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What is the only acceptable solution to our student debt crisis?

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

This year, my son and I hosted a holiday pie party at our house. Each guest brought a pie and then chose an assortment of slices from all the pies to take home. It was a delicious blast.

Now, back at work, my thoughts turn to the proverbial pie of economic lore. Economics is often defined as the study of the allocation of limited resources to satisfy unlimited wants. In other words, it’s the study of how to slice the pie.

Modern economic theory focuses less on who gets how much pie and more on making sure that the pie is large and that the entire pie is enjoyed. This is the economist’s definition of efficiency—no pie is left on the table.

In our current education market, pie is being left on the table due to inefficiencies in the way education is financed. In a previous column, I proposed reprivatizing the student loan market to improve the way the education pie is sliced. Private lenders have more incentive than the government to account for the value of one’s education their risk of default. They would set interest rates and availability of funds accordingly, and this market information would guide students in making choices they could reasonably afford.

The market solution would fix the debt problem and would get us closer to consuming the whole pie in the education market … in theory.

But, such a market solution is unlikely to work. There is too much uncertainty in estimating the returns to education for a given individual, and unlike with a mortgage or car loan, there is nothing to repossess when someone defaults on an education loan. This is part of why the government stepped into the student loans market in the first place. It is not practical to expect private lenders to get into such a risky business. There would be very few education loans at all if they were not at least guaranteed by the government.

Moreover, even if it would work to fix inefficiencies, the market solution wouldn’t – and doesn’t claim to — fix inequities. See, under the market solution, fewer people would have student debt because fewer people would get educated. It’s exactly the point that those who could not afford education would not get it. They’d understand market signals and stay out.

Even to a devoted free-market economist, though, it raises moral red flags to advocate for a system in which higher education is only accessible to the affluent. The only solution to our current student debt crisis that makes both ethical and economic sense is publicly funding higher education for all. There are many options for shaping such a policy. Funding for each student could be partial or in full, but it should be without expectation of direct repayment.

Indeed, the educated individual does repay society indirectly, through their contribution to economic growth. The social benefits of higher education are too high for us to accept a student debt solution like privatization, which leaves so many out. Higher education is a classic example of an activity with positive externalities; third parties benefit from an individual’s choice to go to college. Education improves productivity of individuals and raises standards of living for us all. A well-educated workforce not only shifts us toward a more equitable distribution of the pie, but it increases the size of the pie for everyone!

In summary, our current system of funding higher education through federal loans is broken. There are two potential fixes: 1) re-privatize student loans, or 2) publicly fund higher education for all.

The former may fix the debt problem but is unlikely to work and would create inequities in educational opportunity that are both morally unacceptable and economically lacking.

The latter fix—public provision of higher education – is recognized even by the father of modern economics as a moral imperative and is the only solution to our student debt crisis that grows the pie rather than simply redistributing it.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

Food Insecurity in the U.S.

Written by Roscoe Scarborough on . Posted in Reg Murphy, Roscoe Scarborough.

If you are gathering with family and friends on Thanksgiving, there is no need to look further than your full plate to find a reason to be thankful. 1 in 10 households in the U.S. experienced food insecurity in 2021. If you have visited a grocery store in the past year, you know that food prices are way up. Higher prices for food and other commodities promise to force more U.S. households into a state of food insecurity in 2022 and 2023.

10.2% of U.S. households were food insecure at some point in 2021, according to the “Household Food Security in the United States in 2021” report published in September by the United States Department of Agriculture, Economic Research Service. This means that 13.5 million U.S. households, or 33.8 million people, “were uncertain of having or unable to acquire enough food to meet the needs of all their members because they had insufficient money or other resource for food.” Households with low food security cope by eating less varied diets, participating in food assistance programs, or getting food from community food pantries.

Even more concerning, 3.8% of U.S. households experienced “very low food security” in 2021. That’s 5.1 million households in which “normal eating patterns of one or more household members were disrupted and food intake was reduced at times during the year because they had insufficient money or other resources for food.”

