January 21, 2023

Matthew Korfhage: How a war on free NY tuition presaged the student debt crisis

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Reporter Matthew Korfhage wrote this piece outlining a history of education financing in New York fifty years ago–but he shows how that history is still resonating today.

In the early 1970s, City University of New York was tuition free, a revolutionary move for higher ed.

CUNY was America’s third largest public university system at the time. Universal admissions transformed it into “the most open and perhaps most envied higher education system in the country,” wrote historian Stephen Brier in “Austerity Blues: Fighting for the Soul of Public Higher Education.”

“At the time it was very inspiring,” historian H. Bruce Franklin said. “It seemed like CUNY was at the vanguard of a democratization of American higher education.”

But it wasn’t destined to play out that way. Instead, the political backlash was swift.

Conservative politicians, from Nixon to Reagan saw this as a threat.

At a 1970 Republican fundraiser, Vice President Spiro Agnew made his concerns explicit, Dawson and Franklin documented. Agnew inveighed against “Black student militancy” at protests like the historic 1969 campus occupation at City College that hastened open admissions, arguing that too high a proportion of Black students were admitted to college. Open admissions, he said, were the means “by which unqualified students are being swept into college on the wave of the new socialism.”

Yes, college campuses were a hotbed of socialist indoctrination, and conservatives were damned if tax dollars were going to pay for it.

And that turns out to be part of the story of how huge college debt became a thing.

The City of New York wasn’t alone in offering college as a free public good, Brier said — in much the same fashion as states expanded public education to include high school around the turn of the 20th century. A handful of states around the country also offered free college, most notably in the university system of California.

But by the early 1960s, Gov. Rockefeller had cobbled together an entirely different funding model for state-run universities in New York: student loans.

For years, bankers had been loath to cover tuition loans as far too risky. After all, students weren’t guaranteed a high income after graduation, and you can’t repossess a degree. And without loans, middle- and working-class students couldn’t afford high tuition.

And so, the state of New York would vouch for the loans. Problem solved.

Beginning in 1965 under President Lyndon Johnson, and continuing with the creation of student loan broker Sallie Mae in 1972, that model went federal. Bankers were particularly enthusiastic about Sallie Mae, Shermer said.

“It’s a government-sponsored agency to actually buy and sell student debt, and make it a lot more profitable…and (bankers) were also part of the lobbying to make this debt almost impossible to discharge during bankruptcy,” Shermer said. “The guarantee was not for the students. The guarantee was that the banker would be repaid.”

Suddenly, once-perilous student loans became a profitable industry. And with student financing available from eager bankers, state and federal governments could raise tuition to cover costs while lowering the government’s overall share of funding.

There’s more, like concerns about the danger of an educate proletariat but there’s a connection that Korfhage doesn’t make. The rise of vouchers means the rise of parents taking out loans for their children’s K-12 education. How long before that becomes a profitable business?

Read the full piece here. 


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