Is There a Student Loan Crisis?

It’s become hard to pick up a newspaper (oops, age is showing) or go to a news site and not see an article about lives being destroyed by student loans or that they represent the new bubble that will soon burst. The citations are familiar: over a trillion dollars in student loans; low repayment rates among underemployed graduates; they’re responsible for tuition inflation (don’t get me started); Millennials who borrowed $250K to earn a PhD in 19th Century Greenlandic Philosophy and are now making pretty designs with the milk on cappuccinos at an artisan coffee shop in Bushwick.

That’s all much better click bait than “Student Loans Help People Continue Their Education and Lead Better Lives. And Most Borrowers Repay Them OK.”

Those who attended the NASFAA conference in 2015 will recall that when the question that gives this entry its title was put up for a vote and the “no” vote won, the backlash was swift; student loan activists who are struggling with their debt accused our profession of being some combination of oblivious, uncaring, greedy, and in general, the face of the problem. Many attendees voted yes, we do have a student loan crisis, but as the only response choices were yes and no, it perhaps obscured the thoughts of many that perhaps many individuals have their own student loan crises, but the nation does not.

Student loans have helped generations of students earn degrees that have led to higher paying careers and better lives. Even during periods of high default rates, most borrowers satisfactorily repay, and the current average debt of about $29,000 is only slightly more than I just spent on a Subaru. And no one has said the economy is going to collapse because of all of these Subarus.  A good education is a good thing to have, in our country it costs money, and student loans have been providing some of that money for decades.  Crisis?  Not if they’ve helped so many people.

So maybe yes/no is a matter of semantics, but that might be weak argument in an environment in which many have been promised a better life by continuing their education, only to see it all go wrong, with misrepresented claims, closed schools, no degree or career advancement, but plenty of student loan payments due. To someone who borrowed thousands of dollars for a bill of goods that turned out to be false but still carries burden of that debt, they’ve got a crisis on their hands no matter what meta-statistics anyone can cite.  Public opinion and public policy should both be formulated by facts and data, but we all know that they are too often informed instead by anecdotes and headlines.  If lots of people have very negative experiences with student loans, even if they’re in the minority, it can do irreparable harm to the program moving forward.

Where does the truth lie? What role do financial aid professionals play?  Are we subjecting a generation to too much debt?  What can we do to make sure that sensible borrowing remains – or becomes – the norm?

This entry was posted in Federal Policy, General, Public Policy, Student Loans, Students and tagged , , by Dave Sheridan. Bookmark the permalink.

About Dave Sheridan

David Sheridan has been a practicing financial aid administrator for 32 years, having started when he was 4 years old. The students he serves at the School of International and Public Affairs at Columbia University hopes that eventually 32 years of practice will pay off and someday he’ll actually know what he’s doing. Dave has worked at colleges around New York City and his native New Jersey and has served as NJASFAA President as well as chairing and serving on several committees for NJASFAA, EASFAA and NASFAA. He has been known to voice what George Chin calls “acerbic” opinions on all sorts of issues related to financial aid and higher education, particularly when politics are involved, and has no problem respectfully debating those with differing opinions, even though they are usually dead wrong. While Brian Lemma is likely to rue the day he asked Dave to blog for EASFAA, the goal of Dave’s blog will be to engage EASFAA members and anyone else who wants to join in on the fun in lively debate on the issues that impact our jobs the most. And maybe sometimes why being a Mets fan is noble and that Yankee fans cast no reflections in mirrors. One thing I have learned along the way is that there are always different ways to reach a goal, and with that in mind, I would like to call this blog…2+2=4, But So Does 3+1.

4 thoughts on “Is There a Student Loan Crisis?

  1. I am sure you saw Justin’s latest article in Forbes about the student loan “crisis”. Like always, Justin said it best:

    “The hyper-focus on a national student debt “crisis” distracts us from the important discussions about how to help students who are actually in crisis, and who are largely ignored because they lack the political clout to have a voice in this debate. They are, as the data portend, the students with relatively low debt amounts that drop out of college without any degree or credential–a double whammy that makes them the most likely to default on their loans. They are the students who financed expensive educations at subpar institutions who later found out that their credentials are not valued in the marketplace. They are the students who are so confused by the mind-boggling number of loan repayment plans that it is easier to just fall further and further behind than to simply bring their loans to good standing.”

  2. I was not at that NASFAA conference, but I remember the Inside Higher Ed article about the protesters who crashed some event during the conference to protest student loans. (I also remember very well my accompanying Facebook rant about just how misguided it was to choose to protest a group of financial aid administrators who have essentially no power to limit the amount of money a students chooses to borrow, nor the ability to decide how much a particular school will cost. Like Justin said, we’re on their side.)

    I think there are a lot of things at play here, but the biggest is that there are more students enrolled in college than ever before. A college education has essentially replaced a high school education as a prerequisite for most employment and upward mobility. That forces a lot of people into college who might not have otherwise chosen to go to college in the past. I can speak from personal experience – college is not for everybody (it certainly wasn’t for me. Not until I was in my late 20s and early 30s. And by then it was a whole lot harder to complete my education than it would have been a decade earlier.) But when you see your options for employment limited otherwise, what can you really do? I sucked it up and finished mostly because I realized I had zero opportunity to progress in my career without at least a bachelors degree, and most likely a masters degree. For me it paid off, but it was reaaalllllllllllllllly friggin’ hard.

    So, there are a lot more students, and less money to go around per student, so the cost goes up. More Subarus on the road than before, so to speak. And neither education nor Subarus are free.

    • OK, so more and more people realizing they need an education, which for many means they must borrow. Do they have all of the information they need to make an informed decision about borrowing, and if not, what information is lacking and where should it come from? Can tools such as the College Scorecard provide what’s missing?

      And of course, nobody said it wasn’t going to be reallllll friggin’ hard.

  3. You make an excellent point, David. The narrative out there is that there is a student loan crisis, but this just may come from the voices of those that have their own crisis. For every student that has $850,000 in student loans (I have seen one) there are many that are using loans strategically to complete their education. I wonder what our other readers think.

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