Student Debt
I believe there are two decisive keys to success for young Americans starting their careers.
Love your work.
Be financially secure.
I believe we can improve the national student debt situation.
Against the backdrop of this article is some reality.Â
First, college students don’t ask to attend universities with high tuition and room and board rates, and then seek to enter a stagnant job market. But this is the reality for some.Â
Second, government can’t tell young Americans what choice to make regarding attending college. Government doesn’t stop you from attending. It doesn’t tell you to attend only if you can secure funding without taking on debt.Â
Individuals make those choices. They could be guided by parents, school counselors, and others. But the choice is ultimately theirs.
More reality. America needs a high quality workforce with a high education level. For many, this means attending college.
What does America owe those who make the choice to attend college? What can we do about the national student debt situation?
Let’s think through a range of options. When developing options, it’s good to consider the current situation (do nothing) and expand into options that become unacceptable because they are too far fetched.
Let the free market dictate the environment (do nothing).
This is the option we’ve chosen in the past. The cost of attending a 4-year university, including tuition, fees, and room and board has roughly tripled in the last forty years, after adjusting for inflation. (Side note: there are many sites and articles with poor statistics about the cost of attending college.)
Let’s look just at student debt for undergraduates (these are the programs most think of when they think about college). Students who graduated from undergraduate programs in 1980 had an average of $12,800 in student debt (all figures adjusted for inflation, in 2021 dollars.) Students who graduated in 2000 had an average of $27,200 in student debt. Students who graduated in 2021 had an average of $31,100 in student debt. Graduate students often have higher student debt than undergraduates.
Total student loan debt for the nation has tripled and now exceeds $1.7T. More youth now attend college. The total number of borrowers dramatically increased, contributing to the overall increase.Â
Wages haven’t increased much for the majority of Americans since 2000 (below from the Pew Research Center):
There is financial risk to attend college. College tuition continues to increase, but wages haven’t kept up. Further, 38% of Americans have a college degree, while another 15% attended some college but did not graduate. Student debt without a degree could be especially difficult.Â
Alternatives to more expensive 4-year college programs could include community colleges and job-specific training programs, which I advocate for here.Â
The bottom line for letting the free market dictate the environment is that tuition is increasing, but wages aren’t keeping up.
Improve the advocacy of the Department of Education.
We need to eliminate predatory lending and predatory colleges. In 1992, Congress gave the Secretary of Education broad authority to hold private college executives personally accountable for fraudulent activities. However, the Department of Education has never used this authority.Â
We further need to improve federal student loan distribution. As a part of the loan application process, students who receive loans should obtain signature on the application by their parent or guardian (if available), the school, and themselves. On their application all parties need to acknowledge the cost and potential starting salary of their proposed undergraduate program.
Low income students have a lower likelihood of graduating and repaying their student loans. We need to expand grant programs for these communities, and assign them mentors to help them graduate (instead of denying them loans). As someone who has lived in a leaky trailer, been the recipient of Pell Grants for my undergraduate education, and graduated with student debt, I volunteer to be a student mentor.
Another idea by Dr. Carlo Salerno here is to have colleges themselves cosign on student loans. This holds both the college and the student accountable for the cost of the education, and the risk of the loan. This option would need additional development and legal analysis.
In short, the Secretary of Education needs to act on behalf of students and potential students, and we have much room for improvement in this regard.
Convert student loans to federal loans, and eliminate student loan interest payments.Â
Due to fraudulent or illegitimate terms, some student loan debt grows even when students continue to pay their bills. This Wall Street Journal article, Why Student Debt Keeps Growing—Even When Borrowers Keep Paying, explains how the total bill grows over time, even when students pay their bill.Â
In the case of straightforward federal loans, why does the government charge interest for students to pay back attending college? The government isn’t a for-profit institution, and the nation in fact needs the students to attend college to benefit the nation as a whole. Charging students interest payments doesn’t improve national finances, and hurts each individual student.
Eliminating interest payments gives students the ability to pay their loan off in a reasonable time frame.Â
Loan forgiveness for service.Â
The federal government sponsors various Public Service Loan Forgiveness programs. For example, if you serve in the military, and qualify by making payments, the remainder of your balance may be forgiven after 10 years of service.Â
Congress created PSLF at the end of the George W. Bush presidency. The program applied to Americans who spent 10 years teaching, nursing, policing or otherwise working for a qualified nonprofit. If the borrowers made 120 monthly payments against their student loans, the government would forgive the remainder.
Info from the Department of Education in 2018 identified that 99 percent of applications for loan forgiveness were denied.
The executive branch must work through the Department of Education to streamline this program in order to assist Americans with qualifying. The Department of Education Office of the Inspector General should assess the existing systemic weakness.
Note: Other federal loan forgiveness programs, such as the US Department of Agriculture Veterinary Medicine Loan Repayment Program, are a success. Veterinarians who agree to VMLRP service (which likely includes spending three or more years practicing large animal veterinary medicine in a rural area) are eligible to receive up to $25,000 per year towards qualified student loans. (Applications this year are due April 17, 2023.)
Student Loan Forgiveness.Â
Student loan forgiveness is under review by the US Supreme Court. I won’t comment much on broadly applied student loan forgiveness, other than to note that the proposal would require spending more money on loan forgiveness than we spend on needed poverty programs. I recognize funding student loan forgiveness wouldn’t threaten funding for these poverty programs.
When I wasn’t working on a farm, I worked at a grocery store in a rural area in high school. One night a woman came in to buy bread and milk and intended to use her Women, Infants, and Children (WIC) card for the purchase. The card declined or malfunctioned in some way. My manager at the time told me the look on her face was just sorrowful—he couldn’t bear it, and sent her on her way with the food. WIC is a needed program.
A woman with one child, with an annual income less than $18,310, qualifies for WIC. The current student loan forgiveness proposal represents approximately three times more federal expenditure than we have spent on the WIC program for the last 20 years.
I don’t seek to refuse help to low income communities that need help. I believe a better, and more equitable, path to financial stability for young Americans is through improving the rate of home ownership. It benefits young Americans financially more than student loan forgiveness, at a lower cost to taxpayers.
There are more options past this mental point, but they become more divisive.Â
We could legislate the cost of higher education, and tie the cost per semester to the expected salary potential for that degree, as this Harvard Business Review piece argues. Should an art degree cost less than an engineering degree? Does art require less mental rigor?
We could reduce the credit hours required to graduate, while establishing a baseline of required courses. Who would determine what courses our students should take?
We could put students in barracks-style housing to save them housing costs.
There are more options I haven’t considered. I would appreciate reading your ideas in the comments!
I believe there are two decisive keys to success for young Americans starting their careers.
Love your work.
Be financially secure.
I believe we can improve the national student debt situation.
Thanks for considering my perspective.
May God bless the United States of America.
