Student Loans: Personal Troubles or Public Issues?

March 5, 2014 | Blog, News

On Thursday, a coalition of organizations from across the nation will launch a multi-year campaign called Higher Ed, Not Debt. It is an effort aimed at pushing for policy changes to make college affordable and reduce the growing burden of student debt facing a large number of young people.  This is a movement that is desperately needed and long overdue, for there is a clear and growing personalization of the student debt issue aimed at reducing it to a matter of people’s personal troubles so as to avoid addressing the problem as the serious matter of public policy.

Blaming students for their loans is a tactic that serves many, including colleges and universities, government officials, and even parents.  It is so much easier to advocate for improving financial education, tightening restrictions on allowable expenses, and lowering loan limits than to fight for increasing state appropriations, stronger government regulation of college pricing, and full re-instatement of the purchasing power of the Pell Grant.  And it seems that people on both the Left and the Right have bought the new narrative: students themselves are the primary culprits of rising debt.

Take Monday’s story on debt from the Wall Street Journal, whose headline proclaimed “Student Loans Entice Borrowers More for Cash Than for a Degree: Low-Cost Debt Proves a Draw for Some Caught Up in Weak Job Market.”  The story features college students who note that they need the funds from student loans on which to live, as well as to attend college– though in no case does a student say that they are attending college in order to obtain those funds for living expenses.  The clear implication throughout the piece is that students should not borrow for living expenses, which throughout the article are variously termed “non-education expenses,” expenses “after tuition,” or “personal expenses.”  In fact, the article concludes that students are “over-borrowing,” and notes that colleges are pushing for tighter loan limits and the Obama Administration is “exploring alternatives to see how we might ensure that students don’t borrow more than necessary.”

This reframing of the student debt issue is a misleading, disingenuous, and thinly veiled attempt to avoid the very real problems of college affordability.  First, it conveniently neglects the fact that the federal definition of “cost of attendance” explicitly includes living expenses since everyone knows that such expenses must be met in order for students to focus on school.  There is a very good educational reason that students can borrow money to cover expenses beyond the cost of tuition and fees: we want them to focus on school.  This has been well-understood for decades– it is why G.I. Bill recipients were provided with subsistence payments indexed to family size.   It is remarkable that at a time when the push for college completion is leading some to advocate for stronger incentives for full-time college enrollment (including, for example, requiring Pell recipients to enroll for 15 rather than 12 credits per term in order to get the full award), we would even consider pulling back on students’ ability to use loans to cover their living costs.   Somehow, over time, undergraduates have become less deserving of financial support to live while attending school, even as postsecondary schooling has become ever more important to their livelihood?

As Nancy Kendall and I argue in a forthcoming paper, the doubt expressed about the need to use loans for living expenses belies a lack of knowledge  about the current strategies available for making ends meet while attending college. Our parents and grandparents harbor fond memories of the good old days, when they could work part-time while taking classes and cover all of their expenses.  But not only has the purchasing power of grant aid declined, leaving even the poorest students to come up with at least $8,000 or more a year to attend even a public community college, but work simply doesn’t pay and isn’t available like it used to be. Today, part-time employment typically pays less well per hour than does full-time employment, and it is also less flexible and does not come with benefits.  Jobs that our parents held while attending college no longer pay what they once did: for example, waiting tables used to bring the promise of sizable un-taxed cash tips but today, thanks to the use of credit cards, electronic systems, and changes to IRS rules regarding automatic gratuities, tips have declined and taxes have increased. The tipped minimum wage has fallen in value by almost 60 percent since the 1970s.

Furthermore, consider the situation facing single parents, who now constitute 13 percent of all undergraduates and one-third of all low-income undergraduates.  If a single mother is working at a low-wage job, she may qualify for assistance from Temporary Aid to Needy Families, the Supplemental Nutrition Assistance Program, and/or Section 8 housing. If instead she is pursuing a college degree and thus cannot keep up those work hours, she is often rendered ineligible for that assistance, increasing the living costs that she must cover on a monthly basis, while decreasing the sources from which she might obtain support. If juggling work and college, she must also obtain childcare at non-traditional hours, and incur additional transportation costs. The ways that she can obtain living expenses for her and her children are narrowed by going to school, which may in time render college unaffordable. Clearly there are marginal living expense costs arising from attending college that are not observed in administrative data sets or systematically collected in surveys. Since they are not observed, they are often simply assumed to be zero, helping to make college appear more affordable.

A sizable fraction of the growth in student loans is undoubtedly coming from their need to live while attending college, and those costs would not be incurred in the same way or need to be covered with the same approaches if students were not in school.  Policymakers may want to avoid this, and schools may want to downplay it, but the fact that millions of students are facing the same challenges tells us something important: these are not personal troubles of individuals, they are public issues that must be addressed with public policy.   In an era of scarce resources, I argue that the best way to address such concerns is with a focused effort to ensure that there is an affordable high-quality public option available to everyone.  We can reduce borrowing by lowering tuition and fees substantially in the public sector, where the vast majority of borrowers are enrolled. We can further take steps to make college enrollment pay by expanding the federal work-study program, indexing it to living wages rather than the appalling low minimum wage, and reinstating the ability of students to live with their families while in college without losing critical social benefits. Finally, we can invest in tax preparation and benefits access programs on college campuses, which can help students obtain resources such as the Earned Income Tax Credit, so that they have the option to borrow less.

Higher Ed Not Debt is a serious effort to help today’s students and yesterday’s borrowers learn that the solution to their shared troubles  is not to struggle individually, but to join forces with those who share their experiences.  Let’s hope its leaders can change this destructive narrative.

Postscript: Apologies for the long hiatus on this blog; I’ve been on sabbatical and writing a book. You can always find me on Twitter @saragoldrickrab

 

 

 

 

 

 

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