Skip to comments.How to Fix the Student Debt Crisis
Posted on 12/02/2015 7:12:23 AM PST by SeekAndFind
Each of the Democratic presidential candidates has come out in favor of some version of a plan to make college "free." This staggeringly bad idea would cost a half-trillion dollars per year. Things that seem to "cost nothing" can often wind up being worth nothing. College is no different. Students need to have some "skin in the game." They will make more considered choices-about where they go to school, how much debt they take on, how hard they party, and how diligent they are in their studies-if they're paying something.
That's not to say that growing student debt isn't a problem-for both students and for the nation-or that college costs aren't a real concern. The price tag for attending college has risen 1,275 percent since 1978. That's almost double the inflationary pace of health care, which rose a mere 634 percent in the same period. The cost of a private college can easily exceed $250,000 for a standard four-year degree. Attending many state universities can top $150,000. And that's assuming a student graduates in four years-which is becoming the exception, not the rule. Today, the average time to graduate is 5.6 years.
Why is college so expensive? Three main reasons. First, because colleges, with enthusiastic support from politicians of all stripes, have convinced Americans that higher education is the ticket to success. While a college degree is no longer a badge of the upper class, it is still viewed as a luxury good and is priced accordingly. Second, colleges have joyfully suffered from what Andy Rosen, CEO of the testing and online-education company Kaplan, has called "an edifice complex." Colleges, including lots of state schools, continue to build luxury dorms, gourmet dining rooms, and lavish athletic centers to attract students-almost as if academics were an afterthought. Staffs have become bloated, too, not with more professors, but with administrators. Third, colleges have been playing with other people's money. Washington has pumped trillions into financial aid programs. Low-income families get outright grants; everyone else qualifies for easy-to-obtain loans.
Interestingly, none of the Democrat candidates has mentioned why costs have gone up so much or suggested how they might be contained. The higher-education lobby, among the most effective in Washington, is partly to blame. This year, PACs and individuals affiliated with higher-education institutions contributed more than $233 million to members of Congress-with three times as much going to Democrats as to Republicans. Another $57 million has been spent on the lobbyists themselves.
Congress has also fueled the soaring cost of college through the irrational and unrealistic "Expected Family Contribution" (EFC) calculation, a formula that (supposedly) takes into consideration a family's size, income, and assets, and then spits out what it thinks the family should contribute to a child's college education. The EFC must have been created by proponents of legalized marijuana: the formula generates fantastical, almost delusional figures that few middle-income families can afford. For example, the EFC for a family of four earning $100,000, with $50,000 in assets and one child about to go off to college, is $17,375-every year.
What that means for colleges is that they don't have to dip into their own financial-aid reserves until the family comes up with their EFC portion. Families, faced with the choice of depleting their savings-not many families can tighten their belts by the 21 percent that the EFC requires-are forced to borrow more easy money from the government. No wonder some call this predatory lending.
Thus, candidates who promise free college get enthusiastic receptions. Never mind how the government will pay for all this. Even Bernie Sanders can only tax Wall Street so many times.
Is there a way out of this death spiral of college costs and mounting student debt? Maybe. First, Congress would have to scrap the EFC. It's an artificial price support that serves no purpose other than to give colleges cover for not providing more financial aid. Second, the president and Congress would have to agree to change how financial aid flows. Instead of lending money to students and their families, Congress should lend money to colleges and universities. In turn, the schools would lend it to students and parents, with repayment going back to the school. In this way, colleges would have an incentive to limit tuition hikes-and thus how much students needed to borrow. Colleges might think twice before increasing tuition with this debt overhang and its credit-rating implications.
Today, the most popular loan programs have repayment plans pegged to a percentage of what graduates earn. Recent initiatives cap the repayment at 10 percent of a graduate's paycheck, which is reducing defaults. Lending money to the colleges themselves will foster a host of creative repayment options. Just as students need to have skin in the game in order to take college seriously, colleges must have something at stake to get costs under control.
- Steve Cohen is an attorney at KDLM and co-author of Getting In.
How to fix it?
Garnish their wages.
Every simple non-problem can seem like a problem if you are so droolingly stupid as to discount the obvious.
Eliminate worthless academic departments and the cereal box top majors eminating from that cess pool.
Fix it by ending the doomsday debt machine known as the Federal Reserve.
it supports the US Government in everyone of its progressive social-engineering schemes.
