Student loan debt topped $1.3 trillion in 2016. The federal government now originates and services a whopping 93 percent of student loans meaning, when defaults occur, they are financed on the backs of taxpayers. Policymakers often justify this heavy public investment in higher education because a college education is a significant step towards achieving upward economic mobility. But are college students making the most of this important time?
My colleagues Lindsey M. Burke Jamie B. Hall and I analyzed data from the American Time Use Survey produced by the Bureau of Labor Statistics, and found that they may not be. Americans whose full time job is being a college student spend just 2.76 hours per day on education-related activities. This includes time spent in class (1.18 hours) and doing research and homework (1.53 hours). Altogether, this makes for about a 19.3 hour work week.
College students are working about half the time they will likely spend working when they graduate, as most Americans work a 40 hour work week, and are even working less than they did in high school. According to the American Time Use Survey, the average full time high school student works 30.2 hours per week on education-related activities.
It is no wonder that today most American college students do not graduate in four years. Students are not maximizing their credit hours to stay on track to graduate. Unfortunately for the taxpayers, estimates indicate that every extra year a student spends at a public four-year college costs an additional $22,826.
If college students spent most of their time in college leisurely racking up unnecessary debt, but were financing their education themselves, the financial repercussions of these decisions would be contained to the individual. However, with the federal government now originating 93 percent of all student loans, taxpayers – through subsidies and as a result of defaults occurring – end up financing both the education hours spent by a student in college and that student’s leisure time. Additionally, evidence suggests that more federal subsidies in higher education encourage colleges and universities to raise their tuition costs. A 2015 report form the Federal Reserve Bank of New York found that every additional dollar in Pell Grants that an institution receives leads to a tuition increase of 40 cents. Moreover, the report found that every dollar of federally subsidized student loans leads to a tuition increase of 63 cents. Those costs are spread across the institution, and are felt by recipients and non-recipients of aid alike.
As college tuition increases exponentially and more and more students are defaulting on their debts, American taxpayers deserve to know how their heavy investment in higher education is being used. The trend away from the four-year degree towards the six-year degree coupled with increased rates of borrowing to attend college should be concerning for taxpayers. The limited amount of time college students spend on their education suggests that removing the financial responsibility from the recipient of the education to the taxpayers is an expensive trade off.
Policies that further subsidize higher education and increased access to loan forgiveness programs only exacerbate this problem. A better alternative would be to limit federal subsidies – by, for example, eliminating the PLUS Loan program – in order to restore private lending in the marketplace. Increasingly generous loan forgiveness programs should also be curtailed. This could discourage students from taking out large amounts of federal student aid and potentially encourage more students to graduate on time. Otherwise, we could see more taxpayer dollars being spent on leisure rather than learning.