September 28, 2013

Remarks to the Education Writers Association Conference on Higher Education

Senator Elizabeth Warren
Remarks to the Education Writers Association Conference on Higher Education
Northeastern University
Boston, MA
As Prepared for Delivery

Thank you to Caroline Hendrie and the Education Writers Association for inviting me to join you today. The American education system faces some huge challenges, and high quality news coverage in this area is more important than ever. So I am very pleased to have the opportunity to speak with you today.

I understand that you all have been discussing the challenges that face our higher education system.  Good! Because the truth is, our college students are in crisis-and we need to talk about it and then make some meaningful changes.

I don't have to tell this group about rising college tuition.  Many of you have been sounding the alarm on this issue for years now. But let's hit the highlights:

College tuition and fees have been skyrocketing for decades. A kid who goes to a public university will pay more than 300% of what parents paid thirty years ago.[i] Even after we factor in the discounts colleges offer to students, costs are going up across the board - and low and middle-income families are being hit especially hard.[ii]

College pricing trends can be explained in a lot of different ways, but the need to raise tuition boils down to two simple causes: either less money is coming in the door, or more money is going out. Both of these are happening in our schools today. Many colleges are losing revenue because of less state support or lower alumni donations, and so they need more tuition dollars to cover those losses. Other colleges are simply spending more each year - on research, facilities, competition for the best students - and they're financing these improvements with increased tuition.

And there's another driver of high college costs that often gets lost. Total college costs aren't just affected by yearly tuition bills - they're also affected by the number of years it takes to finish. Today, fewer than forty percent of students finish a bachelor's degree in four years.[iii] And the more years a student spends in school, the more the student will pay -- an extra year or two can add 25 or 50% to the cost of college.

More and more low and middle-income kids simply can't afford to pay the high cost of college. But if those kids want a shot at a stable future - the kind that comes with a college degree - they can't afford not to pay, either. So they take on loans to finance their education. That debt is adding up - student loan debt is approaching $1.2 trillion.[iv] A huge portion of this debt rests on the shoulders of young people who are struggling to keep up with their mounting bills while they try to launch their lives.[v]

Student loan debt is a threat to our students' futures, and it's a threat to our economy. A recent report from the Consumer Financial Protection Bureau cited student debt as a serious obstacle to homeownership and saving for retirement, and the Federal Reserve has made clear that education debt is dragging down family budgets and poses a risk economic growth.[vi]

Instead of using education to build economic security, inefficient and ineffective education policy is hollowing out our middle class.

We must do better - for the financial health of our families, and for the financial health of our economy. That means taking action to address both the existing mountain of student debt - and it means taking action to address the rising cost of college.

Let's start this conversation with the debt. Here are three things I think we should do right now.  Not next year, not in five years, but right now.

·         One. Eliminate government profits from the federal student loan programs-period.  Student loans should cost the students no more than what it costs the government to make those loans. The point of these programs should be to help our kids get an education, not to tax them for the privilege of borrowing money to go to school.

·         Two. Reduce the burden of student debt on existing borrowers by refinancing that debt to let students take advantage of historically low interest rates.

·         And three. Restore basic consumer protections like bankruptcy relief so that people can get a fresh start when a job loss, a health crisis, or a family break-up drives them over an economic cliff. 

These are all important changes, and they would make a huge difference to millions of families. This is something we could do right now-and we should do now.

What about the other half of the problem: rising college costs? How do we lower the cost of college for all of our students?

·          I put restoring the traditional role of public higher education at the top of my list. Public colleges and universities are the backbone of the American higher education system. More than three-quarters of college students in the United States are enrolled in public schools - whether it's a community college, a flagship research university, or a local state college.[vii]

There was a time when state schools provided a reasonably priced, high quality education for all our citizens.  Today, the quality of the education offered at most public schools is strong, but the price is staggering.

A generation ago, states covered the bulk of the costs at our public universities.[viii] But most states are steadily cutting their investment in higher education. From 2007 to 2012, state funding per student dropped by an average of 23 percent.[ix]  Let me say that again:  23 percent.  That's astonishing.  It means students and parents pay more-and that is making state schools less and less affordable for students who don't come from wealthy families.

The federal government cannot solve this problem alone.  But the federal government can-and should-leverage its dollars to push for improved educational quality and lower tuition costs. In the same way that the federal government helped build and maintain interstate highways across the country by partnering with the states, the federal government could partner with states to help lower costs for public higher education.   Congress can provide matching funds to states when states agree to provide better funding for public colleges - and when the colleges themselves agree to better manage costs for their students.  There are complications about how different states and different schools can meet these goals, but there are complications about building roads over mountains and through deserts, and we managed to do it anyway.

