Academia: The Cost of an Education

  As of 2016, 77.1% of families in the United States held some amount of debt. For 29% of these families, education loans contributed to that debt—this equates to nearly a quarter of the US population holding student loan debt (“Changes in U.S. Family Finances from 2013 to 2016”). Student loan debt is a prominent issue in the US, well-discussed during the election cycle and rightfully so, as roughly 44 million Americans are affected and the amount of debt held has doubled since 2010, reaching over $1.6 trillion (Minsky). Though few would argue that student loan debt is not a widespread problem in the United States, there is ample argument surrounding how to solve this problem for individuals. Current policies exist but are claimed by some to fall short of meeting needs, the most extreme opinion on this side being that forgiveness of all student loan debt and free higher education are necessities. Proponents of student loan debt cancellation—partial or full—are met with many questions from opponents who struggle to make sense of the sustenance and success of such a program. An all-pleasing answer is fanciful but there are facts that, if presented correctly, could provide ground for compromise.

  Numerous measures used by the US Federal Reserve show that there were decreases in debt between the years of 2013 and 2016, however this was not observed for education loans (“Changes in U.S. Family Finances from 2013 to 2016”). Today, United States consumers hold a total of $13.86 trillion in credit card, auto loan, mortgage, student loan, and other debt (Fay). Many opponents of student loan debt cancellation ask why relief should be provided for student loan debt and not any other type of debt. While a valid question, an answer may be that other sources of debt are not worsening at the moment—but student loan debt is. Furthermore, education is a huge contributor to one’s capability of achieving financial stability. There is reason to believe that enabling a greater portion of the population to receive an education would wholly benefit the country—and this may require financial aid reform. Much of American society is dependent on the education system and the limits that exist within it. It affects households by motivating certain actions before children are of school age or even born, it molds generations that will in turn shape the future of America and be bound by their educational experiences and qualifications, and it is a key factor in how America is perceived globally. Long-term collateral restrictions for individuals and the country as a whole can be associated with education. Student loan debt has been identified as one cause of delays in graduates buying homes, marrying, and growing in wealth, as well as the declining retirement savings of older generations (Kahn). However, it would be difficult to show that these observed trends have everything or nothing to do with the significant amount of student loan debt held by Americans, so the most sensible perspective is to view the debt as just one of many factors. Student loan debt accounts for only $1.6 trillion out of the total $13.86 trillion of American consumer debt. Again, this doesn’t definitively excuse inaction, because if $1.6 trillion in debt can be prevented from growing or even reduced through a widely supported measure, it should be.

  Following the crash of 2008, states reduced funding to higher education, and tuition subsequently increased—36% in the 10 years following the financial crisis—also due to an increase in demand for education, as jobs were more difficult to come by. The transition from support via grants to loans brought a shift in the concentration of responsibility and burden. Some believe that the burden was multiplied when shifted to individuals rather than the government, because those individuals were entering a suffering job market following the recession. Minority groups were particularly affected by this shift, as there is an additional discriminatory disadvantage in the job market. Forgiving loans and returning to grant support places the burden on taxpayers, which increasingly includes the originally indebted group. Advocates for debt cancellation explain that a broad economic burden would be lifted by lessening the stress on borrowers, ultimately favoring everyone—from those never having had student loan debt to those who have recovered from former debts (Kahn). A possible countereffect of switching between grant and loan support is explained by the Bennett Hypothesis. This is a theory stating that as financial aid increases, schools tend to raise tuition, which renders no greater affordability of college, even with loans. Colleges are on a constant quest to improve their standing and require revenue to do so, driving certain colleges to hike tuition, which ultimately leads to tuition hikes for all colleges to keep up with competitors. The hypothesis is an economic theory applying supply and demand models to the market for college. There have been a variety of studies regarding the Bennett Hypothesis, some arguing that there is evidence only observed at certain private universities and none at public or low-ranked private universities, while others argue that there is no evidence at private universities and it can only be found at public universities. No consensus has been reached on how the Bennett Hypothesis materializes in the American education system, however it is definitely a worthwhile thought when discussing possible changes to student loan policies and considering how this could impact competition in higher education (Gillen). Opponents of student loan debt cancellation would use the Bennett Hypothesis to contend that providing a greater degree of financial support for higher education would only lead to greater costs and borrowing in the future, fueling a cycle of debt prompting aid that leads to more debt. Cancellation would need to coincide with reform in funding and aid for higher education to ensure that the results are maintainable and progress is echoed in future generations.

