If you noticed an uptick in offers to “buy now, pay later” while shopping online or while checking out at a store, you’re not alone. Last year, Americans spent more than $20 billion through buy now, pay later services. In California alone, 9 out 10 consumer loans were so-called point-of-sale loans.

Buy now, pay later is also how many students have financed their college degree over the last decade and a half. Student debt has more than tripled in the United States since 2006. Collectively, 45 million Americans owe $1.7 trillion in student loans.

In recent weeks, discussions about forgiving some of that student loan debt has picked up steam. The November midterm elections are only six months away and Democrats think canceling at least a part of student loan debt will motivate young voters. The clock is also ticking on the pause to student loan payments—first put in place by the Trump Administration in the early days of the pandemic—and now scheduled to end on August 31, if it doesn’t get extended again.

It’s been more than two years since nearly 37 million borrowers with federal student loans have been required to make payments—resulting in about $195 billion waived payments so far.

The pause in payments combined with all the talk of forgiveness has created what some are calling a moral hazard. As Scott Galloway argued recently on the Pivot podcast, because younger consumers expect forgiveness on their student loans, they are spending and borrowing more for everything else. Buy now, pay later (BNPL) loans are especially popular with Gen Z, which is spending 925% more on such short-term loans now compared to two years ago.

Meanwhile, the news headlines about student debt cancellation are leaving prospective and current undergraduates in a state of confusion. Today’s students won’t be eligible and are left wondering why they’re any different than their older GenZ counterparts who might benefit.

All this uncertainty over student loans is only adding more fuel to the volatility facing higher ed right now.

Covid-19 upended the face-to-face college experience for much of the last two years. College enrollment is down by more than one million students. The number of Americans with some college but no degree grew by almost 2 million between 2018 and 2020—and that was before the full impact of the pandemic was felt on college campuses in the fall of 2020, when one in four of the previous year’s freshmen didn’t return for their sophomore year.

I’m sure some readers will accuse me of being alarmist, but it sure feels like we’re reaching the end of an era where American students and their families think it’s worth taking on debt for any college degree, at any cost. With larger numbers of students leaving college short of a degree, for many the return on investment is simply not worth it. It’s peak debt. Indeed, one leading higher ed expert expects the Republicans to make a “serious effort” to stop issuing federal student loans if they gain control of Congress.

“We're not doing a very good job of adapting to student needs right now,” Eloy Ortiz Oakley, chancellor of the California Community Colleges system, said earlier this month at a panel I moderated at the Milken Global Conference.

Oakley’s right. Higher ed leaders became so convinced of their way of doing business over decades of enrollment growth that they were resistant to change, even as the landscape around them dramatically shifted. Now’s the time for higher ed to play catch-up.

Events

Higher Ed Fault Lines

The second stop on the Future U. Campus Tour at UCLA with a panel of students and campus leaders.

During the pandemic, enrollment in California’s 116 community colleges fell below 2 million students for the first time in at least 30 years. Meanwhile, this spring, the nine-campus University of California system received the most applications for admission in its 154-year history.

What’s happening: California is a microcosm of the growing divide between the “haves” and “have nots” in higher education. During the pandemic, the “haves” got stronger, shattering records in terms of admissions applications and saw their already-large endowments surge in value.

• With the fall-off of some $70 billion in government pandemic funds coming in 2023, there is a reckoning on the horizon for many institutions that have used the dollars to plug holes in their dikes.

—At UCLA, Chancellor Gene Block told the Future U. podcast during the second stop on our campus tour that the university, which received the most freshman applications of any in the U.S., is “reaching the limit right now of how many students we can serve well.”

• “The question is, can you be larger yet and can you get to a mega size?” Block said. “That's really sort of the Arizona State model if you look at it, and that's kind of an interesting model. That's a big tent model. There's parts of it that are very attractive to me.”

The pressure is on in California from politicians and voters for the UC system to take more students, and several campuses, include Merced and Riverside have physical space to grow.

• "No one is satisfied with just growing other campuses," Block said. "They say, ‘That's great. Talk to the hand. I want to come here.’”

What’s next: UCLA is “thinking creatively how to better use our summer,” especially with online education, “which we’ve gotten better at doing” during the pandemic.

• Soon after we recorded Future U. at UCLA, Block expanded on his summer ideas for ULCA at the Milken Global Conference. He has a group studying a better way to use the university’s summer quarter to serve 2,000 more students.
• But summer can’t just be an extension of way higher ed does business the rest of the year, Block said. It has to be more flexible. “We want to open up more of the day," so more synchronous, real-time courses early in morning and late in the day, which would allow students to work in the middle of the day—and then more asynchronous courses overall.

