A Crimson Tide of Debt

Weeks into his freshman year at the Marion Military Institute, a public two-year college in Alabama, Thomas was bored. The campus, in the sleepy, hard-luck town of Marion, lacked the glitzy amenities of modern-day universities. To escape the institute’s starchy military uniforms and rigid schedule, Thomas would jump in his truck on weekends and head to Tuscaloosa, home of the University of Alabama.

The University of Alabama had a meticulously groomed campus and stately redbrick buildings whose white colonnades conveyed scholastic gravitas. It had the championship-caliber Crimson Tide football team and legendary game-day tailgating with students swilling beer on fraternity-house rooftops. It featured amenities such as a state-of-the-art recreation center with a climbing wall and a “lazy river” pool complex with a 30-foot water slide. Fraternities hosted world-class rock concerts. A campus dining hall served steak cooked to order.

Everything on campus—including the student tour guides dressed in red polo shirts, riding around with parents in the back of golf carts, and the tulips carefully arranged at the school’s main entrance—was designed to appeal to young students like Thomas and their parents.

But Thomas, one of nine children raised in a turbulent home in Bradenton, Florida, faced seemingly insurmountable economic barriers. (The name Thomas is a pseudonym I have chosen to protect the privacy of members of his family. The University of Alabama declined multiple requests to speak with the president and other high-level administrators. Stephen Katsinas, a professor who heads the university’s Education Policy Center and who served as a mentor to Thomas, corroborated Thomas’s story.) Money was tight. Neither of his parents had gone to college. His father once owned a construction business but lost everything during the 2008 housing bust. His mother worked 12-hour shifts as an emergency-room nurse. Thomas’s family moved 11 times during his childhood. He and his siblings shared rooms crammed with bunk beds. Thomas stayed out of trouble, earned good grades in high school, wrestled and swam competitively, and bagged groceries at the local Publix from age 14.

Pell Grants and a scholarship covered his tuition and living expenses at Marion. But Thomas yearned for the American college experience of living on a big campus. After he spent a few months at Marion, Alabama’s allure closed the sale. In the spring of 2014, he enrolled at the state flagship university.

He would need to borrow money to do so. He wasn’t alone. By 2014, nearly 20 million students were enrolled in higher education, most of them at public colleges. Unlike just two decades earlier, borrowing was the norm; two out of three undergraduates relied on student loans to help cover their tuition.

Thomas’s need to take on debt did not happen by accident. It resulted from a strategy the university’s leaders had embarked on a decade earlier—one that relied on families’ getting into deep student debt, without any assessment of the borrowers’ ability to ever repay. It was working just as planned.

Until 2000, Alabama was known more for its game-day parties than academics. Faculty felt underpaid. School leaders deferred repairs or upgrades to campus facilities while downsizing or eliminating departments. Asking the state legislature for more money was a long shot; Alabama was one of the poorest states in the U.S.

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Then came along Robert Witt, a visionary who would radically shift the university’s trajectory. In 2003, Witt was in his early 60s and thinking about retirement from his role as president of the University of Texas at Arlington when a recruiting firm called to discuss the vacant presidency of the University of Alabama, his wife’s alma mater. Members of the university’s board of trustees traveled to Texas to sell Witt on the job, stating a bold goal: make the University of Alabama a national brand.

Witt agreed to take on the challenge. His strategy would transform the state college’s mission—and in the process, adopt a new model for getting students on the hook for debt.

A generation ago, public colleges such as Alabama received the large majority of their funding from state legislatures and were thus relieved of the need to charge students high tuition. As late as 1980, the money that public colleges received from student-paid tuition made up only a fifth of their revenues, on average.

Over the years, the responsibility of paying for public college shifted from state governments to students. By 2019, tuition dollars made up nearly half of all money state colleges collected each year.

Colleges such as Alabama say they have been forced to raise tuition because state governments cut direct funding of schools. During the 2007–09 recession, state governments radically reduced funding for higher education in order to deal with a severe drop in tax receipts. But many state colleges have raised tuition even when times have been good and state funding has been stable or increasing.

Another theory better explains why public-college tuition has risen so fast. The idea, outlined in the early 1980s by a former college president named Howard Bowen, is simple: Colleges will find a way to spend money, no matter how much of it they have. Their appetite is never sated.

The biggest cost for public colleges is their employees’ salaries. Pressure from university faculty and administrators for raises often leads college presidents to raise tuition. Student loans enabled college presidents to extract more money from students to pay professors more.

That pressure existed at Alabama. A week into his tenure, Witt called Judy Bonner into his office. Bonner had worked at the university for decades, starting as a professor and working her way up to dean of the College of Environmental Sciences. Witt asked Bonner to be provost. She accepted, and then delivered a dire message to her new boss. “We’re going to have to cut something really big,” she told Witt.

