When "Solutions" Are the Problem: Student Debt

Whether on the Left or on the Right, there seems to be a general consensus that there is a student debt crisis.  The statistics are quite stark in this regard: total student debt exceeds $1.1 trillion and has surpassed credit card debt as the #1 source of all household debt.  The average amount of student debt held by a household in which at least one wage earner has a college degree averages over $25,000.  Federal taxpayers are currently on the hook for over $90 billion while federal spending on higher education is around $235 billion. About 71% of all student financial aid comes from the federal government with 43% of that in the form of loans.

While federal spending on education has increased since 2000, so have college costs at twice the rate of inflation.  Since 1990, college attendance has increased 15% while the number of actual teachers has increased 18% and the number of college administrators an astronomical 39%.  Meanwhile, 48% of these graduates work in jobs that did not require a degree in their major area of study.  Only 41% of college graduates received their degree after the traditional four years.

Like Obamacare, the federal response has been a tendency towards increasing access to higher education rather than enacting policies that place downward pressure on college costs which would, ironically, increase access for all.  Some have argued that the federal government should just get out of the way and out of the business of higher education.  Unlike K-12 education- where there was no federal involvement until ESEA in the 1960s- starting officially with the Morrill Act during the Civil War, the federal government has had a role in higher education.  So outright extraction is not an answer either.  In fact, it was the GI Bill after World War II that is seen as substantially transforming America- a large federal intervention in higher education.

Research into liberal solutions to college student debt invariably comes back to a reliance on “fairness.”  And yes- it is unfair that costs are so high.  But many of the “typical cases” they trot out are, upon closer inspection, not that “typical.”  Unanswered questions of the poor, debt-ridden college graduate often leave out that person’s major area of study or the school they attended.  Are we to feel sorry for the English major wishing to be a children’s book writer who attended Harvard and is now saddled with debt?  Or should we feel more sorry for the graduate with a degree in nuclear physics who graduated from a state college saddled with debt?  Considering that the liberal solutions place the true financial burden on the backs of taxpayers- the majority of whom do not possess a college degree- seems to be the ultimate unfairness.

Solutions up until now (and many of them instituted by Obama) help to alleviate the current crop of debt by restructuring repayment of loans.  These solutions include cutting interest rates, expanded lending, lifting caps, direct loans from the federal government (Parent’s PLUS), various loan forgiveness schemes, or caps on repayments based on discretionary income.  Even a plan offered by [mc_name name=’Sen. Marco Rubio (R-FL)’ chamber=’senate’ mcid=’R000595′ ] to basically garnish wages after graduation to repay loans would, in effect, codify the existing system while placing no downward pressure on college costs.

Like so many Leftist solutions, along comes people like [mc_name name=’Sen. Elizabeth Warren (D-MA)’ chamber=’senate’ mcid=’W000817′ ] who want to tax “the rich” to help with the student debt crisis by (again) codifying the status quo.  While they portray themselves as the champions of the middle class, their solutions most directly hurt the middle class.  In fact, it is these Leftist policies that have created the obscenely huge profit margins for colleges and universities, but its much easier to rail against the 9% profit margin of oil companies.  If anything, it is the federal government that has created the monster that it now tries to appease when it should be starving it into submission.

And there are ways to do it, many of them cost-free to the federal government.  For example, a unique suggestion by [mc_name name=’Sen. Mike Lee (R-UT)’ chamber=’senate’ mcid=’L000577′ ] would reform the credential system.  Currently, an institution must be credentialed by recognized entities in order for students to receive federal financial aid.  This federal sanctioning of accreditation simply creates a college/university brick-and-mortar monopoly in higher education.  Institutions become accredited, not courses- courses that can be taught by private industry.  A company like Boeing would seem like an ideal venue to teach courses on aeronautical engineering, but they cannot be accredited and thus a potential “student” could not get financial aid.  A nursing student must go to an accredited college if they wish to get financial aid while an actual hospital may offer comparable courses without financial aid.  Assuming the states establish acceptable standards, they should be allowed to accredit courses and programs towards “college degree” credits thus creating an alternative to the higher education monopoly.

In teacher certification programs, there is a system called “alternate route” where a college graduate interested in teaching can bypass the traditional teacher education programs offered at colleges.  Instead, it is more on-the-job training with some classroom instruction.  Every alternate route teacher I know does an excellent job.  This decoupling aid from accreditation would do the same.  And, incidentally, alternate route certification for teachers is considerably cheaper.

In order to reign in costs, Pell grants must be used for their intended target- low income qualified college students.  There must be firm caps on family income in order to qualify and tied to actual college performance based on a GPA threshold and not to exceed 4 years.  Considering that 59% of all college graduates are on the six-year plan, cutting out two years of grants would save money.

Secondly, the Parent PLUS program should be reigned in regarding cost by capping loans and family income to address the needs of middle class families making $85,000 or less per year at the time of the loan based on a 4-year college attendance program.  This way the loan would based on the family income at the time the loan was taken out and would not penalize that family for increasing their income in the ensuing years.  Since these are loans directly from the federal government to middle class families, interest rates should be capped and repayment terms liberal.  However, the total cost of the loan should also be capped and not tied to inflation overall, or in college tuition.

Obama recently lowered the cap on repayments so that it does not exceed 10% of discretionary income, down from its former 20%.  Perhaps a happy medium of 15% or 17.5% of discretionary income is needed.  He also decreed loans can be forgiven after 20 years (10 if they enter public service).  Although well-meaning, this directs graduates into government jobs with that carrot of a 10-year window of possible loan forgiveness.  The last thing the government is needs is more $80,000/year bureaucrats.  Eliminate the public service provision and change loan forgiveness to 30 years, the standard length of any loan.

Fourth, Title IV of the Higher Education Act should be rescinded and transferred to the states.  This section of the law deals with teacher enhancement program funding.  This would free up federal dollars for better use elsewhere.  Fifth, Title V provides for remedial programs in college.  This has always baffled me as to why remedial programs are even needed in college.  I suggest that if they are “needed,” then the college student taking such help does not belong in college in the first place. Just eliminate this altogether.

Another area where there could be cuts to free up spending elsewhere (by increasing Pell Grants, for example) is to scrap the international education programs funded by the government.  While it is necessary that we have college graduates who know foreign languages and areas, this program can be transferred to other programs in the Defense or State Department for those purposes.  And why we fund an Institute for Peace is mind boggling.  This Cold War relic needs to go.

Finally, colleges are subjected to a bevy of federally mandated surveys and paperwork which may explain why there has been an explosion of college administrators.  While there should be financial accountability, the entire system needs to be streamlined with the goal of decreasing the educational bureaucracy on campuses.

It is one thing for the Left to rail against the military-industrial complex, but they and their policies have created the educational monopoly complex.  Instead of putting superficial accounting band-aids on the problems they created- which is all Warren and others have suggested- one needs to address the rising costs of higher education to place downward pressure on those costs so that all future college graduates benefit.  We may not have too much leverage over the current crop of graduates when it comes to debt other than to cross our fingers and hope that debt is paid.  But we sure can and must reform the system for future graduates lest the American dream remains just that- a dream.