Should colleges be held responsible for the student debt crisis?

As American college debt continues to skyrocket, many are asking, “Why aren’t colleges and universities to blame for today’s student loan debt crisis?”

So far, colleges and universities have dodged the spotlight—even as data shows loud and clear that university endowments are swelling at the expense of students' debt balances.

As of today, the average borrower is carrying $37,388 in federal student debt and $54,921 in private debt.

Meanwhile, the likes of Harvard, Yale, Stanford, Princeton, and MIT have seen their endowments grow to between $27 billion and $53 billion. And these are just some examples.

Since the pandemic, endowments across the country have soared as schools raised tuition.

Recently, President Biden attempted to wipe clean upward of $10,000 of student loan debt per borrower. But the U.S. Supreme Court ultimately ruled his move unconstitutional.

Now, the administration is working to find new ways to ease borrowers’ pain.

But the question on everyone’s mind—especially taxpayers—is who should be held accountable for hordes of broke graduates? The government, universities and colleges, or the students themselves?

Can universities be held accountable?

At a recent House Subcommittee hearing on Higher Education and Workforce Development, lawmakers discussed ways to solve this student debt crisis.

One idea floated around was whether to force universities to co-sign loans taken out by students.

“Students benefit from risk-sharing because institutions that are held financially liable for their student’s success will put more effort into getting those students through the system faster and more cheaply,” said Calo Salerno, an education economist who has criticized President Biden’s student loan relief plan.

“Taxpayers benefit because part of the risk of loss gets covered by an entity that does not have to be skip-traced and compelled to repay.”

According to a recent Wall Street Journal report, colleges and universities are on a spending spree with money they don’t have.

The Journal found that of the nation’s 50 flagship universities, 38% increased spending while tuition more than doubled between 2002-2022 for undergraduate and graduate students.

Universities blamed cuts in state funding as the main reason for hiking tuition. But the Journal found that for every $1 lost in state support over the past 20 years, universities increased tuition and fees by nearly $2.40 per student.

“I think the knee-jerk reaction was, ‘OK, we’ve got to raise tuition,’ and I think perhaps the knee-jerk reaction should have been, ‘We need to get to work on the things we should’ve been doing for the last 10 years and light a bit of a fire underneath our behinds,” said Barry Fenchak, a trustee on the Penn State Board of Trustees.

At the University of Kentucky, for example, students paid an average of $18,693 to attend classes during the 2021-22 school year.

Over the last decade, the school has spent an average of $805,000 a day to upgrade its campus—despite Kentucky ranking as one of the poorest states in the nation.

Student loan payments will soon hit millions of graduates

Student loans are set to resume next month following a three-year pause.

Although some borrowers could be eligible for cancellation or lower payments, many won’t be able to afford their payments because they’ve reallocated money to paying down other debts or have incurred new expenses.

Meanwhile, with the average cost of college increasing to $36,436 per student per year, a new crop of students will be taking on debt before they’ve even started their careers.