  If student loan debt forgiveness is not paired with a more sound student loan program or free higher education—as advocated for by some proponents of forgiveness—there will exist a great deal of uncertainty surrounding if or when America may find itself in the same position it is in now. Currently in the US, student loans may be forgiven, cancelled, or discharged, depending on the qualifications of an individual. Though there are a number of opportunities for loan forgiveness, many efforts to forgive student loan debt are poorly executed. One example is the Public Service Loan Forgiveness program, which has left many who had intentionally pursued public service work without the forgiveness they were expecting. This is often due to discrepancies between the requirements and the applicant, many of which occurred in early years of the program’s existence, prior to widespread publicity (Minsky). Another common critique of today’s program is that the money saved that would have gone towards loan repayment is still taxable, so recipients of loan forgiveness end up losing a portion of that sum regardless. During her presidential campaign, Senator Elizabeth Warren released plans to make higher education more affordable, partially through forgiveness of student loan debt. In her proposal for the cancellation of debt, Warren identified numerous methods by which she would take immediate action to cancel student loan debt, improve current application systems for student loan cancellation, all while ensuring that “loan cancellation will not result in any additional tax liability for borrowers” (“My Plan to Cancel Student Loan Debt”). Warren planned to fund these measures through her “Ultra-Millionaire Tax” ( “Affordable Higher Education for All”). Similarly, Bernie Sanders promised during his 2020 campaign to provide a minimum of $48 billion per year to cover tuition and fees at public institutions for higher education. In addition to this provision, Sanders would cancel the $1.6 trillion in outstanding student debt. His plan included paying for much of these promises with a Wall Street speculation tax—money collected on stock and bond transactions—bailing students out of debt by having Wall Street requite bail received over a decade ago following the financial crisis in 2008 (Sanders). Some of the strongest opposition to student loan debt forgiveness is rooted in the tax increases that would ensue—particularly for higher-income households. It’s important to note here that, if total student loan forgiveness were to occur, many high-income students would reap large benefits, as they are similarly as likely to borrow when compared to low-income students, but because they do not have the same relief from tuition increases, their loans are typically larger. This would be an unlikely outcome, as the goal communicated by proponents is to lighten the burden for lower-income households, so targeted actions would be more probable. These households are perceived as being more at risk to default on their student loans—which could result in consequences including increased loan cost, poor credit score, and lost job opportunities. According to data reported by the Federal Reserve, between 2013 and 2016, the amount of student loan debt held by young households—defined as having a head of household younger than 40 years old—with incomes less than $30,000 decreased by 5%, ultimately making up only 18% of the education debt held by young households (“Changes in U.S. Family Finances from 2013 to 2016”). This is not the most current data and it isolates a smaller subsection of all households with student loan debt, however, it is an indicator that most student loan debt exists in households with income levels that would be more likely to permit timely loan repayment. Moreover, this data cannot convey details about the circumstances of individual households and should not be taken as point blank proof that every household above the specified range can pay off loans with ease—but the likelihood is greater than may be thought.

  Not always recognized are the additional factors that contribute to the likelihood of loan default, aside from solely income. One such factor is the failure to complete the sought-after credential. From 2003 to 2004, students who did not complete their credentials were more than twice as likely to default within 12 years of beginning their higher education than those who did—this is considering all students enrolled, regardless of whether they borrowed. Still, only 23% of students who did not complete their credentials defaulted—a statistic about half as daunting as the 41% who defaulted after attending for-profit colleges. And, contrarily, certain groups with varying characteristics were more likely to default if they did complete their credentials compared to their counterparts who did not (“Students at Greatest Risk of Loan Default”). It’s difficult to draw any firm conclusions from this data as—besides it being outdated—on a case to case basis, drop-out has shown to be key to a student being able to pay off accrued debt. Nevertheless, students who attained their degrees were generally more likely to be able to repay the associated loans, indicating that, regardless of the student loan program in place, increased leverage for students to successfully graduate is essential for program sustainability and positive outcomes. This is building upon the widely articulated goal that increased accessibility to higher education would allow a greater fraction of the population to pursue higher-paying careers, lifting people from poverty and positioning Americans to be able to contribute tax dollars comfortably. In order for this goal to be realized and the plan to be sustainable, students must be prepared to succeed in college, graduating and boldy entering the job market. Pushback also derives from the thought that tax dollars could be wasted if spent on sending Americans to school only for them to drop out. In the description of his higher education plan—which includes free higher education—Bernie Sanders communicates that more than half of students who enroll in college do not complete a degree. Percentages of student debt-holders and unfinished degrees are disproportionately occupied by minority groups, making the discussed legislation a clear effort to bridge certain wealth gaps (Sanders). Considering this, with the current state of the public school system—where schools in low-income communities are often underfunded, the students not being prepared to pursue higher education—such a drastic culture change may not come as easily as is hoped. Along with a change in the finances behind these student loan programs must come a change in the content and financing of preceding programs and the vision for the people involved. Only then, when everyone is on the same page to put in significant effort and foster long-term growth and evolution of American society, will it become a reality.

