Op-Ed: Student Debt Crisis is a Crisis for Us All

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Higher education is bankrupting an entire generation.

Students, parents, schools, lending institutions, and most certainly government have all contributed to this crisis.  Society convinced a generation of students and their parents that attending a four year college was the sole path to success. Students obliged, but some paid little attention to the job prospects of their majors following college.  Lending institutions paved the way by loaning large amounts of money to high school graduates, regardless of their ability to pay. 

Meanwhile, parents allowed their children to “invest in themselves” because they were convinced that college was a “necessary debt” that would eventually pay for itself, while simultaneously neglecting to pass on the aversion to debt that characterized previous generations.

And all the while, government sat idly by while an entire generation propelled itself towards financial ruin.

Many argue that students should forgo post-secondary education altogether due to the astronomical cost. The reality of our current job market is that over 65 percent of job openings through 2020 will require a college degree.  Addressing the trade skills gap is certainly part of the solution; however, forcing all students into skilled trades will swing the pendulum too far in the opposite direction – we need balance.

Since 1978, college tuition has increased by over 1,120 percent, four times faster than the consumer price index.  Yet, studies show that today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago.

This has resulted in younger generations taking on 300 percent more student loan debt than their parent’s generation; leaving long-term effects on the national economy and causing ripple effects in our communities.

Between ongoing fallout from the recession and a high cost of living that is outpacing wage increases, student-loan debt has made it difficult for younger generations to save money, forcing them to postpone key life decisions such as getting married, having kids, buying a house, and saving for retirement.

In fact, some experts have pointed to the ominous similarities between the student-loan debt crisis and the mortgage crisis that caused the economic crash of 2008.

The rate at which student-loan borrowers default on their debt is nearly the same as the rate at which people defaulted on their mortgages in the years leading up to the crash.  Perhaps even more alarming is the fact that the total US consumer debt was higher in the first quarter of this year than it was in 2008.

All of this is to say that the student-loan debt crisis is not a problem unique only to young adults or college graduates, just as the mortgage crisis was not a problem unique only to homeowners.  Rather, just as in 2008, these trends could culminate in a financial crisis that will affect our entire nation.

This begs the question – what can be done?

Tackling this issue before it becomes a full-blown, economy-wide emergency will require a multi-faceted approach that addresses the student-loan debt crisis from all angles.  These will include controlling costs, making college more affordable, decreasing the financial risk of earning a degree, and helping students and their parents make informed decisions about the appropriate amount of debt to incur to accomplish their higher education goals.

Recently, I was appointed to a position on the Higher Education Funding Commission where we will consider the state’s role through topics such as affordability, administration and operations, graduation and retention rates, student financial aid, job placement after graduation, entry level wages, student loan debt, and the overall goal of higher education.

Through my role on the Commission, I hope to look at performance-based metrics for higher education funding decisions as a way to hold institutions accountable for results; for example, prioritizing funding for institutions that graduate students with degrees that are in high demand in Pennsylvania.  This may entail placing more emphasis on alternative pathways such as tech schools, certificate programs, trades, and apprenticeships.

But it is also critical that we look at ways to decrease the burden to students who have already borrowed for a post-secondary education.  To that end, I have recently circulated a co-sponsorship memo for an innovative proposal that seeks to offer better repayment options for graduates by leveraging existing state assets.  Eligible applicants must have completed their degree, secured employment, and responsibly begun repaying their debts – these students should not continue to be shackled by high interest loans.

Finally, it is important that we re-evaluate the way we view debt, in general.  A reboot on our willingness to incur debt and an understanding of debt’s impact through financial literacy could go a long way toward helping future generations and should be a part of the broader debate.

With this obvious problem in front of us, it is past time that we engage in a thoughtful conversation about potential policy solutions to reform Pennsylvania’s higher education system.  We must come together to find solutions, because this burden isn’t unique to students, to the younger generation, or to those with children hoping to attend college – it affects us all. 

Let’s not repeat the mistakes of the past.  Let’s work together to solve this problem before it’s too late.

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