“I did not come here to cut the budget,” Witt replied. He wanted the school to grow. It needed a new source of cash. Bonner’s task was to find one.

Witt told Bonner he was determined to raise faculty pay. “My heart raced as I listened to him say that,” Bonner says. Prior presidents had aspired to raise salaries, “yet we had never gotten there in any discipline or any rank,” she says.

Witt needed money to fulfill his vision. The state legislature had for years rejected the university’s requests for big funding increases. Witt concluded that he had to raise tuition and expand the student body. The more students the school enrolled, the more money it would make.

Witt and Bonner came up with a strategy. Alabama didn’t have enough college-eligible in-state students, so they’d expand the pool of applicants by recruiting from outside the state. The university at the time had about 19,500 students, three-quarters of them from the state. Not only would Witt and Bonner expand the number of applicants; they’d recruit students who would pay far more than those who had come from Alabama. The school, like most state flagships, charges much higher tuition—up to three times higher—for out-of-state students. Many of those students would pay that tuition through student loans. And because the federal government had capped how much undergraduate students could borrow, many parents had to take out loans too.

The strategy changed the university’s identity. Its leaders abandoned the school’s role as a state flagship whose main mission was to teach in-state students and give an economic lifeline to the poor from rural areas. Instead, it became a regional, and eventually national, franchise.

Witt looked at what national elite universities were charging and determined that Alabama was underpriced. His first year, he raised tuition by $1,000. “We didn’t approach what we’d charge from a particularly sophisticated level,” Witt says. “We increased it $1,000. It was a fairly significant percentage increase. Applications and acceptances continued to go up. We basically systemically started taking it up $1,000 a year. Our thinking was If we begin to notice a softening in applications, acceptances, and/or matriculation, we’ll know that we need to start backing off a little.” That never happened.

Witt speaks of this strategy with pride, recounting how much he raised tuition for out-of-state students. When he started in 2003, the school charged them about $9,500 a year. That figure had more than doubled by the time he left.

The amount of debt that students and their parents shouldered rose commensurately. The school did not analyze whether students would have any trouble repaying their debt. Like so many advocates of higher education before them, Witt and Bonner assumed that attending Alabama was a good investment for students, who would benefit from higher incomes after graduation.

Raising tuition was one prong in the strategy. Witt and Bonner also had to geographically broaden the student body to get prospective students from around the country to pay attention to Alabama and apply.

Witt foresaw a domino effect. Recruiting out-of-state students would beget more out-of-state students. Once someone from, say, Oregon committed to Alabama, they’d tell their friends or younger siblings, who would then be more likely to apply. Alabama hired three dozen recruiters stationed all over the country.

“We worked very hard to not only recruit students aggressively, but to recognize that to the right or left of that student is a parent or parents, and you need to recruit them also,” Witt says. “You need to, in effect, recruit the high-school counselors who advised many of these students. And you need to put together a field of recruiting operations that needs to be managed exactly the way you manage a field-sales organization.”

Each recruiter knew precisely how many high-school graduates were in their territory and how well they scored on standardized tests. “We told the recruiters, ‘Your job is not done until that student is registered and sitting in class,’” Witt says.

Witt transformed the university into a wonderland of higher education, and not in a figurative sense: He used Disney World as a model. Research indicated that many families decided whether to apply to a school within 20 minutes of arriving on its campus. First impressions were everything. Witt concluded that the grounds had to be pristine. He hired a retired Air Force colonel whom he sent to Disney World to study how the theme park managed its grounds.

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When Witt went recruiting in wealthy enclaves in the Northeast, he discovered that many prospects had their own bedroom, not shared with siblings. He believed he needed to cater to those students by building dorm-room suites. The university built 10 residence halls during Witt’s tenure, along with the new recreation center, new academic buildings, and a baseball field, and expanded the football stadium. A new building opened every 90 days.

The university didn’t just want to increase the student body. It also wanted to attract students with strong academic credentials—high SAT and ACT scores—who tended to come from wealthier families. Those students would raise the university’s national profile and ranking.

But those students were also hard customers to land. The University of Alabama needed to have exactly the right pitch to lure them in and close the deal.

So the university did what more and more schools had quietly started to do since the early 2000s. It turned to consultants who specialize in tailoring tuition for individual students. Specifically, a consultancy by the name of Ruffalo Noel Levitz, which plugs student data into algorithms that cough out custom-made tuition plans—one of a half-dozen firms in a cottage industry known as “enrollment management.” These firms, largely unknown to the public, set the true price of college tuition, using a calculus hidden to applicants.

The industry emerged in the 1970s. At the time, colleges faced a crisis on two fronts: a demographic slowdown and the end of the Vietnam War. Fewer customers meant fewer tuition dollars. Colleges had to get creative about tuition in order to extract more money from those who did enroll. Consulting firms cropped up to help them do that.

