namely to address “gaps in college attendance and college completion associated with family income.” As important as higher education is, students’ ability to fund their education often is chaotic and untenable in the long term.
American students fund their college educations in myriad ways, including government loans, Pell Grants, family savings, and by working part- or full-time jobs. This leads to inherent inequities, related to who can pay for college and how much debt they incur — factors often accentuated along race and class lines. In addition to preventing large segments of the American population from entering or completing college, these disparate funding sources also have led to a significant increase in the share of students who have taken out government loans since 2000 — particularly among graduate students. As a result, some 1 million people per year have defaulted on their loans as of 2020.
Matsudaira explained that in order to formulate policy that can at least alleviate the problem, he and some of his colleagues adopted a mindset of “how an economist might think about the system of higher education finance, and what the appropriate role the federal government might be in that equation.” He conceded that such an effort would be an enormously expensive undertaking; indeed, an ambitious plan he advocated for earlier in the Biden administration — giving free community college to all, doubling the number of Pell Grants, and student loan forgiveness — would cost more over the next 10 years than all of the money invested in higher ed in the last half-century. Nevertheless, Matsudaira believes that the cost would be worthwhile given the societal benefit.
Matsudaira praised new laws gor giving the Department of Education more latitude to make college an affordable proposition for everyone. He sees the Saving on a Valuable Education (SAVE) plan as a step in the right direction, noting that it “essentially creates a window to having your loans forgiven if your income is low.”
He said such actions will help more Americans increase their incomes, thereby strengthening the economy.