ISSUE BRIEF Wall Street & North Carolina s Student Debt Crisis By Charlie Eaton and Brian Stewart* PART 1: Tax Breaks For Wall Street, Cuts in Per-Student Funding For Higher Education While Wall Street profits have soared benefiting from corporate tax breaks state funding per student has declined for higher education. From 2006 to 2012, state appropriations per student in North Carolina declined by 7.2%. $15,000 $13,918 $12,500 $13,104 $12,099 $12,148 $11,469 $11,548 $11,233 2006 2007 2008 2009 2010 2011 2012 State Funding Per Student for Higher Education in real 2011 Dollars Source: 2013 Grapevine Compilation of State Fiscal Support for Higher Education, Center for the Study of Education Policy at Illinois State University. This data is adjusted for inflation to represents 2011 constant dollars. Between and, state and local funding per student declined by 0.5% at the University of North Carolina () and by 9.4% at community colleges. $15,000 $14,391 $14,946 $13,249 $12,759 $12,760 $13,008 $13,352 $13,163 $13,188 $7,485 $7,052 $6,822 $7,652 $7,963 $8,759 $9,074 $8,417 $6,784 $5,000 State Funding Per Student by Higher Education System Source:: Author analysis of Integrated Post Secondary Education Data (IPEDS) from National Center for Education Statistics. 2012. IPEDS Analytics: Delta Cost Project Database 1987-2010: Data File Documentation. Washington, DC. This data is adjusted for inflation to represent 2010 constant dollars. Charlie Eaton is Javits Fellow and PhD Candidate in Sociology at the University of California Berkeley. Brian Stewart is the Communications Director for Generation Progress. Page 1 of 7
PART 2: Students Are Paying the Price With Higher Tuition Public colleges have radically increased tuition to offset state appropriation reductions rather than rein in spending on noninstructional costs. From to 2013-14, in-state tuition increased by 34.5% at four-year public institutions and by 44.3% at public, two-year institutions. Four-Year Public Two-Year Public $7,000 $6,011 $5,428 $5,701 $4,240 $4,176 $4,482 $4,644 $4,787,500 $1,482 $1,490 $1,452 $1,492 $1,466 $1,719 $1,890 $2,138 $0 2010-11 2011-12 Average Sticker Price Per Student Source: U.S. Department of Education, National Center for Education Statistics, Higher Education General Information Survey Average revenue per student from tuition after financial aid is awarded increased by $2,101 at and increased by $539 at community colleges. $1,446 $4,054 $1,636 $5,128 $1,633 $5,272 $1,695 $5,522 $1,702 $5,659 $1,698 $5,894 $1,804 $5,814 $1,714 $5,909 $1,985 $6,155 $0,500 $7,000 Tuition Revenue Per Student After Financial Aid Has Been Awarded Page 2 of 7
PART 3: More Spending is Going to Wall Street Instead of the Classroom Spending is increasing rapidly for auxiliary services, the area in which large parts of amenity spending is reported. Public colleges have dramatically increased borrowing from Wall Street, much of it to pay for construction of amenities such as dorms, recreation centers, and sports facilities. Increased borrowing has also led to substantial increases in interest payments to Wall Street, despite a decline in interest rates offered by bond markets. Comparatively, spending on instruction has remained flat. From to, North Carolina s public higher education institutions paid $756 million in interest to Wall Street. $141,565 $53,585,748 $267,032 $51,618,596 $177,246 $55,391,801 31,697 $64,173,909 $227,944 $91,861,951 00,276 $95,812,994 87,094 $109,178,125 $436,020 $111,904,564 54,866 $120,410,583 $0 $75,000,000 $150,000,000 Annual Cost of Interest Payments For Servicing Higher Education Debts To Wall Street From 2001-2002 to, North Carolina higher education institutions paid as much as $625 per student in annual interest to Wall Street. $1 $2 38 66 $1 50 91 $2 $540 $547 $2 $603 $601 $625 $0 50 $700 Dollars Per Student Paid Annually as Interest to Wall Street Page 3 of 7
