The next US President needs to build a grand pact for Higher Education

The US university system is rightly regarded as among the best in the world. American universities have long dominated the global rankings, while their ability to generate academic research is of a comparatively higher volume and impact than other countries. Moreover, the United States is the leader in attracting foreign country university students.

Unlike other regions such as Europe, where higher education has been mainly the responsibility of the state, at least until recently, the American university model is mixed, with public and private universities coexisting and providing examples of excellence in both segments.

In recent decades new suppliers have emerged, among them universities "for profit", which I prefer to call "big educational retailers”. These institutions play a complementary role to traditional universities, appealing to a much wider audience, especially in the field of lifelong education. This diversity and segmentation makes the US higher education sector the most diversified and sophisticated in the world.

In addition, the curriculum of American colleges, with two distinct cycles, the generalist Bachelor and the Master or postgraduate degree, is widely admired, prompting regions like the EU, through the Bologna Process, to copy it, although so far success has been uneven. One of the advantages of the Bachelor’s degree, with the inclusion of Humanities and Social Sciences, is that gives students time to think things through and avoid specializing too early, often resulting in better personal development and interpersonal skills. Perhaps the best proof of this is that American universities produce more entrepreneurs than their European counterparts.

That said, the Achilles heel of American higher education is student debt, now close to a shocking $1.3 trillion. Given the size of this amount, it would be unwise for the next administration to try to play down the problem or postpone dealing with it. Neither would it be wise to assume that this is a problem solely for the government, whether federal or at state level, or for the indebted students in question.

 This is a collective problem at a national level: Firstly, because it raises the need to rethink the system of financing university studies in the future; secondly, because the debt directly affects the quality of life of many individuals and their families, as well as their future working and personal lives; and thirdly, because without an imaginative solution, there is a serious likelihood of creating a financial bubble that could pose unpredictable negative consequences for the economy if it were to burst.

Given the gravity of the situation, I believe one of the priorities of the next president should be to formulate a new higher education strategy that would address ways to reduce the mountain of student debt and to design a sustainable system to finance higher education.

Considering the magnitude of the challenge, its complexity and interconnectedness within US society, I believe the only way to address it is through the creation of grand pact for higher Education that would include all stakeholders, including representatives of universities and governments at federal and state level, financial institutions, foundations, think tanks and corporations, student representatives, as well as opinion makers in the sector.

The new president could create a commission made up of representatives of these stakeholders who would be tasked with working out an educational funding model, as well as a solution to the current mountain of student debt.

 This commission would have to include the future secretary of education. Therefore, it would make sense for that person to be somebody with a thorough knowledge of the US university system, perhaps even an insider. There are enough leading academics in the university sector with both the vision and a successful managerial career behind them to take on the job.

What principles would this committee follow to lay the foundations for a grand pact for higher education?

-Firstly, and to be realistic, the solution to reducing student debt cannot be solely through more taxes, directly or indirectly. However, extra resources need to be allocated to refinance student debt, along with additional resources to finance the future of tuition, which will inevitably mean a greater tax burden, but it also seems appropriate to come up with some creative solutions that would include the financial operators in the sector.

- In the future, loans to finance study should follow more flexible guidelines, with longer periods of repayment, as well as accommodating graduate profiles and income. The Australian model, which gives students at least 25 years to pay back their loans after graduation, rather than the current 10 years in the United States, with payments adapted to earnings, seems more sensitive from a social perspective, as well as more effective from a financial and business angle, and also avoids default. The United Kingdom has implemented a similar model that is still in the trial phase. 

 - Risk assessment prior to granting loans should be more rigorous and more personalised. In addition, students need to have a better understanding of what they are getting into. Easy access to credit in recent years, not just to finance tuition but also to cover living expenses, has led to a somewhat relaxed attitude among some students, reflected in other areas such as mortgages or consumer credit.

 - As said, the above mentioned commission would have to look at refinancing existing student debt, extending as far as possible the repayment terms of loans, especially for low-income graduates. It might not be a bad idea to come up with a Plan B in the event of an NPL ratio exceeding 5%.

- Another of the challenges the commission would have to tackle is the role of public universities, those dependent on state governments, not federal money. Historically, publicly funded universities have offered high-quality education for low tuition fees, with the aim of reaching a wider public and providing universal access to higher education. However, successive cuts in education budgets have forced many states public universities to up their tuition fees, in some cases similar to those of private universities. There will have to be discussion on how to provide competitively priced tuition, along with more scholarships, which might mean more taxes at state level, or seeking business solutions and ways of creating alternative revenue for public universities.

- Private universities, especially those with significant endowments, can also play an important role in helping provide universal access to higher education, in particular by offering a program of broad and generous scholarships. The absence of any tax burden on these endowments is because it is assumed they are applied to education, rather than financial speculation. Part of these endowments could be spent on the creation of funds to finance study loans.

- Another way for universities to generate additional funding would be by charging international students higher tuition fees, other than those with scholarships. This is a formula used in other countries like the UK, and that have no xenophobic connotations. The practice is justified because foreign students benefit from a system that neither they nor their families have contributed to through taxes.

- I also believe that we need to awaken a sense of solidarity among university alumni, public and private, to encourage donations to scholarship programs and study funding. The United States is the birthplace and the global center of fundraising. The primary objective of socially committed fund raising should be the financing of tomorrow’s students.

Aristotle said that the future of a civilization depends on its education. The United States can continue to lead global university education, attracting and educating the best talent. If it is to continue doing so, then sustainable solutions to the problem of student debt need to be found now.