Get Smart About Student Loans

Friday, November 18, 2011
First, apologies for the long silence. My workload has increased tremendously post-tenure (sorry to disillusion anyone) and I'm having trouble keeping up with the blog. (This is why this post, so deserving of embedded links to sources, lacks them.)

Second, let me go on record as a supporter of the Occupy movement. Protest is powerful, period. The denigration of protest and attempts to make it look irresponsible, violent, and evil is a power tactic leveraged by elites. Ignore them.

Third, this post is a few thoughts for the OccupyCollege movement in particular. The battle cry against student loans is worthwhile but needs a more informed perspective. Yes, there is now more student loan debt than credit card debt. Yes, tuition and fees are high, and it's one reason for the growth in debt. And some schools leave students with more debt than others. Yes, Obama's recent plans will help, but only a little. Yes, this is problem that needs to be addressed.

But too little knowledge is dangerous. Protesters need to know and address the following in formulating their counter-proposals:

(1) Rising tuition is outstripped by a massive expansion of costs of room and board and student fees-- they are now the bulk of "cost of attendance." These costs are growing because colleges and universities think students are demanding them. They say you want climbing gyms, organic foods, and dorms at 2-year colleges. Do you--or don't you? Are you willing to get less in order to pay less?

(2) The growing reliance on loans is reflective of a turn away from grants, and it's not only a fiscal decision but a philosophical one. There has been push back against aid you don't have to repay, supported by a new claim that students benefit by having "skin in the game." There are accusations about the misuse of aid dollars, and discussion that states aren't getting much for their money since many students-- even middle-class ones--aren't completing college degrees. So why, they ask, shouldn't students foot the bill themselves?

(3) Colleges and universities and policymakers are loathe to rethink what being a student means, and adapt college requirements and scheduling accordingly. Large fractions of students now work, and must fit that work into their schedules. Work comes with benefits, sometimes-- which aid does not. So many students are going to work, no matter what. The fact that college doesn't accomodate work means that working students take even longer to finish college and that increases overall debt.

(4) Rising time to degree is likely a good part of the story about the ballooning debt. So those who oppose debt should join forces with those who seek to get more students to a degree in a timely fashion.

(5) Student debt, in and of itself, is not evil. When you borrow to buy a car, having that car does nothing to help you pay back the loan. But when you buy college, having the degree does help you pay off the debt. Moreover, unless you forsee some massive lottery winnings for the nation in the near future, we are never going to have enough money to meet the full financial need of everyone attending college-- and evidence suggests that grant dollars are most important and effective for students from lower-income families. So loans are likely to continue to be part of how students finance college -- the question is what fraction of the strategy should they be? By no means should students borrow to meet their entire costs of attendance, and by no means should they borrow to finance an overly expensive institution with low graduation rates. But a no-loans platform will not succeed.

(6) Yes some colleges have graduates with less debt than others. But be careful of conflating correlation with causation. Colleges enrolling wealthier students, those with larger endowments, and more investment from the state tends to graduate students with less debt. It's not like they are BETTER colleges because of that. And it doesn't mean that if you have less money and attend that school that you are guaranteed to graduate with less debt than you otherwise would-- you can't use averages to make decisions for individuals.

The biggest underlying problem facing our nation's college students is that many showed up to college totally unprepared for how to pay for it. They had next to no plan. They had no 'game' and neither did their parents. They went to college because they thought they were supposed to, and the colleges assumed they knew what they were getting into. That was wrong. There are dozens of different ways to pay for college and it requires research and education to make it work out for your own family. The goal should be to help all kids and parents get informed, and to help ensure that all colleges and universities do their due diligence in making that happen.