Between and, North Carolina s public higher education institutions increased spending by 38% for auxiliary services, which include many amenities. $643 $597 $595 $598 $5,817 $5,676 $5,772 $5,558 $598 $627 $683 $702 $6,482 $6,608 $6,617 $6,776 $749 $8,297 $0 $2,250 $4,500 $6,750 $9,000 Annual Auxiliary Service Spending Per Student Between and, North Carolina public colleges increased per-student spending on instruction just 1.9%. 2002 2003 2004 2005 2006 2007 2008 2009 2010 $5,532 $5,443 $5,324 $5,970 $6,164 $6,537 $6,809 $6,279 $5,630 $11,097 $11,104 $11,030 $11,147 $11,053 $11,437 $11,636 $11,417 $11,448 $0 $2,400 $4,800 $7,200 $9,600 $12,000 Instructional Spending Per Student Page 4 of 7
PART 4: As Tuition, Amenities Spending, and Financial Transfers to Wall Street Have Risen, So Has Student Debt While the federal bailout has helped profits soar again on Wall Street, unemployment especially youth unemployment remains high. With limited employment opportunities, students are taking on more debt than ever before. An increasing share of borrowers cannot afford to make required payments. Students at for-profit colleges some of them turned away from publics because of budget cuts have been hit particularly hard by student debt. Youth unemployment in North Carolina is 18.8%. 30 20 18.8 10 Source: Young Invincibles ND NE SD OK IA MN MT UT MA NM OH WY WI VT KS MD NH PA HI TN TX AK IN DE WV MO AL FL ME CO LA WA VA KY MI CT RI ID AZ NV AR OR NY NH IL NC CA GA SC MS Youth Unemployment Rate The average debt owed by North Carolinians with student loans rose from $13,400 in 2004 to $24,300 in 2012. $25,000 $23,200 $24,300 $17,500 $18,200 $20,100 $20,900 $21,500 $16,700 $14,900 $13,400 2004 2005 2006 2007 2008 2009 2010 2011 2012 Average Student Loan Debt Per Loan Holder, In Real 2011 Dollars Source: Federal Reserve Bank of New York Consumer Credit Panel The share of North Carolina borrowers who are more than 90 days delinquent has increased to 17.4%. 20 15 17.4 10 10.4 11.5 11.7 11.7 12.7 13.2 13.5 12.8 5 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Federal Reserve Bank of New York Consumer Credit Panel. Percent of Student Loan Holders Who Are More Than 90 Days Delinquent *90 day delinquency rates tend to be twice as high for borrowers who are in repayment, because many borrowers have loans that do not require repayment until future years and conditions. Page 5 of 7
PART 5: Nationally, African Americans Are Hit the Hardest Students at for-profit colleges have the highest rates of student debt as well as the highest average student debt. African Americans, who have disproportionately turned to for-profit institutions, have the highest rates of borrowing and the highest average debt levels. National age breakdown of borrowers with education debt 1.4% Under 30 30 to 39 40 to 49 50 to 59 60 and over Age not known 16.4% 11.3% 4.2% 33.9% Source: CBS News 32.8% National rates of borrowing and average student debt level by race Percent of students who borrow Level of average debt for each student type 90% 0,000 60% 66% 81% 65% 66% 54% $20,000 $24,842 $28,692 $24,724 $22,886 $21,090 30% 0% All Black White Hispanic Asian $0 All Black White Hispanic Asian Source: Demos, College Board Levels of student debt by institution type Percent with $0 Percent with $1-$9,882 Percent with $9,883-$17,288 Percent with $17,289-$27,978 Percent with more than $27,978 Public four-year Private nonprofit four-year For-profit four-year 17% 14% 40% 25% 32% 6% 2% 13% 20% 8% 65% 11% Source: College Board Page 6 of 7
National Drop out rate by debt level Percent of dropouts with $0 Percent of dropouts with $1-$9,882 Percent of dropouts with $9,883-$17,288 Percent of dropouts with $17,289-$27,978 Percent of dropouts with more than $27,978 Public four-year Private nonprofit four-year For-profit four-year 10% 13% 17% 24% 37% 17% 28% 17% 22% 15% 29% 13% 27% Source: College Board National Drop out rate by school type 60% 54% 40% 45% 35% 20% 0% Source: Reuters, CNN Public Four- Year Private Nonprofit Four-Year For-Profit Four-Year Share of students by each school type Percent of students who default at each school type 15% 14.7% 9.5% 12.9% 7.5% 8.3% 75.8% 5.2% 0% Source: Department of Education Public non-profit Private non-profit For-profit Page 7 of 7