Early on, it was primarily private universities that used enrollment-management consultants. But in the 1990s, a move by Congress sent this practice into overdrive, beginning the era of “gapping.”

Starting in 1992, Congress barred schools from using home equity in calculating a family’s expected contribution. The result was that the “gap” per family—the difference between a school’s sticker price and what a family can pay, according to a federal formula—suddenly became much bigger. When families are faced with a gap, as most are, they can turn to federal student loans. “That was the shock to the system,” says Kevin Crockett, Ruffalo Noel Levitz’s former CEO.

The government wants families to pay something out of pocket toward tuition. But the school can also cover a family’s gap by using its own money to provide a scholarship, offering a discount off the sticker price. Firms such as Ruffalo Noel Levitz help schools determine how much to discount for each student in order to make as much money as possible overall. The firms take hundreds of variables into account and then suggest, down to the dollar, what the school should charge different students.

Witt’s plan paid off. The University of Alabama’s enrollment started to climb, and so did its prestige. By 2005, it had advanced 12 spots up the U.S. News rankings. But Alabama and other public colleges soon faced the same existential threat that schools in the late 1970s had: a smaller number of students. This time, the cause was largely economic.

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Alabama’s legislature—and those of most other states—cut higher-education funding after the 2008 recession. But, when an economic expansion began in mid-2009, the legislature didn’t move to restore the school’s budget to prerecession levels. Alabama had to rely even more on tuition revenue to pay the bills.

By 2014, Witt had moved on to become chancellor of the state university system, and Judy Bonner succeeded him as the University of Alabama’s president. She continued the strategy of recruiting out-of-state students and jacking up tuition. The university would need even more students to offset the state funding cuts. Thomas would be one of them.

Thomas had cheaper options than Alabama. He could have gone to a state school in Florida for a lot less. But he was responding to incentives built into the student-loan system—and so was Alabama. The situation exposed an inherent contradiction in the student-loan system. Historically, state schools are supposed to serve the students of their home states. Yet the student-loan structure resembles a voucher system in that it enables students to go to the school of their choice—whether that be an in-state school, an out-of-state school, a private university, or a for-profit college. Thomas’s top choice was Alabama, and that voucher-type system enabled him to attend regardless of whether he’d be able to repay his debt. Like so many others, Thomas was convinced that college would lead to economic security and a higher standard of living than that of his parents.

Thomas was a rock of stability despite chaos around him. He avoided drugs and stayed out of trouble. His parents divorced when he was young, and he was raised mostly by his mom and his stepfather. The couple would fight, and she’d sometimes move out with the kids, only to move back in. (Both his mother and brother declined my requests to interview them.) No one in his family had ever earned a four-year college degree. His father had been injured on the job by a falling tree in the early 2000s. He never fully recovered. To make ends meet, he returned to construction in his 50s, this time working as a foreman.

Higher education would be Thomas’s way out of that hard life. His father had no money to give to his son. Meanwhile, Thomas’s stepfather had the means to help but felt that Thomas needed to work his way through school on his own. He preached personal responsibility and self-sufficiency. If the public-school system—and the student-loan program—was designed to serve anyone, it was Thomas.

Thomas wasn’t a “price sensitive” student. He was a transfer student. He had decent grades but not great ones. And he really wanted to go to Alabama. The school had leverage over him. As a result, he got little scholarship money. The financial-aid “package” that the school provided to cover his gap included a big Parent PLUS loan. Thomas would have to borrow the maximum in loans himself, and then ask his mother to borrow to make up the difference—tens of thousands of dollars.

Thomas didn’t think much of it. This was a government program, after all. And this was the University of Alabama, a state flagship school, not some fly-by-night, for-profit college in a strip mall. How risky could this investment be?

Thomas, like most recent high-school graduates, didn’t have much experience with money. He had a credit card with a $2,000 limit and a checking account with a small balance. But he felt that incurring college debt would pay off. In 2003, the year Witt took over as president, the University of Alabama charged about $11,300 a year for out-of-state tuition. By 2015, Thomas’s first year, it had more than doubled, to $26,000. Room and board was another $9,000. Each year Thomas was there, tuition rose 4 percent, more than double the rate of overall inflation. Room and board also rose.

Debt was passing upward from the young to the old, and not just in Thomas’s family but in thousands of University of Alabama families and millions across the U.S. For much of the 20th century, families like Thomas’s would have passed wealth downward to offspring. But now, for a shot at the American dream, the opposite is occurring—families are passing debt upward to older generations.

Congress and the Obama administration were partly to blame. In 2010, when the administration killed the Guaranteed Student Loan program, it projected that the government would “save” $60 billion over 10 years. Those projected profits helped fund the Affordable Care Act and other programs. Some of that money would come from people such as Thomas’s mother. The government charged higher interest rates on Parent PLUS loans so it could make a profit. And the price families would pay was high—in Thomas’s case, so high that it would stand in the way of the very moment of triumph he craved.

