MITIGATION OF COLLEGE EDUCATION AFFORDABILITY STRESS

BY
RIAZ H. RANA

Our capitalist nation enjoys an excellent education system and, until recently, those who
desired to pursue higher learning had few overwhelming affordability issues. Now we are
a debt-ridden nation, and a majority of students seeking higher education must borrow
funds. In the past, one could graduate debt free. Of course, a person can survive without
education, but how well? And can an industrialized nation survive without an educated
labor force?

The answer is yes, within the context of global opportunities. The industrial tycoons have
outsourced their needs to be performed in other countries, where the desired labor is in
ample supply; but by doing so, they are contributing to decreasing intellectual capital of
their own nation. What made this nation the wealthiest and most powerful in the world
was and is the best creative and educated labor force. This asset of our nation must not be
lost. Eventually, we will realize our loss, but recovering from this type of situation may
take many decades. Of course, some will say that we can open the gates for educated
immigrants to meet our needs, but how about beginning by meeting the needs of our own
children for higher education.

The lurking threat of losing intellectual capital due to the unaffordability of higher
learning imposes perhaps a more serious threat than many others our nation is
experiencing. To understand its scope and breadth, we should review the affected
population. The 2006 report of the U.S. Department of Education’s National Center for
Education Statistics can help us understand the scope of the problem. The total
enrollment of students in fall 2006 was projected to be 72.7 million, including
elementary, secondary and postsecondary degree-granting institutions. The postsecondary
enrollment was approximately 17.65 million, with 13.36 million in public and 4.29
million in private institutions. In terms of output from postsecondary institutions, degrees
granted for year 2006–2007 is projected by type as: associate, 0.658; bachelor, 1.488;
master, 0.503; first professional, 0.0874; and doctor, 0.0505 million, respectively.
Furthermore, in all degrees categories, 50 percent or more were females, except the
doctorates. In essence, the population seeking undergraduate degrees yearly ranges from
1.7 to 2.1 million and is expected to grow by 5 to 8 percent in coming years. The female
population growth in elementary and secondary schools indicates that the college
population will increase proportionately.

The average family income in the U.S is approximately $48,000 and average family size
is four or less. The number of students graduating from high school is approximately
3.232 million in year 2006–2007, and approximately 50 percent of them will be seeking
admission to higher learning institutions. The annual cost of public and private four-year
colleges is approximately $18,000 and $30,000, respectively. The question arises: why
are half of high school graduates not seeking higher education? The first answers that
come to mind are cost and that some do not measure up to the challenge of higher
education. But since it is improbable that such a high percentage of high school graduates
cannot succeed in college, it seems safe to assume that some percentage of these students’
families cannot afford the economic burden of higher learning. This fact is pretty much
borne out by labor force statistics, which show that 32 percent of labor force comprises
college graduates, 28 percent some college, 30 percent high school graduates, and 10
percent less than a high school diploma. The measure of unaffordability for families to
support higher learning at all levels can be gauged by looking at FY 2006 data for the
number of higher education loans (18.515 million) and total amount ($161.6 billion), or
approximately $8,726 per loan. In short, to supply well-educated labor for our nation’s
industrial, business, and governmental infrastructure, families have to bear the burden of
debt. Unfortunately, the increasing cost of education is bound to degrade the nation’s
ability to meet its need in the coming decade. It could be possible that an educated labor
force may begin to consider itself a valuable commodity and demand sign-up bonuses to
relieve its educational debt burden; by so doing, many small companies may be deprived
of talented labor. To avoid this happening, it is important to look at the current revenue
profile of all businesses.

Biz Stats projects the number of active business entities for 2007 at about 31,600, and
total revenue of $25 trillion. Approximately 58 percent of these businesses will have
revenue under $25,000. The number of corporations is estimated to be 6,000, with
revenue of $21.6 trillion. Regardless of their strength or weakness, the fact remains that
businesses need skilled labor and families want their children and grandchildren to have
an equal opportunity to pursue higher education. For the last four decades, I have heard
politicians touting the importance of small businesses and their vital role in the nation’s
economy; yet, families face a financial hurdle to have their children attain higher
education without going into substantial debt. In this deprived class of people, possibly
some future Einstein is lost.

In view of this, one way to assure equal opportunity for children regardless of their
financial situation in for business entities, small or large, to contribute one-third of one
percent of their revenue to a National Education Foundation Trust (NEFT). A business
with $20,000 revenue will contribute approximately $67, and a business giant with a
billion dollars revenue will contribute $3.33 million. This trust will help build the
nation’s intellectual assets, assuring a sound supply of skilled labor for our capitalistic
business infrastructure. Inevitably, economists and other numbers crunchers will label it a
burden upon businesses, ‘taxes for social cause,’ and anti-free market. Let us briefly
review the tax implications, as well as current student loan facts. The fiscal year 2005 and
2006 student loan origination trend summary reported by www.student-
marketmeasure.com states that the total number of loans was 17.9.and 19.4 million and
total amount was $132 and $160 billions, an increase of 8.6 and 20 percent, respectively.
The average loan amounts in 2005 and 2006 were approximately $7,379 and $8,210.
These percentage changes are correlated to the changes in institutions’ increases of
tuition, etc. It is recognized that borrowers are not exclusive to undergraduate populations
addressed in this article, but include all levels of standing in our educational institutions.
However, the data show that to generate skilled labor to support the industrial
infrastructure, students and their families have to bear the debt burden. So, if skilled labor
enters the labor market, just as a great athlete enters a professional sports market, should
he or she not be entitled to a sign-up bonus to recover at least the debt equivalent
obligations? The ramifications to industrial and governmental infrastructure could be
enormous, but this can be avoided by creating NEFT and funding it as proposed to
produce skilled labor as a national asset rather than debt and stress-ridden labor.

Experts in the finance and education domains can determine how to manage and
implement this. As a novice, I only can outline my concept but not the details. First, all
students should take exams in areas specifically designed to meet the nation’s needs, such
as science, engineering, biotechnology, etc. The SAT exam covers a broader scope and
could be used as a supplemental source, rather than being mandatory. Score levels should
be set for participants to obtain funds for four years of college expense. Successful
applicants funded through NEFT would enter into a contract that, upon graduation, they
will serve in industry or government for at least five years, and for ten years; they will
pay NEFT 1.5 percent of their income. As far as the NEFT funding is concerned, one-
third of one percent of revenue could yield approximately $82 billion, of which 70
percent should be allocated to public institutions and 30 percent to private accredited
institutions. At the rate of $18,500 on average per student per year, this could serve 1.13
million students at a total distribution of $21 billion. The remainder of $61 billion would
be invested in risk free treasury notes at the rate of 4.75 percent or better, which would
yield sufficient funds to manage the operation. Lastly, as I am nearing end of my life
journey due to my old age, I hope this humble suggestion to mitigate the stress of college
education affordability will draw others to contribute their thoughts to kindle the beacon
of knowledge and strengthen our nation.