Public Education In America

This article (via Manan Shukla) describes the evolution of public education in America.  It one time, higher education in America was viewed as a public good.  The majority of Americans received their education from universities funded by state governments.  Funding for higher education declined by 26% between 1990 and 2010, while tuition and fees more than doubled.  This occurred during a period when median family income was also declining.  Consequently, students and their families have financed their education with student loans.  The average student graduates with $25,0000 in student debt.  Since the average earnings of college graduates aged 25-34 have declined by 24% over the last decade, many students have had problems paying off their debt.  This has created problems for many students who have faced financial hardships.  Unlike other debts which can be discharged through bankruptcy, student loans cannot easily be discharged in bankruptcy court.  Some of the  problems faced by graduates who cannot afford to pay down their debt are described in this article.

The transformation of public education funding raises many questions that are explored in the article. The implication is that higher education is no longer regarded as a public good.  It is regarded as a private good that must be funded with private income, or personal debt, just like other commodities purchased on the market.  The total amount of student loan debt in the US is now greater than credit card debt which is used to purchase consumer commodities.  Education is regarded as a private investment in human capital that will produce a return on the investment similar to debt taken on by entrepreneurs who borrow money to start up a new business.  The quantity of student debt serves another purpose in the economy.  Most of the loans are sold and packaged into securities which are sold to investors. This has contributed to the financialization of the US economy just like the securitization of sub-prime mortgages had done.  Transforming the debt of families who borrow to fund their education, and their purchase of homes, into securities which are sold to investors became a source of fees and income to firms that package and sell the securities.  The securities are also used by hedge funds and investment banks as collateral for short term loans that are used to fund longer term investments which have a yield greater than the short term interest that they pay to fund their debt.