—Are 2,000 more students at UCLA enough? Perhaps not, according to Daniel Markovits, a professor at Yale Law School and the author of The Meritocracy Trap, who told the Milken Global Conference that the most elite, selective colleges and universities in the U.S. should “grow dramatically.”

• The problem is that selective colleges are trying to stay small at the same time they are opening themselves up to students from less privileged backgrounds.
• “What they have not managed to do is keep out the rich people,” Markovits said. “There's just no way that you can allocate something that rare and that valuable in a way that satisfies basic notions of equity.”

Quotable: “If you have a 4% acceptance rate to get in, you have to never have made a mistake in your life,” Markovits said. “And in order never to have made a mistake in your life, you had an army of privileged people behind you, making sure that you don't make the mistakes. And that's the thing we have to change. Everything else is tinkering on the margins.”

—When can we stop talking about the elites? “We have a valuation system in America that values those institutions that turn away the most students, and values the least those institutions that include the greatest number of students,” said Oakley, the California community college chancellor.

—There’s no one reason for the enrollment drop at California’s community colleges, Oakley said. Enrolling in a community college is inherently flexible—they are designed for students to come and go unlike many four-year colleges—but that also means “when there’s a lot going on in a student’s life, it’s easy to drop out.”

ALT ED: Students who would have enrolled in a community college also found alternatives during the pandemic, said Oakley and Maria Flynn, president and CEO of Jobs for the Future, who also joined me on the panel at Milken. Some took jobs that paid well, while others found the education and training they needed on the job.

“We have a moment in time to leverage this opportunity into a new way of thinking about education and training beyond high school,” Flynn said. “It's not saying that degrees aren't valuable or important, but it's really opening our eyes to look at different ways of thinking about skills, how you attain those skills, how you assess those skills, and how you help employers of all sizes start to hire on the basis of skills versus degrees.”

Bottom line: Operating during a global pandemic gave colleges permission to act differently. In­deed, few institutions approached the past two years in exactly the same way. As a result, colleges have more agile mindsets.

• The question now is whether various stakeholders on campus will pull the levers available to them to gain a competitive advantage and make the needed changes that will endure.
• Those changes include providing more flexibility to learners, improving the student experience, and rethinking legacy structures, such as academic calendars and legacy credentials.

🔈 Give a listen to the second stop on the Future U. Campus Tour at UCLA. Our next two stops are at Georgia Tech and Bowie State. (The tour is sponsored exclusively by Salesforce.org) 

📹 Watch the video from our town hall at UCLA. 

🖥 Watch the Milken Global Conference panel on higher ed.

SUPPLEMENTS

—Applications to brand-name colleges continue to surge, according to a newsletter published by College Tuition Advisory Services, with “most highly-selective institutions seeing at least 20% growth in 2022 compared to 2020.” The analysis found two selective institutions are “are not keeping pace with the application growth: Bowdoin (flat) and Tulane (a small decline). With a retention rate below the average for a highly selective school, Tulane might be facing the limits of its location. There may just not be that many students who want to live in New Orleans.”

• But they do want to live in Boston, where selective colleges have “enjoyed a rise in applications of at least 30% since 2020.” (College Tuition Advisory Services)

—Colleges will need to make the case for higher ed in a few years “because if a middle schooler’s big brother or sister didn’t go to college in 2020 or 2021, then they might be less willing to go themselves in 6 years,” NPR education reporter Anya Kamenetz told the Future U. podcast.

• Kamenetz, the author of a forthcoming book on the pandemic’s impact on education, noted that college enrollment among New Orleans students has not rebounded to levels before Hurricane Katrina despite the fact that many students in that school system were quickly re-enrolled in schools after the storm. (Future U.)

—Study abroad benefits college completion, according to The Chronicle of Higher Education’s Karin Fischer writing in her newsletter, Latitudes, and citing new research from the University System of Georgia. “Students who study abroad are more likely to graduate on time — and students from underrepresented minority groups or on need-based aid benefit the most from studying overseas.” (Latitudes)

—And one last word on student loan forgiveness from The Atlantic. ”Student debt forgiveness relieves the colleges that drove students into debt. Instead of pressure to control costs and steady prices, debt relief suggests to colleges that affordability should be somebody else’s concern, writes Republican political commentator David Frum. (The Atlantic)