Panel Aims to Dispel Myths, Uncover Truth Around Growing Student Loan Debt
By Joelle Fredman, NASFAA Staff Reporter
Many news articles related to student debt seem to tout the same figures — that 44 million Americans have accumulated a total of more than $1.4 trillion in student loan debt. Higher education experts, however, gathered in D.C. Thursday to look beyond those numbers and shed a light on the real challenges that students are facing and the policies that could help them.
During the discussion, hosted by Third Way, panelists debated both what the underlying issues actually are when it comes to increasing student loan debt, as well as what has been written about the subject that should be taken with a grain of salt.
Jason Furman, Harvard Kennedy School professor and former economic advisor to President Barack Obama, for example, argued that the rising amount of student loan debt is “not a macroeconomic problem,” and that is not directly harming the housing market, which has recently been reported by many major news outlets. While some articles have speculated that college students are not buying homes because they are overburdened by debt and hyper-focused on repaying their loans, Furman said that it is common for students to delay larger investments and major life changes, such as getting married and purchasing a home, until after they have established themselves.
“Don’t confuse correlation... I worry that some of the conversation deters people from making a good investment,” Furman said.
Mark Huelsman, senior policy analyst at Demos, a left-leaning think tank, said that while it is important to address the growing amount of student loan debt, his biggest worry is that policymakers, higher education stakeholders, and the public are not focusing on the students who are struggling the most and where the real issues of debt, default and repayment lie.
“My major concern about student debt isn’t the average or the aggregate necessarily, it’s that the people who are in crisis in student debt are making up more and more of the student population,” Huelsman said. “Half of all black student borrowers default on their loans within 12 years of starting college — that’s a crisis, that’s a problem.”
While Fenaba Addo, a professor at the University of Wisconsin-Madison, agreed with Huelsman that policy efforts need to be targeted at black students, especially as more are seeing that college is the mechanism they need to earn higher salaries and are pursuing degrees, she argued that the focus should not be restricted to the high rate of debt, but rather include the high rate of default.
Addo argued that high debt and default rates are the result of the racial inequality that many black students face at different points in their college careers.
“The fact that families are increasingly having to shoulder a larger share of college costs makes this not just a young adult issue, but a family and intergenerational issue,” Addo said. “I think that comprehensive policies that address this and take it from that lens are nessicary.”
Furman argued that one way to help decrease defaults and take into account the salary a student is earning after leaving college, or their return on investment, as opposed to the wealth they entered college with, is to enroll students in income-driven repayment (IDR) plans.
“If this investment pays off for you, you will repay the cost of the investment, and if this investment does not pay off you, then you won’t have to,” Furman said.
The other two panelists, however, while they supported aspects of IDR plans, were concerned that this concept did not address issues of racial disparity. Addo questioned whether IDR plans only maintain the status quo that some populations of students have an easier time paying back their loans than others. Huelsman argued that IDR plans ignore the racial wealth gap, because “white households making $50,000 have a very different wealth profile than households of color making $50,000.”
“As higher ed-focused people, we can do one of two things on that front. We can say this is an issue for other areas to sort of fix… or we can say, ‘what are we doing in higher education if not trying to close some of these things?’” Huelsman said. “Higher education is supposed to close gaps and allow people to be upwardly mobile and not calcify or reinforce disparities we see in society. I’m very worried that student debt, not necessarily the total amount, but the existence of it for certain communities... is just reinforcing inequality.”
The panelists agreed that while students’ struggle with loan debt is a function of many different issues, such as a poor labor market, and those issues need to be addressed, one way to start helping students now is to reexamine and fix education policies and financing practices that lead to poor outcomes for all demographics of students.
Publication Date: 4/20/2018
Kimberly L | 4/20/2018 12:57:04 PM
I applaud the efforts of looking at student loan defaults. I would like to add that I have been a financial aid administrator for almost 30 years. I have worked at three different schools. It has been my experience that many students make poor choices prior to signing their first promissory note. For example, a student who is undecided about their major will select a very expensive college, not taking into account their future earnings. I have also seen students select majors and not do any research on that particular field, as far as employability and or future earnings. When I talk to students about planning for college, I tell them to work backwards. They should research where most employers are recruiting from in their field of study, what are the starting salaries, etc. Also, while working at a community college, where the tuition was $46 per unit, some students met their aggregate loan limit for undergraduate study. I strongly believe that more effort needs to be placed on financial literacy beginning in the 9th grade.
David S | 4/20/2018 11:24:53 AM
I would love to see average/median salary information for borrowers by race and gender. Yes, higher education is supposed to close gaps and provide upward mobility, but we can't do it by ourselves when our students go into a workforce in which persons or color aren't paid as much as white workers, or women aren't paid as much as men (not to mention companies moving more jobs off-shore or to part-time status and changing entry level positions into internships). This is first and foremost, in my opinion, an income inequality issue.
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