Columns, Opinion

Max vs. Media: Dear President Brown: invest in students now, for the future

The U.S. economy is performing well based on a variety of measures. Gross domestic product numbers have come in at high rates, the unemployment rate is at historical lows and business and consumer confidence rates are at levels not seen since before the financial crisis. President Trump — of course — takes credit, but let’s stop pretending presidents have that much power over the economy.

Yes, the new tax bill and cuts to regulations certainly are helping short-term growth. However, it’s basically the equivalent of throwing gasoline on a campfire. Sure, it helps temporarily, but it’s best saved for when the fire is about to go out, not when the flame is already high.

That said, this has been one of the longest economic boom cycles in modern U.S. history. The stock market hasn’t done this well for this long since the ‘90s boom. However, the stock market is not reflective of the average American’s well-being. The richest 10 percent of Americans own 84 percent of all stocks, and only 27 percent of the middle class owns any at all.  Real wages have barely changed for the average American in decades. For the middle quintile of earners, real wages grew 3.41 percent over 37 years — that’s getting a 0.1 percent raise every year when adjusted for inflation. However, for the top quintile of earners, wages grew 27.41 percent over the same time period, a little over eight times higher.

Another sign of a weak economy is the decline in homeownership rates. While rates finally bottomed out in 2016 at 62.9 percent, the last time they were near the current level of 64.3 (besides in 2014 when they were still declining) was in 1995.

Many economists attribute the decline in homeownership to a rise in student loan debt. Student loan debt has increased so dramatically over the past few years for three main reasons: cuts to spending on public colleges, a rise in enrollment in for-profit colleges and (more generally) increases in tuition that far outpace inflation. During the Great Recession, the percentage of students enrolled in for-profit colleges increased. Thankfully, those rates have declined more recently, but states are still funding public four-year colleges less than they did before the recession.

Private universities like Boston University focus more on building up capital reserves than on limiting tuition increases. I’m not arguing for a halt in increases, but a 3.7 percent increase in tuition far outpaces inflation. And it’s not like BU needs the money — with net revenue from tuition and fees totaling over $1 billion last year, BU had an operating gain of $149.9 million. While tuition and housing has increased $11,000 over the past five years, BU’s net assets have increased by $1.24 billion over the same time period. Sure, BU initiated a program guaranteeing grant money for all four years of enrollment, however, at the same time, they’ve created a stockpile of cash to invest in the stock market.

BU doesn’t need to raise tuition by 3.7 percent — no college does. It has been a practice among many colleges to create large endowments to “invest in the future.” Yet, BU has invested billions into new projects while it has increased the endowment enormously.

I seriously doubt President Robert Brown will buck the trend and argue to reduce tuition increases to 2 percent. However, this $1.9 billion endowment can be put to better use. Instead of reducing tuition or giving out more financial aid, BU could use some of the endowment to offer low-interest loans (as in less than 3 percent) to high-performing students. This way, financially struggling students wouldn’t have to take out high-interest private loans that cripple former students. BU also only loses money based on opportunity cost  — the return on investment was 13 percent last year. This isn’t financial aid, this is financial necessity.

I’m sure alumni would much rather give money to a program of this sort, rather than to an investment fund. BU students are the future. Invest in us now.

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