Ky. cuts to higher ed budgets will lead to hikes in student debt

In January, Gov. Matt Bevin rolled out a budget-cutting plan largely meant to service the enormous pension obligations for Kentucky government employees.

Public school funding, veterans affairs, student financial aid, pensions, social workers and other programs defined as critical by the administration were spared the 9 percent cut, but nearly every other program went under the knife, including higher-education funding.

This is a common trend across the United States, and has been for the last 30 years. In the last eight years, government funding for higher education in Kentucky has been cut by a third. As higher education receives less funding from the government, the burden is shifted to students. 

Normally, a budget cut by the state would lead to colleges and universities cutting spending and programs, but in the era of student loans, this is not completely necessary.

Student loans are freely available and will be for the foreseeable future, which means that anyone who wants to go to college can “afford” it. When an institution of higher education is faced with budget cuts, they have perverse incentives to raise tuition instead of making cuts. The loans ensure payment to the institution is guaranteed by the federal government. Colleges and universities get their money either way. 

Meanwhile, students are saddled with an ever-increasing burden of debt. As tuition rises, students are forced to take out ever larger loans. 

This is the real danger of Bevin’s cuts. They make college more expensive without giving students the incentive to seek another, less expensive path.

The Council on Postsecondary Education reported that in 2012–13, 64 percent of public four-year graduates in Kentucky left school with student loans. Of that number, roughly two-thirds had a debt balance of $20,000 or more, and 80 percent of that number had a debt balance of at least $10,000.

Kentucky also has the third-highest rate of student-loan default in the country, at 16 percent, which means that a large number of students cannot afford to pay their debts. 

This trend will only continue to worsen if Bevin’s cuts remain in effect. The irony is that, in his annual budget address, Bevin refused to fund the pension liabilities by borrowing because he was unwilling to “encumber future generations with debts.” 

People in power like Bevin are willing to state that hard truth when it comes to the state budget, but the same people fail to state the same truth for up and coming students who are able, and even encouraged, to take out massive student loans. Certainly Bevin is not to blame for the broader student-loan crisis, but his policies are shortsighted and exacerbate, rather than ameliorate, the problem. 

In the name of getting our financial house in order, Bevin has virtually ensured an ever-larger number of Kentuckians will graduate with growing amounts of student debt, destroying their financial solvency and stunting Kentucky’s economic growth. 

Money needs to be restored to higher education in the form of needs-based scholarships, reducing the need for student loans across the board. Bevin did restore funds from the lottery to provide for needs-based scholarships, but that money is a pittance in the face of the proposed budget cuts. Higher education funds need to be exempted from the larger budget cuts, just like K-12 education.

For Bevin to make these kinds of cuts (University of Kentucky President Eli Capiluto called them “draconian”), knowing the obvious ramifications, is unconscionable, which is probably why the attorney general is suing him over the current-year cuts. 

The student debt problem is not going away. To borrow from the governor’s own budget address, “to continue to ignore our financial problems is no longer an option. It just isn’t.”

This story was originally published May 25, 2016 at 5:53 AM with the headline "Ky. cuts to higher ed budgets will lead to hikes in student debt."