  It’s not news that education systems—primary, secondary, and higher—seem to work in the favor of some and not others. Student loans are just part of this problem. David Laude, a chemistry professor at University of Texas at Austin, was tasked in 2012 to raise the four-year graduation rate at the school. He performed a small study in his classroom to investigate why his own passing rate was 80%, a phenomenon he saw as related to the graduation rate and correlated with income. Laude took deliberate actions to create an encouraging atmosphere and foster ambition in his students. After this switch—which included sharing tips on multiple choice testing and meeting personally with students he identified were struggling—the students who were more likely to have earned low grades passed the class and the number of A’s he gave out increased. This is an example that brings to light a few additional considerations in regards to the accessibility of higher education, aside from solely lightening the tuition burden. Higher education can be made available to all, but unless students are equipped to work hard and it is evident that they have the opportunity to succeed, they will not be able to do so. As Laude says, “...economic disadvantage figures into everything: the quality of the high school, the quality of the food you eat, the quality of the opportunities you have,” so attempts to improve higher education accessibility that has been hindered by economic disadvantage have to start earlier than when the full effects may be evident and possibly be applied to areas other than education. There are “common-sense techniques” that help students manage various pressures in university that may not be familiar to students coming from a less competitive and well endowed public education (Seale). David Laude’s study is not comprehensive enough to make any conclusions about what additional changes are necessary to either higher or public education. Preparatory programs implemented at all public schools focused on useful strategies for higher education could make a difference for many students who would otherwise be unaware of the demands of more rigorous schooling. Should higher education become available tuition-free, this would be an important consideration that, if implemented, could improve confidence in the completion of degrees and thus, program benefits. Training for teachers and professors at all levels could also assist in providing the supportive environment that Laude considers so essential. Regardless of the root of the problem and the measure that could serve as a solution, further cost ensues. Laude demonstrated that smaller classes, lecturing on study and test techniques, and individual meetings with students following test failure could all contribute to increased likelihood of low-income students’ success. Making these commonplace in institutions across the country to help secure the success of all students who Americans would be contributing tax dollars to send to school would increase the cost of education by requiring additional faculty and possibly additional resources or training. Again, a repercussion to consider alongside improving the base level of education is the competition that will occur at higher, more prestigious institutions—which has had great influence in how the American education system is perceived—and how funds to support that growth will be raised.

  Expecting all Americans to align strides and accept socialist-leaning policies is a tall order. Throughout the past four years of his presidency, President Trump’s administration has been working on policies to lower student loan debt without total forgiveness—which would be difficult to build Republican support for—attempting to compromise between public support and personal responsibility. His first budget request to Congress involved proposed changes to federal student loan programs that included changes in loan forgiveness term length from 20 years to 30 years for graduate students and 15 years for undergraduate students in the Income-Based Repayment program, along with a change from monthly payments being capped at 10% to 12.5% of income—a midpoint between returning to the percentage in the 2007 IBR program, which set payments at 15%. This plan would reduce the annual cost of the loan program by $7.6 billion and was an undoing of policies enacted under former President Barack Obama that decreased income percentage and forgiveness terms. Trump’s plan has been shown to yield benefits for undergraduates through the adjusted terms in the IBR program, though these are often dependent on loan size and income level—most individuals with larger loans and higher income benefiting more than their counterparts. The proposal renounces certain measures benefitting graduate students, but this is done considering that graduate students already have a four-year degree and doing so lightens the skew that gives benefits to some upper middle-class families instead of low-income families (Delisle). These adjustments are just one indication that there is potential for the current system to be made more equitable, alleviating burdens in the most dire areas and not over-extending programs to provide excessive aid, which could generate great costs for taxpayers and no long-term debt improvement. Additional legislation has been passed during Trump’s presidency that is argued to lean too much in favor of taxpayers and make student loan forgiveness much more difficult to receive. An example was when the President vetoed congressional legislation that would have overturned rules crafting narrower requirements for forgiveness when a school was deceptive in encouraging borrowing (Friedman). Student loan policies, like other legislative topics, are partisan and particularly subject to change during shifts in power. A strong leader would need to step forward to guide productive improvements on existing programs that satisfy the majority and would be preserved. The most probable set of policies America has to hope for in favor of student loan debt cancellation is that promoted by the official Democratic nominee for President in the upcoming 2020 election, Joe Biden. Biden vows to continue a plan spearheaded with former President Barack Obama to provide two years of free community college, while also creating programs to improve the quality of these colleges. In addition, Biden’s plan covers tuition at colleges and universities for families bringing in less than $125,000 in income, adopting what was initially part of Senator Bernie Sanders’ proposal. The plan also allots an increase in grant value and continued loan forgiveness based on income and public service (Biden). These measures would require American embodiment of generosity to bring up the less advantaged and improve society and the economy as a whole.

  There’s no doubt that reform in educational funding at all levels is a massive hurdle and reaching a compromise on the matter that can foster sustainable growth is the best way for equitable change to be seen. Evidence of successful repayment supports the current approach to student loans, but there is a clear cycle that is keeping some Americans from overcoming hardships. The country is divided on whether or not it is sound to rely on the government to remedy this situation caused by their faulty actions with additional—and potentially continually faulty—legislation (Kahn). It often seems that when the government extends itself to support many programs and problems at once, the policies decided on may not be as successfully implemented. In cases such as student loan debt, total reform of policies may be necessary to establish a small set of sustainable measures that makes loans accessible and is flexible in cases of financial distress or economic crisis. Rather than planning to implement drastic new measures alongside reforming current programs, it may be wise to improve the current methods, ensuring they are functioning effectively, and then proceed to analyze where supplementary action is needed. Gradual change, the results of which can be seen as change is furthered, likely has a better chance of enduring.

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