Student Debt "Crisis"

In my first Abortion post, I mentioned that I had been thinking about a post concerning the recent debates surrounding student debt relief.

First, I did some reading from various sources concerning how this situation developed.  Also, full disclosure, both my children have student loan debt from attending 4 year colleges from 2010-2017, and my wife and I also have debt from funding these efforts, initially borrowing money through the Parent Plus loan program.

There are a number of factors which have contributed to the current situation which finds over 40 million Americans holding student debt worth over 1.7 trillion (that's trillion) dollars, a number that was just about $500 billion only 14 years ago.  All of the articles agreed on some causes, but not on all.

What was agreed upon was that state aid to higher education has been reduced dramatically over the past 20 years causing the need to borrow more.  Some of those cuts can be blamed on legislators and governors who promise low taxes to get elected, then reduce budgets to fulfill those promises, the education budget being on the list of popular choices.  This is especially relevant to the rising cost of state universities where less public tax money has been available.

Another agreed upon factor is that it is just too easy to borrow money for college, both for students and parents.  There are no qualifications, other than filling out the forms.  Now, one might say that by making it easy to borrow, all students, even those from the middle and lower economic classes can now have access to college, but it is still true that since the government backs all student loans, there is no incentive to make sure that the money can be paid back.  Add to the fact as listed above that state assistance has been greatly reduced, and it is clear that more borrowing, student and parent, is required.

And then there is the skyrocketing cost of higher education which has far outpaced both the normal standard of living cost increases and the wages of pretty much every economic class below the very well to do, who generally don't borrow money for college anyway.  (And whose children tend to get into the "better" schools based on legacy and income, but that is another story).

So, you have steeply rising costs, partly attributable to simple supply and demand, as college is still associated with higher future wages, so more applicants mean higher costs can be charged, a sharp reduction in state aid to fund both 2 year community colleges and the 4 year state schools, and am ample supply of loan money.  

Also, a factor that I did not mention above, is that it does cost more to run a university, public or private, as student services have become more popular and costlier, educator pay has increased beyond those of other careers, and there is a need for more teachers and support staff than previously.

All those reasons, plus the fact that student loan interest rates are much higher than that of homes and cars.  For instance, while the Stafford loans for students, loan that are capped at an amount that has not kept up with the rising costs, are in the 3.5 to 5% range, when my wife and I borrowed money through the Parent Plus loan program, the rate was 7.9%. While it has dropped a bit since we employed the program, it is still over 6.25%, a remarkably high number given the historic lows in interest rates that we have experienced until just recently.

Solutions.

Like any problem, it is important to understand the causes while considering a solution.  From that perspective, merely forgiving student loan debt is, at best, a band aid on a limb threatening injury. I don't know if, as part of an attempt to address this situation, there is serious talk about digging deeper to address the root causes, but if not, then this situation will not go away, student debt forgiveness in the short run or not.

That being said, and while I know that my children will benefit from $10K or more being lopped off their debt, I would prefer that the whole idea of student debt forgiveness be rephrased as student loan interest forgiveness.  In other words, once a student has repayed the principle of their loans, the remaining interest should be forgiven.  This rewards the effort to repay, while eliminating the penalty of all that interest that has accumulated, especially since that money has been generated by what most people might consider higher than reasonable rates.  Also, and this is another example of Democrats phrasing an issue poorly, student loan interest forgiveness plays better in the heartland where people can understand their federal tax money being used to reward those who have paid their original debt, as opposed to what some believe is just the elimination of debt without the string of responsibility for paying something back.

This also connects to the idea of a new GI bill that would be created for those who serve, not just in the armed forces, but in the community as well.  Perhaps, in conjunction with the "free" community college idea, the free is only free when service is attached; it is earned, in other words.  Again, I believe that most Americans would be on board with their tax money used to pay for 2 year colleges for those who give back, whether it be in the military or a local assisted living community, or a school, or any other place where young people can provide support for those less fortunate than themselves. Or, if service without direct compensation sounds too much like indentured servitude, then perhaps most (or all) of the pay would be "paid" in a manner by which the student can choose to take a small portion of the money for living expenses if needed, with the vast majority targeted to their choice of advanced education.

And this idea of service, does not just apply to college.  It is very clear that some people prefer to seek their future in ways that do not include college.  We need to find a way to provide blue collar skills training, either through an apprentice type program, or some other way that allows for future electricians, plumbers, carpenters, mechanics, etc, to get the skills they need through real life experience without being made to feel that just because they aren't attending college, they are less smart, less important to our society, less worth the trouble to help.

It has been proven time and time again, that money spent in early intervention programs, is recovered 4 and 5 times over, sometimes even more.  What could be better for our national economy than to have a generation of young people who receive solid career counseling which offers the full gamut of possibilities, whether advice that steers the student to academic or trade options, who are encouraged to be involved in their communities while receiving the benefits of government provided assistance if they need it, then who emerge from whatever path they have chosen, partially or completely debt free with the skills that enable them to begin their life with knowledge and confidence.

And to be that much better positioned to become consumers, if I may be so crass, so that the demand for more goods and services will not be hampered by debilitating student debt first.

An investment in our youth to guarantee a growing economy, a trained labor force, and an educated public (educated defined in both the traditional way and as applied to acquiring life skills).

Ah, but that still leaves the actual cost of higher education.  This is where we may need government regulation that freezes tuition costs for a few years, then ties future tuition increases to a rate at or below what the average American worker nets in wage increases.  Had even that second part occurred since I attended college in the 1980's then today's tuition cost would not have been such a huge factor in the current debt crisis. For instance, one report I read calculated that college costs since 1980 have risen 213% at state schools, 129% at private institutions.  In other words, the days when summer income could pay for fall tuition no longer exist.

Finally, since all the reports I read point to falling education investments on the state level as a contributing factor, perhaps we also need to vote for state legislators and governors to increase (in real dollars) education funding.  While higher taxes may be a less enviable choice, a dedicated education tax in combination with some creative public-private partnerships, and an evaluation of where the state tax dollar goes towards prioritizing education, might be worth considering.  

As for easy credit, I can't imagine that Americans want their youth tested in high school to weed out those who should or shouldn't be allowed to go to college.  Yes, encourage each student and their families to make the choice by providing the full range of options, but we must still provide anyone who wants to the opportunity to attend a 2 or 4 year college.  But, with the knowledge that whatever assistance is provided, federal or state, must be repaid through service or money, and that those costs will not balloon above the student or parents ability to pay, and that the reward at the end of the process might be student loan interest forgiveness, but only after the principle is repaid.

Like all of our more complex problems, there are no easy answers, but simple solutions, like student loan debt forgiveness without any further discussion of the root causes of the problem, will not solve the problem.  In the end, it is always about priorities.  Do we want to prioritize the education of our children, or pretend that without support, financial as well as social, our youth, and consequently our country's future will be assured?