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?

2+2=4, But So Does 3+1

I once had a letter to the editor published in the Chronicle about how punishing schools for loan defaults is misdirected policy.  No matter what counseling we provide, we can’t make borrowers pay that student loan bill on time every month.  Washington was abuzz with suggestions on how to hold schools’ feet to the fire as an effective means of reducing student loan default.

Except when I wrote that letter, Ronald Reagan was President, women wore big hair and men wore Members Only jackets, Madonna was young and shocking, and my New York Mets were the best team in baseball.  Because it was the mid-80’s.  So how far have we come, as all reliable sources tell me it’s almost 2014?  Suggestions on how to hold schools’ feet to the fire as an effective means of reducing student loan default.  Or as Senator Jack Reed of Rhode Island (a one-time EASFAA Conference keynote speaker, I’ll have you know) said, colleges “will have to have skin in the game.”  Maybe Senator Reed would benefit from checking how much skin we have left.  Institutes of higher education can already face penalties up to and including removal from Title IV participation for high loan default rates, which has caused some to close up shop.  Schools have dealt with – and paid penalties for – audit findings for not just failing to provide proper entrance and exit counseling for borrowers, but even just failing to properly document doing so.  Attempts to convince lawmakers that financial aid professionals should have the authority to deny or reduce a loan they feel is excessive or unnecessary fall on deaf ears.  Numerous products and services to teach students about financial literacy (because many have absolutely zero) may be very high quality products and services, but have you had success getting students to pay attention to them?  What else can we do on our campuses to prevent loan defaults?

I wish I were a Senator.  In my job, when I see a problem, I need to a) make sure that it is a real problem, b) determine what the real cause of the problem is, and c) identify and implement a solution.  How well I do this is my skin in the game.  If I were a Senator (or a Congressmen, they work the same way), it would be much easier.  Then I could a) misinterpret the root of the problem, b) propose punishments on those who my limited knowledge and research tell me are responsible for the problem, and c) offer no solution whatsoever…even say “no” when experts offer real solutions.  No skin in the game for Senators.

So what is the solution, according to Senators Reed, Durbin and Warren (and that one really hurts…I see Elizabeth Warren as Presidential timber…)?  Financial penalties to schools based on their default rate.  Money would be used for, uh, student loan “delinquency and default prevention or rehabilitation.”  So give money to the federal government, and they’ll fix it.  Except if they know how to fix it, why haven’t they already fixed it?  Will they only be able to fix it if they collect money from colleges?  And how will the colleges get the money to pay these fines?  Uh, by raising tuition?  Which will lead to more borrowing?  Which will lead to…gosh, how ironic.

You want fewer student loan defaults?  Have you considered stronger grant programs, less confusing repayment options, more uniform and effective servicing procedures, and (I know this is a reach) a healthy economy for all Americans (not just the 1%) with real job growth?

2+2=4, But So Does 3+1

There’s a joke that goes something like this.  A guy walks into a shoe repair shop and says to the guy behind the counter, “You’re not going to believe this, but I found this ticket you gave me when I dropped off a pair of shoes to be fixed here, must be 10 years ago.  Is there any chance you still have them here?”  Guy looks at the ticket and says, “Yeah, they’ll be ready next Thursday.”

So imagine how our colleagues at Yale and the University of Colorado at Boulder must feel.  According to this morning’s Inside Higher Ed, both of these schools had program reviews and liabilities were discovered.  The schools appealed, as is their right, and the Department of Ed told them to wait until they reviewed other similar cases.

And the schools never heard back, until now.  The Department of Ed bill collectors have sent them each a PAST DUE notice and would like their money, thank you.

And oh yeah, these program reviews happened in the mid-90’s.  Nearly 20 years ago.

Spoiler alert for future posts, I’m an unapologetic, dyed-in-the-wool liberal.  I believe that government, when working correctly, is citizens collaborating to accomplish what they cannot as individuals.  I think that paying taxes is the least we can do to live in a great country, and I cringe when I hear Republicans say that government has no place in education and that the Department of Ed should be eliminated.  No anti-government bureaucracy tirades from me.  Usually.

But this is absurd and calls the very nature of program reviews into question (state agencies, you too).  I’m all for accountability, but at what point do program reviews stop serving as training opportunities to improve compliance and become a means of leaving no stone unturned to recover some of the costs of the program?  These were piddling amounts of money, the fiscal management equivalent of digging for coins in the sofa cushions.  What other office on campus is subject to this level of scrutiny and punishment?  Even NASFAA President Justin Draeger – who has elevated play-nice diplomacy to an art form – called this “outrageous” and asked whether the point of a program review is to fix things or to be punitive.  Justin’s not from my home state, but dude, get your Jersey on.

Was going to use my first entry to explain why I call this blog 2+2=4, But So Does 3+1, but that will have to wait.  Had to seethe about this first.