Opinion: Student Loan Debt Hits Record High And That's Good

"The total of all student loan debt just hit $1.5 trillion, so prepare for a slew of stories telling you how student loan debt is out-of-control and we must reform the program to avoid a crisis. Ignore the hype. The reality is that most borrowers are using student loans responsibly, graduate with a perfectly reasonable amount of debt, and are making a smart investment. Given the excellent return on investment from college educations, why is society acting like student loan debt is a problem? Instead we should be glad so many people are acting in a way that will make the country better off in the long run," Jeffrey Dorfman writes in an opinion piece for Forbes.

"Since the start of the 2007-2009 recession, the federal government has run enormous budget deficits. While the value of this borrowing and the accompanying spending has been of questionable value, many economists on the left have stressed how smart such behavior is. Former Treasury Secretary Larry Summers penned a great example of the genre back in 2012, encouraging countries with access to low-cost money to borrow heavily and long-term for a variety of uses. Anything with a rate of return or reduction in costs greater than the cost of funds should be pursued using borrowed funds.

A college education is considered one of the best investments a person can make. As reported last week by Kaitlin Mulhere in Time, national data collected by PayScale shows that, after accounting for financial aid, tuition and other costs of attendance, and the four-year delay in starting full-time work, the average college pays off in $280,000 in higher earnings over the twenty years after graduation. Given that college costs are accounted for and that $280,000 is the average net gain, it is clear that the return on investing in a college education is quite large.

If we apply the same logic to college attendance as to government deficit spending, people borrowing at low rates to obtain a college degree are making a smart investment. Why are liberals so obsessed with forgiving student loan debt, making college free going forward, and other policies that reduce the cost of higher education for its beneficiaries? After all, the students borrowing (at government-subsidized rates) to invest in a better future are simply following the identical strategy those same liberals insist is smart when the government follows it."

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

 

Publication Date: 5/14/2018

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