Notes on the US Student Loan Crisis
This is just to capture some initial thoughts about a very complex problem.
I think it’s difficult for people to understand how much education costs now. The situation has changed so very much over a generation that costs and priorities do deserve some analysis. Our parents’ generation could earn enough over the summer job to pay for college, and no-one had to accrue substantial debt. Housing was much less exensive, too. Sometimes the loan is more for room and board than anything else, but who can really live on $10k a year anyway?
At the same time colleges are not paying adjuncts (who are more and more of the teaching resources, not full time professors) a living wage. There are fewer paths to a career in higher education. College presidents and upper administrators can make millions, as do football coaches, but not the people who have actually earned their status as world experts in their fields. There’s always enough money for the campus landscaping, but maybe not so much for the faculty.
The nation as a whole suffers in terms of our brain trust against the world stage, and some of our best and brightest are fleeing. Skills training is fine, but it is insufficient – even for business. Occasionally some higher levels of discernment – the kind that come from a well-rounded education – are needed.
The student loan program as it exists is without any consumer rights at all. What few forgiveness programs are in place count any forgiveness amount as taxable income. We’re at a point now where federal money in later life is impacted – loans can be taken out of social security first. If you’re not yet retired, you’d better be doing very well indeed to pay your loan and your children’s loans too (as is now required, at least in part).
The way the loans are designed, most of the payment is toward revolving interest (accrues daily) not principal. Hardly any of my payment goes toward the balance. 8 years paying, not much of a drop.
Currently national student loan debt exceeds even credit card debt. For many, there is no escape from it in a lifetime. At this point, most would need to send their children out of the country to get an advanced degree.
College only for the rich … all the gains for education since WWIIÂ thrown away so, so easily.
One thought on “Notes on the US Student Loan Crisis”
The student loan program itself is partly to blame for inflated higher education costs because the financial incentives are all wrong. By loaning money from the federal government to students, we incentivize institutions to get as much money from the students as possible without regard to whether the students succeed in getting jobs that enable their loans to be repaid, or even whether they complete their degree programs. The money should be loaned from the federal government directly to the institutions with the stipulation that the institutions can must re-loan all of that money to students for their educational expenses, and that there would be no forgiveness for the institutions who cannot repay their debt to the government. In other words, the institutions of higher learning should carry the risk of loan default rather than the government (i.e. us, the taxpayers). That way the institutions would be more selective in who they admit, more active in helping their students finish their programs, more directive in steering them to programs which lead to employment, and more active in helping students get jobs when they graduate. And the institutions would be less incentivized to arbitrarily raise tuition and fees, because the institutions themselves would thereby carry greater risk. Of course there is a risk of socio-economic exclusion – but that should be manageable these days.