President Joe Biden has set an aggressive agenda for his first 100 days in office. Atop that agenda will likely be higher education reform to reverse the course of the country’s $1.7 trillion student loan debt crisis.
And rightfully so.
The nation’s near $2 trillion student loan debt balance makes it the second-largest form of consumer debt in the country. According to LendEDU, the average student loan borrower from the Class of 2019 owed $29,076 upon the conclusion of their college career.
On top of the staggering numbers, student loan debt reform has also finally become a high-priority issue for both parties as neither wants to lose votes from the millions of young Americans that are the most financially hamstrung by student debt.
This gives the President the opportunity to score a major, bipartisan policy achievement within his first few months. He can have that achievement by working with college and university administrators and holding them accountable for their own affordability.
The country’s student loan debt problem has evolved to its current state in large part because of the colleges and universities themselves.
In the last 20 years, they have raised tuition rates at a level that is outpacing the inflation rate by at least three times. Higher tuition rates have required most students to take out more student loans to cover costs.
Higher education institutions have gotten away with the unjustifiable increases because there’s no one stopping them. There is no system of accountability. A college raises its tuition because all the other schools have and a student has little choice but to take out more student loans lest they decrease their value in the working world without a degree.
And the cycle continues.
But, President Biden can break the cycle if he passes bipartisan legislation that punishes colleges and universities that have a consistent history of high student debt & default figures.
The idea is not new. In March 2019, former President Trump’s White House submitted proposals to reform the Higher Education Act. Amongst these proposals was to “increase institutional accountability” by requiring “postsecondary institutions that accept taxpayer funds to share in the financial responsibility associated with student loans.”
President Biden should carry on this proposal and eventually sign it into law with bipartisan support. If any one college or university has consistently high student loan debt and default figures, they should become equal partners in repayment with the borrowers that attended their institutions.
This would put some onus on higher education institutions to decrease their tuition rates and keep them there.
In this same vein, Biden should also add to what his predecessor proposed by rewarding those colleges and universities that have low tuition and low student debt and default numbers.
Any school and its administrators that actively work to keep tuition low and affordable and prove it by having excellent student debt figures should be rewarded via additional federal funding.
That funding could be used to offer incoming students more generous financial aid packages, mainly in the form of scholarships and grants. Or, it could be used by the institution to bolster research done on-campus or improve campus facilities.
A system of checks and balances exists for most other sectors or industries, but for some reason does not exist in the U.S. higher education system. This has allowed colleges to run wild with tuition, which has put us in the student loan debt crisis.
President Biden can change this by pushing for a bipartisan higher education accountability bill that he can eventually sign into law. This bill will finally establish a working relationship between colleges and the federal government as the former will ultimately have to answer to the latter and be held accountable for its own affordability.
The student loan debt crisis has negatively impacted students and the government, but not the colleges and universities.
By creating a law that rewards affordability and low student loan debt and punishes the opposite, higher education institutions will actually have some skin in the game and have an interest in keeping student debt at a minimum.
In his role as Director of Communications at LendEDU, Mike uses data to identify emerging personal finance trends and tell unique stories.