Children are at a heightened risk of food insecurity in the U.S. 12.5% of all households with children experienced food insecurity in 2021. Food insecurity only impacted adults in about half of these households. In the other half of households with children present, some 5.0 million children in the U.S. experienced food insecurity directly. Even more tragic, 521,000 kids in the U.S. lived in households where children experienced very low food security. In other words, more than half a million kids in the U.S. had their normal eating patterns and food intake disrupted at some point in the year. Food insecurity was especially pronounced in households with children that are headed by a single mother, which experienced a food insecurity rate of 24.3% in 2021.

Food insecurity is higher in the South than in other regions of the U.S., but Georgia is close to the national average. 9.9% of Georgian households experienced food insecurity and 3.9% experienced very low food security based on Department of Agriculture data from 2019-2021.

Food insecurity promises to be on the rise in 2022 and 2023.

Prices for food and other essentials continue to increase due to inflation. Though there are signs that inflation may be cooling, the cost of food continues to increase. According to the October 2022 Consumer Price Index report from the Bureau of Labor Statistics, food prices in the U.S. were up 10.9% in October 2022 compared to a year earlier. Eggs are 43% more expensive than they were a year ago. Chicken is up 14.5%. Flour is up 24.6%. Dairy products are 15.5% higher compared to this time last year. These increasing food costs will exacerbate food insecurity. Higher costs at the cash register force many households to choose less nutritious options or skip meals altogether.

If you are interested in addressing hunger in our community, consider getting involved with or donate to Manna House of Brunswick, FaithWorks’ Sparrow’s Nest, or America’s Second Harvest of Coastal Georgia. Meanwhile, Blessings in a Backpack works to prevent hunger among children. These organizations mitigate food insecurity that already exists in our community. On a larger scale, broad institutional reforms are needed to address the root causes of hunger, including lifting families out of poverty, getting capable folks into jobs that pay a living wage, and addressing social problems in the family.

Roscoe Scarborough, Ph.D. is interim chair of the Department of Social Sciences and associate professor of sociology at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at rscarborough@ccga.edu.

Leisure and Hospitality Industry Faces a New Challenge

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Leisure and hospitality is Glynn County’s leading industry.  Let’s get to know it a little better.

The leisure and hospitality industry is a collection of many industries, from hotels, restaurants and bars to the performing arts, spectator sports, museums, zoos, golf courses and fitness centers.  That collection of industries is on track to produce $740 billion in goods and services this year, about 4.2% of U.S. private sector GDP.

Leisure and hospitality’s importance as an employer has increased over the decades.  In 1950, leisure and hospitality employed 7.1% of U.S. private sector workers.  By 2000, it employed 10.6% of U.S. private sector workers.  In February 2020, the month before the pandemic hit, it employed nearly 17 million workers – 13.1% of U.S. private sector workers.

In Glynn, leisure and hospitality’s employment stats are mind-blowing.  In 2000, leisure and hospitality accounted for 17.5% of total employment and 21.7% private sector employment in Glynn.  In 2019, the figures were even higher: 22.1% of total employment and 27% of private sector employment.

Leisure and hospitality’s employment growth did not come easy.

In the U.S. from 2000 to 2019, leisure and hospitality employment grew by 39.8%, while the labor force grew by 14.7%.  In Glynn from 2000 to 2019, leisure and hospitality employment grew by 32.3%, while the labor force grew by 11.4% — and all of that 11.4% occurred between 2000 and 2005.

Workers have plenty of employment options, so every business must compete with other businesses for workers.  The competition intensifies when the demand for workers in a growing industry increases at a faster rate than the labor force.  Businesses in a growing industry must draw workers away from businesses in other industries, which might also be growing.

Such a situation, though not uncommon, is certainly challenging, and the leisure and hospitality industry clearly met the challenge.

Things have changed since the pandemic.

