The cost of higher education is rising at an alarming rate in the US. This higher cost has resulted in college students saddled with insurmountable debt. This student loan debt issue has become a national crisis. There have been many efforts to address this issue. I believe, however, there is more to be done in curtailing the effects on our students. We can all agree that student loan debt is a crisis. Although a solution to the issue is not clear-cut, there are many different measures and practices that could help alleviate the effects of student debt. The US Government should tackle the student loan crisis by encouraging debtors to take advantage of Income Debt Repayment (IDR) and Employer-Sponsored repayment. This reform should also enforce stricter regulations on for-profit colleges and their predatory practices.
According to Jillian Berman’s MarketWatch report, “Outstanding student debt reached $1.521 trillion for the first time [in U.S. history]” (Berman, 2018). This figure is second to only to mortgage debt. The cost of tuition has rapidly increased while wages and financial aid options have not played catch up.
President Richard M. Nixon himself said that “no qualified student who wants to go to college should be barred for lack of money” (qtd. Christian Century. 2016). Why do we then see such a crisis happening today? Especially given that it was acknowledged in 1971 by a then sitting president? The article further mentioned that the issue was acted on by offering Government grants, work-study programs, and low-interest loans for those in financial need (Christian Century, 2016). These programs were extremely beneficial initially. However, these benefits were soon insufficient as college expenses skyrocketed. The more money allocated to financial aid, the more schools charged for tuition. This is according to Mary Kate Cary, a senior fellow for presidential studies at the University of Virginia’s Miller Center.
Is there more that the Federal Government can do to reduce the cost of college tuition? Should the federal government do more to reduce these expenses? Yes, the Federal government offers loans and grants to students every year but that alone will not solve the issue at hand. In a 2015 study conducted by the Federal Reserve bank of New York. They found that the increase in subsidized loans is in greater proportionality to the increase in tuition costs. For every $1 increase in subsidized loans, there’s an increase of 60 cents for tuition. While there’s only a 40 cent increase for each dollar increase on unsubsidized loans (Ma, 2018). Many will argue that the responsibility falls on the borrowers. They’d argue that students should assess their chances of success before taking on the loans. Many schools tend to bloat their statistics and estimates which in turns mislead prospective students as well. Jillian Berman said it herself, “Economists and advocates have pointed to the for-profit college industry, which has been accused of using inflated job placement and graduation rates to lure borrowers to take on debt” (Berman, 2018).
There can be legislation reform done to prevent colleges and lenders from conducting these predatory practices. Student loan debt is rapidly growing and when a student takes a loan the college receives its money right away as the funds are dispersed directly to the school. They have no business to want to lower their prices. The task is now on the federal government to start reducing the amount of aid they offer. Lessening the aid offered to the students forces the schools to lower their costs or be forced out of business. Contributing Editor for US News Mary Kate Cary stated that “According to Neal McCluskey’s research at the Cato Institute, it costs roughly about $8,000 a year to educate an undergraduate at an average residential college” (Cary, 2011). If we have studies showing this affordable option, why is it not a thing?
Flexible income-based repayment is a loan payment method that allows borrowers to repay student loans in affordable amounts based on current income. According to Susan Dynarski in her NY Times article, “ … students [in Australia] borrow about as much as they do in the United States.” However, their system “… runs smoothly because borrowers pay nothing until their earnings reach about $40,000.” Anything above that amount leads to a 4% gross payment from their checks until the debt has been satisfied (Dynarksi). That income cap can be lowered to around $35,000 to cover more borrowers that are repaying into the system. A system like this, coupled with lower interest rates equal to inflation can help to alleviate the burden high loan payments have on lower-income borrowers. This option would allow loan payments to fluctuate with current income to prevent borrowers from loan defaults.
Another option to curtailing the debt is to offer tax incentives to businesses who contribute to their employee’s student loan repayments. This would work similarly to 401(k) tax incentives that employers get when they offer a match on employee contributions. This benefit can significantly improve the lives of Americans. Should this type of legislation pass and employers make such an offer, then we can see where both parties would benefit. According to personal finance writer for CBS News and Yahoo! Finance Shannon Insler, three-quarters of the millennials questioned in the 2016 Wells Fargo Millennial Survey found their student loan debt unmanageable (Insler). Hiring and retaining Millennial talent is a very challenging task. A reduction in stress can undoubtedly contribute to a healthier and more efficient workforce that contributes even more to the economy. Gallup Editor Amy Adkins states that “Gallup estimates that millennial turnover costs the U.S. economy $30.5 billion annually” (Adkins). People may argue and say that offering another tax break to businesses is not the way. That’s $30.5 billion more in the economy. Money that will be subjected to taxation which means that revenue can still be generated while at the same lowering student loan debt.