That wouldn't work so well when someone with a $150,000 degree in XYZ studies is making coffee at Starbucks for $10 per hour ($15 in Seattle) . . . if they are working at all.
Does getting your Counseling or Social Science degree yanked make any difference to you when you’re main job is to say “do you want fries with that?”
But if you make relatively little and saved nothing, you get all sorts of grants, scholarships, and subsidized loans.
One of the biggest problems I have with the EFC is that it does not take into account your younger children, or children that have already graduated college.
Most people I have spoken to are in the same boat as me. The EFC comes out to $55,000 per year. We all compare EFC's and we are all get the same number.
We got an offer letter for my daughter (now a junior in college) when she was accepted, and I went back to the college and asked if they could do any better. The answer was "no"... their offer (around $30K/year) was already below my EFC so they couldn't do anything.
Then again, let's not...those who have read Atlas Shrugged knows how these "unification plans" didn't work out...lol.
Harvard could give 50,000 students an annual $20,000 stipend on the income from their $30+ billion endowment.
Formally open up the bankruptcy process to student loan holders.
There is ample precedent. That’s how it will be solved. Discharge unpayable debt, or restructure it.
This will destroy academia as we know it, but that is inevitable anyway.
No American should be expected to be enslaved for life by unpayable debt. Like it or not, that’s the only solution.
One student at a time.
If you can’t afford it CASH, don’t sign up.
So long as prospective students are willing to commit to whatever hair-brained schemes to pay for whatever the list price is, schools will keep jacking up those prices.
One reason for raising tuition to the stratosphere (other than they’re just happy to accept whatever you’re willing to pay) is to create _friction_: there simply isn’t enough seats available for everyone who allegedly* wants a degree, and they can’t discriminate on any other grounds, so they have to raise prices until demand finally drops off to match available supply.
(* - as a part-time prof, I found fully 1/3rd of students either wouldn’t or couldn’t do the work; if you won’t do the work, you don’t want the degree - go home and save your money.)
We have a winner.
” I found fully 1/3rd of students either wouldnât or couldnât do the work; if you wonât do the work, you donât want the degree - go home and save your money.”
Did your institution send them home, or accommodate them so that they would continue to be a revenue stream? I think I know the answer. Failure is not an option if you can still borrow money to give to the university.
Nothing wrong with having “worthless academic departments and cereal box top majors”.
The problem is INDIVIDUALS CHOOSING to go into debt to get them.
Methinks the solution is: leave things exactly as they are. At some point people at large will realize “don’t sign up for a huge debt to get a stupid degree”.
Half the problem is people thinking it can somehow be “fixed” any way other than “don’t sign up for a huge debt to get a stupid degree”.
Here’s what I would recommend for students.
1) Select an affordable university.
2) Live at home and commute to school.
3) Work part time jobs to cover expenses such as food, tuition, and textbooks.
4) Keep borrowing to a minimum.
I know this works. It’s what I did to get through college.
When an in debt college student, present or past, gets into the voting booth, issues like the economy, immigration , fundamental Muslim Jihad, race relations,Supreme Court Justice appointments etc will be trumped once again by this simple consideration:
Vote for the Socialists (dems) because they will get the taxpayers to pay off your college debt, because if you vote for Republicans, you will be in debt for the rest of your life. - Tom
That’s exactly what my daughter did. She had her loan paid off in a little over 1 year.
Now, the university uses OPM, yours, to fund their lifestyle, with no limits.
It has become a laundering service, with your money, from the taxes, through govt officials, and back into their campaign coffers.
Slick plan, that.
Every d@mn one of them failed the class.
Three times in a row I actually flunked the whole class (admittedly very small classes then, but still). Seeing what was coming, I called the dean:
“Looks like I’m going to fail all of them.”
“You give each student individually exactly the grade they earned.”
System was set up so all relevant CYA info was recorded. They had absolutely every opportunity & resource to succeed. If you don’t do the work, you can’t pass.
Upon failing, each was given the opportunity to retake the course.
Most of them failed again. (Most notable case: student actually _bought_ answers to the final exam, costing him at least $300. He still failed.)
If. You. Don’t. Do. The. Work. You. Can. Not. Pass.
Yep, the kids don't have any skin in the game when they perceive these loans as FREE money.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.