The U.S. economic recovery from the pandemic recession has been truly remarkable.  Current employment exceeds February 2020 employment in nine of eleven major industries.  The two industries with employment losses since February 2020 are health services and leisure and hospitality.  The employment loss in health services is modest: 0.4 percent.  The loss in leisure and hospitality is not modest: 7.2 percent.

In accommodation, an industry within leisure and hospitality, the employment loss since February 2020 is 18.8 percent.

Why the exodus of workers from leisure and hospitality?

I put that question to Dr. Matt Mosley, Professor of Hospitality and Tourism Management at the College of Coastal Georgia.  His explanation runs as follows.

Most workers view their skills too narrowly.  They consider their skills to be highly specialized, of value to employers in their current industry but of little or no value to employers in other industries.  Consequently, when searching for a better job, they confine their search to the industry in which they are currently employed.

The assumption that one’s skills are of little or no value to employers in other industries has long been prevalent among leisure and hospitality workers, says Dr. Mosley.

The pandemic changed that.

The shutting-down of so many leisure and hospitality businesses during the pandemic forced many Leisure and Hospitality workers to search for jobs in other industries.  Those workers soon discovered that not only do employers in other industries value their skills, employers in other industries are willing to pay more for those skills than employers in leisure and hospitality.  Word gets around.  Hence, the exodus.

Dr. Mosley’s economic reasoning is sound, and his explanation and the data fit hand-in-glove.  If he’s right, then, as he puts it, “It’s a wake-up call to the industry.”

Why we should re-privatize student loans

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

In my last column, published here on October 12, I argued that our current student loan market is different from other types of loans. Unlike with other loans, government intervention in the student loan market has distorted loan prices (interest rates) and quantities (available funds). This, I believe, is a major cause of the student debt crisis facing Americans today and is why I am in favor of the government cleaning up its own mess with debt forgiveness.

But, the administration’s current plan for debt forgiveness is only a temporary solution. It is a short-term bandage on a market with broken bones in need of a long-term reset.

As I wrote in my last column, I can think of two very different ways that we could accomplish a real, lasting fix for our student debt problem: 1) re-privatize the student loan market or 2) fully publicly fund higher education. For this column, let’s focus on the former. I will address the latter approach next time.

The current-day direct federal student loan program was created in 1992 under President George H.W. Bush. The program began to be implemented in 1993 with Clinton’s Student Loan Reform Act. The federal government continued also loaning to students indirectly through subsidized private loans until 2010, when President Obama signed legislation requiring all federal student loans to be direct loans.

Now, Forbes reports that in 2022 almost all U.S. student loans are issued directly by the federal government; only 8% of student debt is owed to private lenders.

The problem with this is that the government does not face the same profit incentives that a private lender would, and so student loans are not issued with the same kind of careful consideration of risk that a private lender would undertake. As I discussed in more detail in my previous column, federal student loans are dished out willy-nilly, without regard for potential return on investment or risk of default. The result is that many students amass more debt than they reasonably can afford.

But, we can do better. And, given the profit incentive associated with avoiding loan default, a private loans market would do better.

Economists have studied returns to education at length, and they have found systematic differences in the value of college education for individuals of differing interests and abilities. A quick Google search turns up average starting salaries disaggregated by discipline or college major.

We have the tools to assess the value of what is being purchased with a student loan and to set interest rates and available funds accordingly, like we do through the property appraisal and income verification processes in the mortgage market. These market signals would give students the necessary information to make informed choices about the quantity and type of education they truly can afford.

A federal student loan market will never operate this way because who should and should not be able to access funds for education is not a comfortable or politically popular conversation to have. Our only options for permanently cleaning up the student debt mess are to let the private market hash this out or, on the opposite end of the policy spectrum, to eliminate the need for this conversation altogether by providing free access to higher education for all. We will dive into this second option in my next column.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

How Did Affordable Housing Become Unaffordable?

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Businesses have made fortunes producing products for people with modest incomes.

Amazon, Walmart, Target, Dollar General, Home Depot, Lowe’s and Best Buy come to mind, along with fast food joints and grocery stores.