·         What else can we do to make college more affordable? We can give colleges additional incentives to keep student debt low and academic quality high. Right now, colleges reap all of the benefits of student loan funds, while students and taxpayers bear all of the risk. There are far too few incentives in the federal student loan programs that encourage colleges to curb their spending or control the debt of their students. The federal government should use the student loan program to encourage colleges to keep costs down.

Here's a simple place to start: give colleges some skin in the game. When borrowers default on their loans, students and taxpayers already feel the pain. Colleges should feel some of that pain too.  Schools that are running programs that result in high default rates should feel the impact of their failure to prepare their students for economic survival. And if we save money by getting colleges that perform poorly to pay back into the system, we can use that money to reward the schools who keep costs low.

·         Finally, we should reform our federal student aid programs. Research shows that students are not effectively using existing aid programs. A whopping 40% of community college students who are eligible for Pell Grants don't even apply for them.[x] There are 6.5 million students in default on their loans, but even with the recent expansion of income-based repayment options, enrollment in these programs remains low.[xi]

Many people say that the solution to these problems is to give students more information.  I am a big fan of information, but I don't believe that handing people a complex wiring diagram is the way to prevent electrical fires.  At some point, we have to acknowledge that the financial aid system is simply too complex.

To truly address this issue, we need to rethink student aid from the perspective of what's best for students.

o   Families should not have to wait until the eleventh hour to find out how much federal aid they will receive.  We should calculate aid packages before students even apply to college.

o   Students graduating with debt should be guided into repayment plans that fit their needs. And if they struggle to repay, then we should reach out and help them get into the right program-not stand by and watch them fail.

o   And instead of asking students to wait ten years for the possibility of public service loan forgiveness, we should set up a "forgive-as-you-go" system that allows students to pay off their loans, starting right away, in proportion to the time they spend in service.

I know that some will look at these proposals and say that we cannot afford to make these changes. And it's true that some of these steps - like eliminating profits from our student loan programs - will require us to make hard choices about our values. But for the most part, these ideas are not about spending more federal dollars - instead, they are about getting a better return on our investment.

Right now, the federal government gives out about $150 billion dollars a year in student aid.[xii] It spends another $30 billion on tax benefits related to higher education.[xiii] And yet, we make almost no effort to leverage that money into keeping costs low for students. We can't afford this-and more importantly, our families can't afford this.  It's time for the federal government to use its muscle to make sure that Americans have access to colleges that they can afford. 

These proposals will require some big changes, and getting our system right will take sacrifice - from Congress, from states, and from colleges themselves. But the way we build a future for our children will be the measure of who we are as a people. 

I was the first person in my family to graduate from college. I went to a commuter college where the tuition was $50 a semester. I went to a public law school where I got a great education.  And I was able to do all of that because I grew up in a country that invested in its kids.

I believe in that America.  I believe that's who we are-and that's how we build a future for ourselves, for our children and for our grandchildren.


[i] College Board, Trends in College Pricing 2012, p. 14

[ii] College Board, "Net Prices by Income over Time: Public Sector,"

[iii] National Center for Education Statistics, Digest of Education Statistics, Table 376, 11/2012 .

[iv] Rohit Chopra, CFPB, "Student Debt Swells, Federal Loans Now Top a Trillion," 7/17/2013

[v] The student loan debt burden for individuals under 30 is $322 billion, while individuals ages 30-39 have $321 billion in student loan debt. Each of those figures represents around 1/3 of the overall student debt burden.

Federal Reserve Bank of New York, "Student Loan Debt by Age Group," 3/29/2013

[vi] CFPB, Student Loan Affordability, 5/8/2013; Federal Reserve, Minutes of the Federal Open Market Committee, March 19-20, 2013

[vii] National Center for Education Statistics, The Condition of Education 2013, 5/2013 p. 62

[viii] SHEEO, State Higher Education Finance FY 2012, 2013 p. 20

[ix] Id.

[x] College Board, The Financial Aid Challenge, 5/2010 p. Executive Summary

[xi] Rohit Chopra, CFPB, "A closer look at the trillion," 8/5/2013

[xii] Department of Education, Fiscal Year 2014 Budget Request, "Student Financial Assistance," 2013 p. Q-25;

Department of Education, Fiscal Year 2014 Budget Proposal, "Student Loans Overview," 2013 p. S-17;

Department of Veterans Affairs, Congressional Budget Submission, FY 2014, "Volume III: Benefits and Burial Programs and Departmental Administration," 2013 p. 2B-2

[xiii] Margot L. Crandall-Hollick, CRS, Higher Education Tax Benefits: Brief Overview and Budgetary Effects, 3/18/2013.