The Register Citizen (Torrington, CT)
The case for federal relief from student debt
As the country debates whether to forgive some federal student loans, it would be best first to take a deep dive into the program itself. Personally, I avoided student loans as much as I could just as I avoid debt of all sorts if I can. Yet, as a financial aid officer for 12 years, including heading the aid offices of two Connecticut colleges early in my career, I am very familiar with them. Indeed, in that role, I awarded thousands of students millions of dollars in them.
Today I think financing higher education through loans is inherently a bad idea and want to suggest briefly three issues in the existing federal program and two problems inherent in student loans.
First, in any regular loan, the lender takes a risk and makes a calculation on the likelihood of its being repaid. In contrast, a student loan is “awarded” solely on the basis of enrollment in an eligible program and financial need. Now, I ask you: Is giving a young person, who probably lacks financial sophistication, a legally binding obligation for thousands of dollars that cannot even be discharged in bankruptcy really much of an “award”?
I am sure somewhere in this country, we could find a person with a student loan debt of six figures and an advanced degree in medieval poetry. There is a lot of talk about delinquency and default rates but little discussion of the criteria for these loans.
Then, the student loan program is structured in such a way that two parties always benefit: the institutions making and servicing the loan and the institutions providing the education. The lending institution takes no risk because the loan’s principal is guaranteed by the federal government and the interest and fees are paid by the federal government.
And the educational institution always gets the proceeds. Indeed, the proceeds from federal student aid programs constitute the primary source of revenue for many for-profit educational institutions. (Legally, federal aid can constitute up to 90 percent of their revenue). In short, I am suggesting that, while in many instances students benefit from federal student loans, lending institutions and postsecondary educational institutions always do.
There is $1.7 trillion in student loan debt in this country, and with so much money on the line, there are always going to be bad actors who look for the angles and how to get a share of the pie. The existing programs are not well designed to defend against that.
Of course, many students have advanced their lives by enrolling in a for-profit, postsecondary institution in programs ranging from licensed practical nursing and truck driving to computer programming and construction management. But one can never forget that, down deep, a forprofit is for profit.
Consider the example of Corinthian College: At its peak, it had 77,000 students on 100 campuses, but it was shut down in 2015 after a federal investigation revealed deceptive and predatory advertising, programs of questionable value being offered to unqualified students, false statements about job placement and the like. In 2022, the U.S. Department of Education forgave 560,000 students of $5.8 billion in student loans that had been given to attend Corinthian, which was essentially a massive scam owned by Wall Street.
Turning from troublesome aspects of the federal student loan program to troublesome aspects inherent in student loans, consider how student borrowers become captive to their loans.
The average doctor, for example, finishes medical school with $250,000 in debt. While not common, it is not unheard of for a new doctor to owe $500,000. How can such doctors really consider pediatrics, a family practice in an underserved setting or some other relatively low-paying field? They have loans to repay and, of necessity, almost have to gravitate to higher-paying specialties. What effects do we think this has on health care in this country?
The weight of student loans can place people in life-long servitude. Conceivably, Ron DeSantis, a graduate of Harvard Law School and a Yale scholarship student, could move into the White House before paying off his student loans. I know people whose children are in graduate school and are still making payments on their own student loans. Millions of people must make the decision to buy a car, a condo or a house; to undertake graduate or professional study; or to have a child are made while they drag about the anchor of student loan debt.
Finally, when you personally have paid for your education by taking on a large amount of debt, it is only natural for you to think that your education’s primary purpose is to pay off those debts and to enrich yourself. Why should you think your education should benefit your community or country? You paid for it. You own it.
However, world leadership will be won or lost by brains — the educational and knowledge level of a country’s citizenry. And our seeing our education selfishly, as a private possession, is putting this country at a competitive disadvantage. It is for reasons like this that Princeton, a relatively small school with an enormous endowment, has for the past 20 years increased its gift aid and eliminated student loans from its financial aid packages.
I paint a bleak picture because I see the financing of higher education as a national issue. If we had a Congress that could deal with anything, it would be the subject of a serious discussion.