Of course, that quick list barely scratches the surface. Amazon and all the big box stores and grocery stores are retailers. All the items they sell are produced by other businesses.

Further, for a vast array of products, from mustard to light bulbs to car batteries to sofas, low price options are readily available.

It’s no mystery why. Lots of people have modest incomes. That means lots of customers for businesses that figure out how to make a decent, low-priced product.

So, what gives with housing?

Home prices and monthly rents currently range from exorbitant to absurd. For instance, ApartmentList reports that the average monthly rent for a studio apartment in the U.S. now exceeds $1,100.

Long-standing financial wisdom maintains that a household should spend no more than 30 percent of its income on housing. Good luck with that if your income is modest and studio apartments are going for $1,100 a month.

Indeed, the U.S. Census Bureau reports that 46 percent of U.S. renters spend at least 30 percent of their income on housing, and half of those renters spend more than half of their income on housing.

Until the 1990s, the housing market performed like most any other market. Prices pushed higher by growing demand signaled “bigger profits can be made here.” Builders responded by building more; others saw the signal and became builders themselves. Prices, which rose from “affordable” to “not as affordable,” returned to “affordable.”

What prevents the housing market from performing that way now?

According to droves of housing market economists, it’s local zoning laws. Two in particular:  minimum lot size restrictions and single-family-only zoning.

Minimum lot size restrictions are self-explanatory. Single-family-only zoning means no buildings other than single-family homes are permitted in the zone.

Used sporadically before World War II, they began to proliferate rapidly in the 1970s. By the 1990s, they’re zoning staples.

The stated purpose of minimum lot size restrictions and single-family-only zoning is to preserve a lower population density. Many claim the rationale is thick smoke to hide the actual purpose, which amounts to “not in my backyard, and that includes riff-raff.”

Whatever the case, the clear consequence of minimum lot size restrictions and single-family-only zoning is a restricted supply of housing, especially housing for people with modest incomes.

Consider these figures, courtesy of economist Jeffrey Zabel. Between 1960 and 1990, the number of housing starts per 1,000 households averaged 22.2 per year. Since 1990, the number of housing starts per 1,000 households has averaged 12.2 per year.

Small home construction has plunged. The plunge began in the 1980s. In the 1970s, economist Sam Khater reports, one third of new homes constructed were homes less than 1,400 square feet, an average of 420,000 small homes per year. In 1990, one fifth were homes less than 1,400 square feet, a total of 230,000 small homes. In 2019, 7 percent were homes less than 1,400 square feet – a mere 65,000 small homes.

Growing demand, sharply restricted supply. That’s how affordable housing became unaffordable.

Fortunately, local zoning laws can be changed locally. No need to wait for Congress or a state legislature to act. And many communities are changing their zoning laws to mitigate the housing problem.

I know nothing about Glynn’s zoning laws. But I do know Glynn needs workers and young families. More affordable housing would help attract them.

Unfortunately, we’ve been digging the housing hole we’re in for decades. It’s deep.

Student loans aren’t like other loans

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

Like many others wishing to take advantage of pandemic-induced low interest rates, I refinanced my home in 2021. I remember holding my breath while my lender checked appraisals to be sure that the value of my house was enough greater than the loan I was seeking that I could avoid paying mortgage insurance. In my previous mortgage, I had been paying for the insurance because, as a first-time homebuyer, I was not able to make a large enough down payment to increase the gap between the values of the home and the loan.

Each time I applied for a mortgage, my lender explained to me these policies, and I depended on their expertise to help guide my home-buying decision. I knew what homes I could afford to buy because the lender, trained in risk assessment and committed to protecting their own interest in the deal, would not loan me more than the value of the investment I was making with the loan.

I did not have to be an expert in housing markets to buy a house. As long as I was working with experts, and as long as we were all behaving in our own self-interest, I could trust the market to provide signals and boundaries – loan, loan with insurance, or no loan – that would inform my own, self-interested choices. (This is assuming we don’t have another 2007, but that’s for another column, and you get my point.)