Total debt forgiveness sounds extremely radical as the student loan debt was reported at a record high. To have that trillion dollar figure forgiven would send that balance to the national debt. Americans would end up footing the bill, and with recent tax cuts that have increased our deficit, adding another $1.5 trillion is not the best idea.
We know that the cost for a college education is high, and as such students are in desperate need of skills-based training that will prepare them for the labor force. For-profit colleges have capitalized on this opportunity. They market skills-based training that will prepare you for the workforce. They market themselves as more flexible with impressive job placement numbers. These numbers are often times exaggerated. According to Shannon Insler, “… the job placement rates for-profit colleges advertise are not always accurate. These numbers are often inflated and don’t necessarily include work found in your field” (Insler). According to Stephen Burd a senior policy analyst for the Education Policy program at New America and an Education Writers Association awardee, there is no “standard methodology for for-profit higher education companies to use when calculating their job placement rates.” (Burd). This allows these institutions to freely record and market job placement numbers that are distorted. For example, they may choose to include job placements that are not related to the degree that you graduated with. This information can be very misleading to prospective students. This lures them blind into a trap that can and will jeopardize their future as they’re stuck with thousands of dollars in debt. Sometimes in low paying jobs that do not require their degree. This increases the likelihood of borrowers defaulting on their loans. According to Time Magazine writer Kaitlin Mulhere, “Over half (52%) of borrowers who attended a for-profit college in 2003 defaulted on their loans after 12 years, compared with 26% of borrowers at two-year community colleges” (Mulhere). The government offers loans to students who attend these colleges and as such these institutions should be better regulated. The federal government has the bargaining power as the primary lender to most students. They can threaten to cut loans funds off for students thus forcing the school to lower their tuition or run the risk of running out of business.
Student loan debt isn’t just affecting the younger generation. The amount of debt that older Americans owe is rapidly rising. Annie Nova with CNBC reports that “the average debt in families in which the head of household is age 75 or older is $36,757.” Which they report as being up from an amount of $30,288 in 2010 (Nova). This data is shedding light on a system we have that isn’t beneficial to even our older citizens. According to Gary Strauss, “ …the CFPB reported that people age 60 and older had amassed nearly $67 billion in student loan debt.” Student loan debt is putting our grandparent’s retirement security at risk. There is a need for student loan reform. We shouldn’t be allowing such an issue to have such widespread effects if there are workable solutions.
Many people will argue that since you signed the loan agreement, you deserve the consequences. In many cases, these very judgmental naysayers are also the ones who feed into the narrative that college is the only way to succeed. It is now hypocritical for them to say that students should pay for the “bad” choices that they made. Even though they’re part of a society that has portrayed student loan as “good debt.” These common misconceptions have led to the crisis we see now. It’s hard for you to argue that they didn’t have a meaningful choice when they signed their student loans. Student loan debt has farther reaching impacts than any other form of debt. Consumers that cannot afford to pay for their boat, house or car have the option of filing for bankruptcy. This allows them the opportunity to go back to the drawing board. While I acknowledge that bankruptcy has its negative impacts, it is much better than having your social security checks garnished in retirement. Carol Eisenstat writes in the Alert — a newsletter done by the Legal Aid Society of Cleveland that, “ Social Security can take retirement and disability benefits to repay student loans in default” (Eisenstat). These policies have discouraging effects on the nation’s students. Child support is the only other debt that is treated like student loans. Are we trying to send the message that Americans who are trying to make something of themselves are equivalent to deadbeat dads? America’s students are not deadbeat dads, so let’s stop treating them like it.
The secretary of Education to the United States, Betsy Devos, has rescinded Obama era policies that were in place to protect borrowers attending for-profit schools. Time Magazine’s Katie Reilly report that she argues the policies created a “muddled process that’s unfair to students and schools and puts taxpayers on the hook for significant costs” (Reilly). These policies were a first step in addressing the issues that borrowers face with for-profit colleges and universities. The Department of Education’s documents in support of her new rules stated that students should be protected from fraud but “Postsecondary students are adults who can be reasonably expected to make informed decisions if they have access to relevant and reliable data about program outcomes” (Betsy DeVos proposes rules that would cut student loan relief by an estimated $13 billion). Her proposal also gives schools the opportunity to defend themselves against these claims. This legislation sounds as though it’s allowing for-profit colleges to continue with their predatory practices as they have the resources to defend themselves against a debt-ridden college graduate. Some of these institutions are known for inflating their job placement statistics which typically deceives potential students. This country needs policies that will foster better loan practices and hold these schools accountable for the things they say. The country definitely doesn’t need another policy that benefits the rich, leaving our students out in the cold.