Student Loan System in U.S. has Deep Structural Problems
"America’s long regnant and self-destructive spirit of disinvestment in society has produced not only the world’s most heavily indebted student population but also a huge tax evasion problem, and the reform legislation Senator Elizabeth Warren and about two dozen co-sponsors proposed last week are not likely to undo the damage," The Voice of Russia reports.
"To discuss the realities of the student loan universe, investigate models from other nations that could help the US, and weigh up the need for society to support higher education, Radio VR’s David Kerans spoke with Justin Draeger, President of the National Association of Student Financial Aid Administrators.
Draeger emphasized that the discourse regarding support for higher education in the US has shifted over the last few decades. Where such support used to be understood in a wider social context (support for students pursuing higher education pays off mightily for society), nowadays the discourse is fixated on the calculus of individual responsibility ('how can we get students to pay back all of their student loans?').
Draeger is not dismissive of Senator Warren’s attempts to alleviate high interest rates for student loans, but points out that as long as we stick to the notion of making students pay back as much of their loans as possible, then rates should fluctuate based on the cost of capital, so as to keep the program self-sustaining. Further, he approves of the model obtaining in the UK, Australia, and New Zealand, where students pay off their loans via tax withholding (this scales their repayments to their capacity to pay, and virtually eliminates defaults).
Draeger emphasizes that taxpayer support for higher education would be healthier than imposing debt burdens on students. But he elaborates on another nuance: namely, grants generate better outcomes than loans."
Audio of Draeger's conversation with Voice of Russia is available here.
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