The market for student loans does not work this way. In 2009-2010, I was one of the 141,720 recipients of a student loan in the University System of Georgia. I logged into my account on the school financial aid portal, clicked a few buttons, and I had a loan large enough to cover my tuition and fees and room and board for an entire semester. As long as I remained enrolled and made progress toward my degree, the loans kept coming.

Unlike with my mortgage, no one asked questions about my expected ability to repay the loans. The amount of the loan I qualified for was based on one thing only: what I was paying to attend school. Unlike in virtually every other loan market, education loans are granted without regard for the applicant’s expected ability to repay. There is a universal assumption that higher education is an investment that will always pay for itself.

It’s true the returns to the investment of higher education are positive almost across the board. But, the magnitude of the returns differs by location, field of study, individual ability, etc. Financial institutions are irresponsible not to consider these differences when issuing loans.

This is why in my last column I agreed with those who say Biden’s student loan forgiveness plan is not fair. I don’t mean that I wish student loan forgiveness were not happening for some. What I mean is that it should not need to happen because we should never have let so many people go into such great debt for education. This includes a lot of folks who have already paid off their education debts and who, unfairly, will never get back the money they should never have had to shell out.

Many on the “it’s not fair” side of the current policy debate are pointing fingers at the borrowers, saying they made their bed of debt and should continue to lie in it. I say that characterization itself is unfair. In other loan markets, we trust financial institutions to assess the value and potential returns of our investments and to loan accordingly.

What is not fair is that we expect college students, many of them teenagers and young adults, to be able to do for themselves what consumers are not expected to do in any other loanable funds market – fully assess their own default risk and make choices about their investment in education without the typical guidance from the market.

In my next column or two, I will write about two possible long-term policy solutions to our student debt problem: 1) return student loans to the private market, or 2) fully publicly fund higher education. These two options are on opposite ends of a spectrum, but I hope to demonstrate that either extreme would be better than the muddled middle in which we currently operate.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

Are we there yet?

Written by Don Mathews on . Posted in Don Mathews, Reg Murphy.

Kids on car trips aren’t the only creatures who ask “Are we there yet?” Economists ask the same question, and in a variety of contexts.

In recent months, the context has been the labor market, where “Are we there yet?” has meant “Is the U.S. labor market back to where it was before the pandemic?”

Economists now have two good answers to that version of “Are we there yet?” One is: no. The other: yes. 

Before you vow never to listen to an economist again, allow me to explain.

No is a good answer to the question “Is the U.S. labor market back to where it was before the pandemic?” because capitalist economies change constantly. Change is fundamental to their nature. There is no “going back to where we were” in capitalism.

Further, the pandemic induced changes in technology, the way production is organized, and people’s perspectives on work and life that cannot be erased. The response to the pandemic shifted future economic growth and development to a different path.

To people who pore over labor market statistics, however, Yes – with a few qualifications – is a good answer to the “Is the labor market back to where it was” question.

Consider. In February 2020, the month before the pandemic hit, the U.S. labor force totaled 164,583,000, employment totaled 158,866,000, the unemployment rate was 3.5 percent, and the labor force participation rate was 63.4 percent.

Current figures show the U.S. labor force at 164,746,000, employment at 158,732,000, the unemployment rate at 3.7 percent (it was 3.5 percent in July) and the labor force participation rate at 62.4 percent.

The current figures are remarkably close to the pre-pandemic figures.

Two age groups account for the bulk of the percentage point difference in the labor force participation rate: 55 to 64-year-olds and 20 to 24-year-olds. The participation rate for men age 55 to 64 years is currently 70.3 percent, down from 71.8 percent in February 2020; the rate for women age 55 to 64 years is currently 59 percent, down from 59.7 percent in February 2020.  The participation rate for men age 20 to 24 years is currently 72.1 percent, down from 75 percent in February 2020; the rate for women age 20 to 24 years is currently 68.6 percent, down from 71.4 percent in February 2020.    

