Ivory Tower 101: An Introduction to How Colleges Have Lost Their Way

The problem of spiraling college tuition costs are the result of colleges' increasing dependence on federal and private loans. Colleges have continued to hike up their sticker prices with little risk as students and taxpayers absorb the financial burden of student loan payments and defaults.
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The 2014 CNN documentary Ivory Tower makes the case that things have gone terribly wrong with the college system in America. And, like a survey course for entering students, it covers a broad landscape of issues.

For example, there are the students who on average study just one hour a day. There is the college president who demands sacrifices but covets a huge salary. There are the colleges that build awesome scaling walls and swimming pools all in the interest of wooing big money from wealthy families or out-of-state students who bring the promise of federal loan dollars. And, sadly, there is the continuing accumulation of student loan debt coupled with low graduation rates and scores of alumni who are either unemployed or underemployed.

CNN does a good job laying out the complex issues entangling the higher education system, but it does far too little to connect the dots that led us this point. To understand what has gone wrong, we need to take a page from Woodward and Bernstein: follow the money. It is the only way to find the road out of this mess.

The problem of spiraling college tuition costs and diminishing benefits are the result of colleges' increasing dependence on federal and private student loans. Colleges have continued to hike up their sticker prices with little risk as students and taxpayers absorb the financial burden of student loan payments and defaults.

The nearly unlimited loan subsidies began in the 1960s with the intent of opening up higher education to a more diverse student population. These subsidies also introduced a flood of new money to colleges. The government looked the other way as colleges became wolves tearing at the financial aid pie, causing tuition costs to explode as schools claimed more and more of the seemingly endless supply of financial aid cash.

Colleges and universities embarked on a consumer-culture path with intense competitive marketing to more wealthy "customers." To attract big money, colleges initiated their own borrowing spree and building boom. Along came new multi-story libraries, elaborate gymnasiums and recreation centers, five-star dining facilities, and spa-like student attractions that effectively increased prestige while also spawning the vicious debt cycle we continue to see today.

It's no surprise that when students and families found it harder and harder to pay off their increasing loan debt, many chose to default. Then, after peaking in 2010, enrollments began to decline as parents became frightened of taking on high debt. As a result, college finances began to weaken and faculty lines were cut, course offerings were diminished, and remedial programs were reduced. Now we see that many colleges are at risk of closing their doors and some of the top-ranked institutions have had their credit rating downgraded. Students and colleges are both facing the consequences of accumulating a crushing burden of loan debt.

Many sins from greed to mismanagement account for where we are today, but the greatest culprit is opacity -- the almost total lack of transparency within colleges. To uncover what is going on we not only need a Woodward and Bernstein, we need Deep Throat.

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