Editor’s Note: This is the third and final installment in a series of articles dealing with the increasingly burdensome cost of higher education in America and the leadership role that Notre Dame can play in dealing with the crisis. Read the first two installments here and here

In our first two installments on this subject we discussed the following points:

  • The extent and delinquency of student loan debt nationally and the negative consequences thereof;
  • The two primary causes of increasing student loan debt, its ready availability, and increases in tuition and fees;
  • The moral issues raised by students who know or should know that the debt is and will be beyond their repayment capacity and by universities that aid and abet those borrowing levels;
  • The Notre Dame financial situation;
  • Financial aid and student loan debt at Notre Dame;
  • Tuition at Notre Dame; and
  • The effect of student loan debt and tuition increases on the demographics of the Notre Dame student body.

Comments and Conclusions

From those installments, we reach the following conclusions:

The student-loan debt crisis is perhaps the next bubble to burst in the American financial markets.  The extent of the debt accumulation continues to increase.  The policies of our federal government to make more and more student-loan debt available, regardless of creditworthiness, as well as government proposals to ease loan repayment terms, only exacerbate the problem.

University tuitions continue their inexorable rise because the higher the available lending the more universities can charge for tuition and fees.  Tuitions also rise to accommodate higher and higher levels of university spending, particularly in respect to new building construction.  Finally, tuitions rise because their level is promoted as a mark of quality and prestige among peer institutions.

As a result of those circumstances, universities are becoming more and more unaffordable, particularly for students from low-income families.  Tuition increases reduce the applications from low-income families because of enhanced price sensitivity.  The loans directly impact the purchasing power and, therefore, the standard of living of the college graduates, the U.S. economy and the feasibility of having families.  A moral taint may well attach to borrowing beyond the students’ present and potential ability to repay as well as the universities’ complicity in the borrowing, especially when raising tuitions to harvest available loan dollars.

Notre Dame, unfortunately, is not immune from those trends but, rather, serves in some ways as a posterchild of the unaffordability problem.  It is one of America’s wealthiest universities, with 2012 Net Assets of $8.3 billion and a 2014 endowment of $9.8 billion.  Despite that wealth, Notre Dame has continued to increase the sticker price of its tuition each of the last five years at an average rate of just over 4 percent.  By its own admission, it prices tuition at the level of its peer institutions, not at what it truly needs to provide a very high quality Catholic education.  It does distribute substantial financial aid.  Notwithstanding, its graduates left campus in 2013 saddled with an average debt of $30,200, compared to $28,000 at other four-year private schools.  Its 2011 law graduates, on the other hand, left with $94,000 in student-loan debt, a very large number but a level that placed it down at 27th out of 28 Catholic law schools.  University President Father John Jenkins, CSC, reports progress on the affordability issue and maintains that affordability will remain a concern for the university.  The question remains whether the concern is compelling enough to merit a greater spending prioritization.

As with many of its prestigious peers, Notre Dame admits students not on the basis of need but on the basis of merit.  One at least implied exception to that “need blind” policy is the determination to accept qualified undocumented students on certain conditions with full recognition that Notre Dame will have to provide financial assistance.

Two tests have been advanced to determine whether a university is indeed treating its low-income students with respect to financial aid the same as it does its higher-income students.  One test is the percent of students receiving Pell Grants.  At 8.4 percent, Notre Dame ranked in the Burd study on that test only 44th on a list of major universities.  The second test is the net price paid per student.  Reported data indicates that over a recent four-year period the net price for ND’s poorest freshmen more than doubled while it declined slightly for higher-income groups.  The tilt in favor of higher-income groups is attributed by a Notre Dame official to the greater skill of wealthier families in finding scholarship and grant monies.  Because tuition increases have an adverse effect on the lower-income cohort due to its inherent price sensitivity, the concern is that Notre Dame has been drifting away from its self-described tradition as “a university of immigrants” and its “long and proud history of educating the marginalized and least among us.”  That, indeed, is an American Catholic tradition from which so many of us benefited and a worthy object of funding that does not discriminate against the offspring of working-class families.

Recommendations

The foregoing comments and conclusions lead to the following recommendations:

  1. That Notre Dame take a leadership role in higher education by pricing its tuition and fees at the level necessary to produce a very high quality Catholic education and not at the level of its so-called “peer” institutions.  Presumably, that pricing will be lower than “peer” level pricing, will make Notre Dame more affordable, and will reduce the amount of student loan debt accumulated by its graduates.
  2. That Notre Dame, additionally, should seriously consider freezing tuition and fees, at least on a year to year basis, as a number of universities have done.  To close a loophole, a freeze or reduction should encompass fees as well as tuition.  Universities faced with legislatively-mandated caps on tuition increases, for example, have been known to replace lost tuition income opportunities with enhanced fee income.
  3. That Notre Dame abandon any conscious (or, hopefully, unconscious) increases in tuition and fees to take advantage of student loan funding, that is, begin to detoxify itself from the annual injections of federal loan monies and remove any moral taint attached to complicity in excessive borrowing.
  4. That Notre Dame demand more of itself with respect to the level of its student loan borrowing.  Instead of a goal that no one graduate with more than 10 percent of the cost of four years in need-based loans, which today equates to about $23,800, Notre Dame should explore the feasibility of, and consider establishing a goal of, a debt-free cohort of graduates, resulting from lowered tuition and fees, a reordering of spending priorities and greater need-based funding though scholarships and grants.
  5. That Notre Dame adopt a policy, if it doesn’t have one, of non-discrimination in the award of gift aid to accepted undergraduate students from low-income/working class families, as opposed to weighting gift aid in favor of higher-income families.
  6. That Notre Dame pursue the possibility of substantially reducing its law school tuitions and concomitant student borrowing, which is not high compared to peer institutions but nevertheless leaves its law school graduates with an average of $94,000 of debt in an extremely weak job market.  Consideration should be given to downsizing the law faculty and student body, concentrating on core courses and eliminating courses that contribute little, if anything, to the effective practice of law in the U.S.
  7. That Notre Dame, in the reordering of spending priorities, in addition to the establishment of a goal of replacing student loans with scholarships and grants, enhance its Catholic mission in accordance with Ex Corde Ecclesiae by (a) allocating the necessary financial resources to attract and retain faculty members who are highly-qualified scholars faithful to Church teachings, in numbers sufficient to satisfy Notre Dame’s goal of a faculty consisting predominantly of dedicated practicing Catholics and (b) fully supporting and  adequately funding student groups and endeavors, such as Right to Life, Students for Child-Oriented Policy, and the Irish Rover, that directly advance Notre Dame’s Catholic character and mission.

Edmund Adams is a 1963 Notre Dame Law School graduate, who formerly was the Managing Partner, and currently is a Retired Partner, of the law firm of Frost Brown Todd in Cincinnati.  He is a Fellow of the American College of Bankruptcy.  He served nine years as a member of the Ohio Board of Regents, the coordinating organization for higher education in Ohio, including two years as Chairman.  He also is the President and a Director of the Sycamore Trust but this series of articles is not written in those capacities or as a representative of the Sycamore Trust.