The Problem of Institutional Debt

Much attention has been given—and rightfully so—to the student debt crisis in the United States. Collectively, outstanding student loan balances have ballooned to a record $1.7 trillion. And as student debt has grown, so has institutional debt, with colleges and universities increasing their debt load to fund ambitious projects and cover expenses.

In fiscal year 2018–19, 70 percent of public and private nonprofit colleges and universities in the United States held interest-bearing debt, amounting to more than $336 billion.

This year’s Annual Report on the Economic Status of the Profession examines the explosion of institutional debt, which might limit an institutions’ options for dealing with financial adversity, from 2008–09 to 2018–19.

Over $336 billion in long-term debt was reported by US colleges and universities in fiscal year 2018–19, a growth of 71.1 percent since fiscal year 2008–09. Long-term debt grew 50.2 percent among public institutions and 116.0 percent among private institutions.

State support is a key financial indicator for public institutions, although the majority of funding for public higher education in half of the states now comes from student tuition and fees, according to a 2018 study by the State Higher Education Executive Officers Association. For 2020– 21, state support per FTE student remained roughly the same as in 2019–20, due in part to nearly $2 billion in federal COVID-19 relief funding. But following the cuts and slow recovery from the Great Recession of the late 2000s, more cuts are looming large because state revenues are projected to fall by as much as $200 billion by the end of the 2020–21 fiscal year, according to projections by the Urban Institute.

Debt is now woven into the fabric of higher education—both institutional debt and student debt. But for an institution with a poor outlook for growth, debt can become a burden and might limit its ability to deal with adversity.

The AAUP’s New Deal for Higher Education campaign has been focusing on the issue of institutional debt and other issues covered in the report, including contingency. You can find a webinar called “Rebudgeting the University” that discusses the issue of institutional debt here, with other webinars from the series.

The full annual report can be found here.

The AAUP Research Department

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Institutional Debt Graphic

Update: The Biden Administration and Higher Ed

The AAUP engages in advocacy and legal work on a range of issues affecting higher education, and we are pleased to report that this winter there have been positive developments in a number of areas. While much work remains to be done to ensure widespread access to quality higher education for all, these developments are good news for the higher education community.

Coronavirus Relief Package. Last week, President Biden signed into law a $1.9 trillion coronavirus relief package, which includes an additional $40 billion in aid for higher education. Institutions must spend about half of the money to help struggling students with living expenses and the technology needed for remote classes. It is still unclear whether undocumented and international students will be eligible for relief. The law also provides dedicated support to historically Black colleges and universities, tribal colleges and universities, Hispanic-serving institutions, and other minority-serving institutions to address the disproportionate effect of the pandemic on those institutions and the students they serve. The AAUP, along with coalition partners, is advocating for a New Deal for Higher Education that would significantly reinvest in our nation’s colleges and universities.

Graduate Employee Unionization. In a major victory for graduate employees at private universities, the National Labor Relations Board (NLRB) announced last week that it was withdrawing a rule proposed in late 2019 that would have barred graduate assistants from engaging in union organizing and collective bargaining under the protection of federal law. The AAUP has long supported the bargaining rights of graduate employees and has submitted amicus briefs in cases on this issue as well as submitting comments opposing the 2019 proposed rule and demonstrating both that graduate assistants are employees with the right to unionize under the NLRA and that unionization advances their academic freedom.

Deferred Action on Childhood Arrivals (DACA) and Immigration Reform. As one of its first acts, the Biden administration issued an executive order to preserve and fortify the DACA program, which allows undocumented immigrants brought to the United States as children to remain in the country legally and expands access to higher education by providing eligibility for in-state tuition and state-funded grants and loans to participants. In 2017 the Trump administration sought to terminate the DACA program, despite overwhelming opposition to this move from the higher education community. Lower courts prevented the termination of the program, and ultimately the US Supreme Court, in a case in which the AAUP joined an amicus brief supporting the DACA program, found that the Trump administration’s attempt to terminate the program was unlawful and allowed it to stand.

The Biden administration has also proposed comprehensive immigration reform legislation to strengthen and improve the immigration system, including expanding and making permanent the DACA program and providing a pathway to citizenship for Dreamers. The legislation could also ease the enrollment of international students, as the AAUP has advocated.