Lower participation of 55 to 64-year-olds is quite likely pandemic-induced: early retirement, lingering effects of the illness, cutting risk. Lower participation of 20 to 24-year-olds might be the result of people returning to college.

Supporting the “yes, the labor market is back to where it was” case is this significant fact: current labor force participation rates for women age 25 to 34 years, 35 to 44 years and 45 to 54 years are either the same as or higher than February 2020 participation rates.

Also supporting the “yes” case is private sector employment: 129,625,000 in February 2020; 130,510,000 currently.

The composition of private sector employment shows two major shifts, however.

Current employment exceeds February 2020 employment in nine of eleven major industries.  The gains are modest, with one exception: employment in transportation and warehousing has jumped by 13 percent since February 2020.

Health services and leisure and hospitality are the two industries with employment losses since February 2020. The employment loss in health services is modest: 0.4 percent. The loss in leisure and hospitality is not modest: 7.2 percent.

In accommodation, an industry within leisure and hospitality, the employment loss since February 2020 is 18.8 percent.

If hotel workers seem a bit frazzled these days, that last figure may have something to do with it.

New Minors Prepare Grads for the Workforce

Written by Roscoe Scarborough on . Posted in Reg Murphy, Roscoe Scarborough.

The College of Coastal Georgia has established four brand new minors this fall, including minors in Diversity and Inclusion, Sociology, Entrepreneurship, and Hospitality and Tourism. In this column, I will discuss how our new interdisciplinary minor in Diversity and Inclusion prepares students for success in today’s workforce.

Coastal Georgia is expanding the choice of minors available to our students. In addition to completing a major, many of our students elect to complete one of our 26 minors as a secondary specialization. Building on the University System of Georgia’s general education curriculum that exposes students to “diverse learning perspectives and ways of knowing,” minors facilitate personal and professional growth. Intellectually, completing a minor allows a student to pursue a subject of interest in greater depth. Students develop knowledge, skills, and a credential in another discipline that increases their marketability as they begin their careers after graduation.

The minor in Diversity and Inclusion is an interdisciplinary program that examines social inequalities related to human differences. Students are required to complete an Introduction to Social Problems course that teaches students about race, social class, gender, sexuality, ethnicity, and disability. Building on this sociological foundation, students select four more courses that examine social inequalities in Psychology, Communication, Education, History, English, Anthropology, Geography, American Studies, or Sociology. These courses offer students an opportunity to deepen their knowledge of social inequalities in a broad range of academic disciplines.

Students who complete the minor are able to identify and address patterns of conscious and unconscious bias and discrimination that produce social inequalities. Students utilize current research to recognize and assess patterns of prejudice and discrimination. There is an emphasis on developing cross-cultural understanding, intercultural awareness, and appreciation of social differences. Additionally, students apply what they learn to various media, social institutions, and their own interactions in day-to-day life. There is a focus on developing and implementing strategies to mitigate social inequalities and build more inclusive social institutions.

Many young people are attracted to curricular offerings that engage themes related to diversity and inclusion because they want to build a more equitable society. These students are often passionate about creating and maintaining an inclusive culture in their workplaces and other groups to which they belong. Conversely, other students are attracted to the minor in Diversity and Inclusion because it makes good business sense. Skills learned in the minor can be applied to facilitate belonging in the workplace, increase organizational productivity, and market products to diverse populations.

In a recent Murphy Center article, Dr. Heather Farley made “a good business case” for fostering equity in the workforce. Farley emphasized that addressing inequity allows organizations to leverage a larger talent pool, understand the needs of a diverse clientele, and generate more effective teams. Additionally, Farley noted that discrimination is an economic inefficiency; discrimination stymies productivity by preventing workers from being employed where they are most productive. Inequities impact workers, employers, and the community. Completing Coastal Georgia’s minor in Diversity and Inclusion equips students to understand and address these organizational and community challenges.

