Over at the Washington Post, my friend and colleague Don Heller has written an op-ed titled “Is the $1 trillion student loan debt a crisis?” In it, he argues that the $1 trillion marker is not cause for worry. This is because, he says, large fractions of students are borrowing and successfully repaying their loans (read: 85% of borrowers are not in default), there remains a substantial premium to earning a college degree, and there do not appear to be any likely policy alternatives to borrowing to finance college in the near future. Thus, Don states, “What we need to do is to provide better information to students and their families so that they can make informed decisions about what are reasonable amounts of borrowing in relation to a student’s career goals. Colleges and universities certainly have an obligation to do more, but these prospective college students and their families need to take responsibility as well.”
On his Facebook wall, Don and I have been strenuously debating this issue since his piece ran on May 1. Followers of that discussion have reported that it’s been useful to see our points of agreement and disagreement, and so here I am reiterating my perspective.
First, I think Don took the question itself too literally. The issue families across America are confronting isn’t whether the $1 trillion point itself marks a crisis, but rather whether the heavy reliance on student borrowing as a form of financing college has gotten out of hand, such that it is generating counterproductive results antithetical to the goals of education for social mobility. Focusing on the narrow question of a particular tipping point both trivializes the central issue and helps the culprits involved (read: policymakers and institutions of higher education) skirt it.
Second, “crisis” is both a rhetorical term intended to inspire collective action and a social psychological phenomenon whose interpretation depends on the viewer. Is it appropriate to call the current moment a crisis? Yes, if you take the viewpoints of families and students whose lack of wealth requires them to rely on loans to finance college. Perhaps not, though, if you are advantaged enough not to care about that. And is it useful to call this moment a crisis? Yes, if you think something should be done to curtail the dramatic shift to loans over grants that Don has written about in his excellent books for decades. But perhaps not, if you prefer instead to insist that students and families should have freedom of (college) choice rather than the right to pursue education in a safe and secure environment.
Third, focusing on the absolute rate of current borrowing and default is the wrong way to size up whether there is a problem. A crisis is usually created over time, and the data on change over time in borrowing bring real reason for concern. The figure above shows that student loan debt tripled in just 8 years, with 2/3rds of that debt held by young people. The same paper, released today , reveals that the percentage of 25-year-olds holding student loan debt jumped from 27 to 43% during that time. Similarly, the trend in rates of delinquency is also steep– jumping from less than 10% to 17% in that same 8 year period. The problem lies in the trend line, not the current magnitude, and decisions about how to address that using public policy should focus on that trend.
Now, I understand that Don’s major concern is what happens students decide to forgo college because of a fear of loans created by the “loan crisis rhetoric.” Of course we don’t want that to happen. But if students are increasingly forgoing college– and the data suggests they are, even among those who are academically prepared– it is a reach to suggest that’s because of a fear of loans rather than a problem with the overall cost of college itself. In other words, most middle and working class Americans find it very hard to accept the premise that it is appropriate to pay $100,000 or more to attend college, even if they could borrow it and even if it is likely (though never certain) that they will pay it off over the long term. It is simply a lot of money, and the risk of not making it back — especially in today’s depressed and discriminatory labor market– remains quite high. So it surprises me that my colleagues focus on trying to convince policymakers and schools to spend their time focusing on educating families as to why they ought to accept student loans, instead of using their considerable brainpower to develop and push for policies that match American’s desire to attend college with financing policies that make it truly affordable? The main cause of rising student loan debt is the steep increase in the number of Americans attending (a)expensive for-profit colleges and universities (and some not-for-profit universities) who set their prices so as to absorb the dollars from student loans, and (b)graduate schools, where master’s and professional degree programs have sprung up as cash cows at all kinds of schools. It has also grown as states have disinvested in public colleges and universities, causing tuition to rise faster than need-based aid programs. These are the real culprits– not the so-called financial ignorance of Americans who should borrow for college but don’t know better. It’s about time we higher education analysts focus our attention on where it can do real and permanent good.