One Monday in December 2017, Thomas missed a call from his father. It was finals week, and Thomas, by now a 23-year-old senior, was studying in his dorm room just before sunset. His cellphone rang at 5:11 p.m. He ignored it, letting the call go to voicemail.

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When Thomas listened to the message, it was his father rambling. Thomas’s father was broke financially and broken in spirit, but one hope sustained him: watching his son grab his college diploma and cross the stage that spring. “I might have enough money saved to go to your graduation in May,” he said. “I might just surprise everybody. I’m proud as shit of you, buddy.”

That February, weeks before graduation, Thomas got another call from his father. He sounded distraught. He was being mistreated at work, he told Thomas, and was depressed. After the call, Thomas felt uneasy. Days later, he texted his brother. “U heard anything from dad? His phone still going 2 voicemail.”

Three days later, police in Fort Myers found his father’s body in his pickup truck at a gasoline station, a dose of heroin injected in his arm. Thomas texted his brother again: “Call me asap dad is dead bro. Bro call me back please.” In between classes, he was on the phone, arranging to have his father’s remains cremated, paid for with his federal-loan money.

A month later, the university’s financial-aid office notified Thomas that he owed $2,800 in back fees. When the Education Department disbursed Thomas’s student-loan funds to the school, the university took its cut to cover tuition and fees and gave him the rest to cover living expenses. But because of an apparent clerical error in the school’s financial-aid office, one of Thomas’s fees had gone unpaid. Thomas had already spent his student-loan money for the semester—he paid his rent six months in advance—and had no money. “You assume that if you get the refund check, that your student bill is paid,” he says.

The financial-aid office insisted that the bill be paid. The price for not covering the fee: Thomas would receive his diploma, but he wouldn’t be allowed to participate in graduation festivities or cross the stage. The University of Alabama—the school with the highest-paid public employee in the country, the football coach Nick Saban, who earned $10 million last year, and with an endowment of nearly $1 billion—wouldn’t permit Thomas to cross the stage over a $2,800 debt.

On the day of graduation, Thomas put on his gown and mortarboard. Instead of lining up with his classmates, he walked around the immaculate campus and posed as his stepfather snapped photos of him in front of various campus landmarks. The ceremony went on inside an auditorium without him.

The architects of the nation’s first student-loan program had designed their policy to put a degree within reach of people like Thomas. They had pushed for student loans as a way to democratize higher education, to lift the poor out of poverty and elevate the nation’s level of education.

In one sense, their vision had worked for Thomas—he had his degree. But the cost was enormous. At graduation, Thomas and his family owed $153,000. For transferring to that lush campus with its lavish amenities, he personally owed about $30,000, near the national average for graduating seniors, while his mother and brother owed the rest. (Parent PLUS isn’t restricted just to parents; other relatives, including siblings, can borrow from the program.) Each had gotten into other forms of debt and filed for bankruptcy. Millions of other Americans have similarly found student debt to be more an anchor than a buoy.

After graduation, Thomas sold life insurance, earning $50,000 a year. His employer offered no retirement plan. To get assistance with his student debt, he joined the National Guard, which within several years forgave a chunk of his student debt. But that did nothing for the debt of his mother and brother, who collectively owed $160,000 in student loans by late last year, as interest mounted. The three set up a joint bank account, each agreeing to pay $400 a month toward the remaining debt. The debt has created a fissure among them, and Thomas says he is no longer talking to either of them. In late 2020, Thomas was thinking about going to law school in the hopes of getting a well-paid job as a lawyer to pay off the remaining balance. To do that, he would need to take out still more loans.

Last year, the Trump administration, for the first time, published how much parents like Thomas’s were going into debt at each university. At Alabama, the typical parent who borrowed owed $55,000 upon graduation. That was on top of the typical debt of $18,000 to $27,000, depending on the major, that undergraduates accrued.

Witt and Bonner’s plan to boost faculty pay through higher tuition had worked. Alabama used the debt that families such as Thomas’s took on to drastically raise the pay of its professors, who in 2020 earned an average of $152,000—nearly double what they had earned when Witt became president in 2003.

Two years after he graduated, in 2020, Thomas had a broader perspective about his college experience. He was no longer enamored of the university that had once beckoned him.

“The fact that they were willing and able to give me hundreds of thousands of dollars in debt—it’s mind-boggling,” he says. He recalled going online to apply on his mother’s behalf to take out student debt. “She just gave me permission—she never went online and did it. She just gave me her Social Security number. She was like, ‘Here, go ahead and do it.’ I just went online at 19 years old”—to apply for student loans—“just with the click of a button.”

This article has been adapted from Mitchell’s book The Debt Trap: How Student Loans Became a National Catastrophe.