The minor in Diversity and Inclusion prepares Coastal Georgia graduates to address inequities in their workplaces and in the community. My colleagues at the College are always working to create innovative academic programs that meet the economic needs of our community and the state of Georgia. Find out more about the College of Coastal Georgia at: www.ccga.edu

Roscoe Scarborough, Ph.D. is interim chair of the Department of Social Sciences and associate professor of sociology at College of Coastal Georgia. He is an associate scholar at the Reg Murphy Center for Economic and Policy Studies. He can be reached by email at rscarborough@ccga.edu.

How are changes in higher education funding contributing to the accumulation of student loan debt?

Written by Melissa Trussell on . Posted in Melissa Trussell, Reg Murphy.

President Biden caused a stir last month when he announced that his administration would cancel up to $20,000 in federal student loan debt for Americans making less than $125,000. My social media feeds went nuts with folks on one side of the issue celebrating the policy as a leap toward economic equity, and folks on the other side lamenting the policy as unfair to those who had already paid their higher education bills.

It’s often the case that the truth lies somewhere between the extremes, but in this case, I think the truth may actually be that both sides are right. This loan forgiveness policy will benefit a lot of low-income families who could really use the lift, and it’s not fair.

I’ll expand more on that in my next From the Murphy Center column. But, first, a little background on the higher education market. It’s not the free and efficient market of an economist’s dreams.

Loans aside, there is all sorts of government intervention in the market for higher education. Coastal is a state college, which means a big chunk of our annual budget comes from state appropriated (taxpayer) funds, and we operate within state policies that govern our operations including the programs we offer and what we can charge students in tuition and fees.

These are not necessarily bad interventions. As my colleague Dr. Mathews showed in his recent column on the local impacts of our graduates, higher education has a greater impact on communities than simply the impact on the individuals who earn that education. This is the sort of market where governments should get involved to encourage more participation.

And, overall, in the last half-century we have seen tremendous growth in demand for higher education. As demand for higher education has increased, though, so has the price of that education, and state governments are contributing less and less toward that price, driving up the cost to students. This trend has remained true even as demographic shifts have caused increasing demand for college to slow dramatically in the most recent decade.

In Georgia, the general funds budget, per-student for all public colleges and universities declined 1% from the 2009-10 academic year to 2018-19, largely driven by major consolidations in the University System. State appropriations per student fell 18%, and student-paid tuition and fees rose 37% on average per student. It’s no wonder that the percent of Georgia students originating a loan increased from approximately 46% in 2010 to approximately 71% in 2019.

At Coastal, consistently ranked among the most affordable colleges in the nation, our general funds budget per credit hour attempted by students increased 30% from the 2009-10 academic year to 2018-19. State appropriations per credit hour rose by only 2%, while student-paid tuition and fees per credit hour rose 128%. The percent of our students originating a loan increased from 40% in 2010 to 48% in 2019.

(These are all inflation-adjusted budgets, accounting for the fact that a 2019 dollar was less valuable than a 2009 dollar.)

This alone would not be a concern to an economist. Coastal and the University System had greater enrollment in 2019 than in 2009. Increases in demand should increase prices, and it is not unreasonable to ask the consumer to pay that price.

My cause for concern is not that increasing demand has increased price. My concern is one layer back, at the source of the increased demand, and this is where student loans come in.

Demand for investments—and for loans to finance those investments— should always be directly related to the expected returns from those investments. The return on investment to education is always positive. But, with the help of family and cultural pressures, the ease of access to education loans gives students a false impression of how high those returns will be relative to the cost of debt. The result is a lot more folks getting a lot more education than they would in a more honest market and getting into a lot more debt than they ultimately can afford.

More on how that happens and how to make it better in my next column. Stay tuned.

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Dr. Melissa Trussell is a professor in the School of Business and Public Management at College of Coastal Georgia who works with the college’s Reg Murphy Center for Economic and Policy Studies. Contact her at mtrussell@ccga.edu.

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