USC Exemplifies the Hypocrisy of Demands for Student Loan Relief

If the government has engineered a student loan crisis, then the University of Southern California is a co-conspirator.

Last month, USC – a private college in Los Angeles boasting a $58,000 price tag for undergraduates – hosted a virtual event decrying the $1.8 trillion student loan crisis. The event was based around the screening of a new film, “Sallie Mae Not.” The movie claims to tell “the untold story of how the US Government set up a system of greed that gutted student loans of consumer protections leading to the skyrocketing cost of tuition and indenturing millions through predatory lending.” 

The event description failed to mention a key point of context: USC’s graduate programs are one of the leading sources of student debt.

The hypocrisy of USC’s holding an event like this – attended by heavy-hitters Senate Majority Leader Chuck Schumer (D-NY) and USC President Carol Folt – is hard to overstate. USC saddles its graduates with more debt than almost any other college or university in the country, yet its officials are happy to point fingers and assign blame for the mounting level of student debt in the U.S. economy.

Like every story, this one has multiple parts. Let’s call them “the good,” “the bad,” and “the ugly.”

First, the good. Just 27% of undergraduates leave USC with debt. Across all colleges in the U.S., almost 70% of graduates carry at least some debt. USC undergraduates who borrow usually take on less than $20,000 (compared to the average balance among all college graduates of around $30,000) – an affordable sum, given that a bachelor’s degree is worth, on average, an additional $1 million in earnings over a lifetime.

Next, the bad. USC might be making admirable strides on the undergraduate borrowing front, but the school is a top contributor to graduate-level borrowing. Even though advanced degree-holders represent just a quarter of all student borrowers, they owe about half of the total volume of student debt. USC alone handed out $533 million in debt to graduate students during the 2019-20 academic year – an amount exceeded only by two for-profit universities, Walden University and Grand Canyon University, that handed out $745 million and $574 million, respectively, in that same year.

When you include all types of student debt, USC was the eighth most-indebting institution, sandwiched between two more for-profits, Strayer University and the University of Phoenix. USC alone accounted for 0.7% of all federal student loans issued in the U.S. in 2019-20.

And now for the ugly. Student debt isn’t exactly the evil that it’s often made out to be. When student debt is used to finance good investments that deliver valuable opportunities for students, financially or otherwise, debt can be a valuable tool that both promotes social mobility and facilitates growth in the domestic economy. But things go wrong when the investment doesn’t pay off. As the Wall Street Journal recently reported, graduate programs can be among the worst offenders in leaving even graduates of elite-brand institutions with debt they cannot reasonably afford to repay.

Despite its recent pontifications about the loan crisis, USC is guilty of handing out unaffordable debt to graduate students. Most people wouldn’t expect to come out of a graduate program in film from USC earning a mint, so the median earnings of $30,000 for this group might not be a surprise. But to complete these degrees, most students probably didn’t anticipate needing to borrow $147,000 – the median amount of debt taken on for students finishing that program. And the film program is not unusual in this respect. More than half of the graduate programs at USC with reportable data leave students earning less than they borrowed.

Unless most enrollees in USC’s graduate programs are sitting on trust funds, those figures will amount to lots of unaffordable loans that only can be paid off with significant help from taxpayers.

As it is typically characterized, the student loan “crisis” is overblown. But to the extent there is a crisis, it occurs when colleges don’t give students the tools to earn a living commensurate with the debt they took on. USC hosted an event that brought attention to the issue of student loans, but the school’s officials have failed to realize that they are complicit in the crisis they decry. If USC wants to reverse the tide of mounting student debt, perhaps it should start cleaning up its own mess.