Travel Bans. On Inauguration Day, President Biden also repealed various travel bans that barred or severely limited the ability of students, exchange scholars, and other visitors from a number of predominantly Muslim countries from entering the United States. The Trump administration had issued four orders banning travel from certain countries. The AAUP and the higher education community overwhelmingly opposed the travel bans, and courts prevented the implementation of the first three. However, in a case in which the AAUP joined an amicus brief in opposition to the travel bans, the US Supreme Court upheld the fourth version of the ban in 2018. The Biden administration’s proclamation revokes the travel bans, finding that they are “a stain on our national conscience and are inconsistent with our long history of welcoming people of all faiths and no faith at all.”

LGBTQ Discrimination. Another executive order issued on Inauguration Day extends federal nondiscrimination protections to discrimination based on gender identity or sexual orientation. The order builds on the Supreme Court’s landmark 2020 ruling in Bostock v. Clayton County, Georgia; the AAUP joined an amicus brief in this case, arguing that workplace discrimination based on LGBTQ status is unlawful. In the case, the Supreme Court extended protection of a federal law banning employment discrimination based on sex to individuals who identify as lesbian, gay, bisexual, or whose gender identity differs from their sex assigned at birth. Reversing the Trump administration’s approach, the Biden order extends this protection to discrimination based on sex forbidden by Title IX and other federal anti-discrimination statutes and regulations.

Race in Admissions. On February 3, the Biden administration dropped a lawsuit brought by the Trump administration against Yale University that had accused Yale of discriminating against white and Asian American applicants in its admissions process. This lawsuit was one of many brought in a concerted effort to end the consideration of race in college admissions. The AAUP has repeatedly joined amicus briefs supporting the ability to use race as one factor in university admissions. While the dropping of this suit indicates that the administration will take a more balanced approach to the issue, private parties are seeking to bring a case to the US Supreme Court in efforts to outlaw such consideration.

Racial Equity. Last fall, the Trump administration ordered federal agencies and federal contractors (potentially including colleges and universities) to end trainings that address topics like white privilege and racism. The AAUP and many others in the higher education community spoke out about bans on racial equity training. President Biden reversed the Trump order and replaced it with a new executive order requiring federal agencies to assess their equity and diversity activities.

Student Debt. With coalition partners, the AAUP is calling for the cancellation of student debt for borrowers who have unjustly shouldered the burden of financing higher education the last forty years. The Department of Education has extended through September 2021 a moratorium on federal student loan payments. In response to concerns that debt cancellation could trigger damaging tax consequences for borrowers, last week’s coronavirus relief law includes a provision that says if student debt is cancelled, the value of the amount forgiven will not be taxed by the federal government.

Far more work remains to be done, but we are heartened by these first steps and look forward to continuing to advocate for equity and access in higher education.


A Reckoning and A New Deal for Higher Education

It’s time for a reckoning. So said Representative Ayanna Pressley at the campaign launch of the New Deal for Higher Education yesterday.Zoom call graphic

In a rousing kickoff, Pressley, Senator Elizabeth Warren, and other panelists talked about dreams achieved through higher education, but also the darker side of dreams deferred and a system of entrenched inequality. Jennifer Mittlestadt from Scholars for a New Deal for Higher Education described how the COVID-19 pandemic turbocharged existing inequities, deepening the austerity model that has gutted public higher education and hurt so many faculty and students through cutbacks, underfunding, and crushing student debt.

But with challenge comes opportunity. The answer proposed by all the speakers at the launch was clear: create a just, bold New Deal that returns colleges and universities to a gold standard of serving the common good.

Check out the resources on our New Deal for Higher Education site. While you’re there, take action. Add your name to a letter calling on Congress to pass the American Rescue Plan.

Higher education can and should be an engine of social mobility and a profession worth joining, as AAUP president Irene Mulvey said at the launch event. As part of this campaign, the AAUP is partnering with the American Federation of Teachers, the Roosevelt Institute, and Scholars for a New Deal for Higher Education to call on Congress to act now.

Here’s what we believe a New Deal for Higher Education can do: it can reauthorize the Higher Education Act and create other federal policies that establish dedicated public funding streams and hold administrations accountable for how those monies are spent. This campaign will advocate for:

  • prioritizing teaching, research, and supporting student success;
  • allowing all students to access higher education regardless of their ability to pay;
  • ensuring job security, equitable pay, professional voice, and sustainable careers for all faculty and staff;
  • creating academic environments free from racism, sexism, and other bigotries that prevent learning, degrade research, and perpetuate inequality; and
  • canceling student debt for borrowers who have unjustly shouldered the burden of financing higher education over the last forty years.

The reckoning is underway. You can access a campus toolkit, read some excellent articles, and join the fight here. Check it out.

In solidarity,
Julie Schmid
Executive Director, AAUP