Student loan debt continues to soar. When will schools be held accountable?
According to LendEDU’s most recent annual report that evaluates student loan debt trends across the United States, the average borrower from the Class of 2018 owes $28,288 in student loan debt. Nationwide, the outstanding student loan debt balance is the highest it has ever been, $1.6 trillion.
The broader economic implications for this worsening issue are hiding in plain sight; how will any young American qualify for a mortgage and purchase a house with a debt-to-income ratio heading towards a dangerous level just from student loan debt?
Who’s to blame for this student debt crisis that has unraveled so quickly? What you are reading may point you to the usual suspects: irresponsible millennials, greedy student loan companies, and uncompromising politicians. However, it’s time to hold the root cause of this problem accountable; the colleges and universities that charge exorbitant tuition rates must be reined in before any headway can be made in lowering student loan debt in the U.S.
Where do we start?
Reauthorizing the Higher Education Act (HEA) is the perfect place, yet much to nobody’s surprise, the legislation has stalled in Congress. As part of the proposed reauthorization, one of the main pillars of the HEA is to increase institutional accountability.
This means that colleges and universities will “share a portion of the financial risk associated with student loans.” If a higher education institution has repeatedly produced a history of high student loan debt figures that leaves graduates repaying their debts well into their thirties or forties, that school should be penalized and must also repay a portion of all student debt from graduates.
Schools throughout the U.S. continue to shamelessly raise tuition rates, knowing full well that they are only crippling the future finances of students. The institutions do this because there is no system to hold them in check; by leveraging the HEA to potentially put schools on the hook for millions of dollars in student loan debt repayment, perhaps these colleges wouldn’t be so quick to hike annual tuition fees.
In addition, improving transparency is another key component of reauthorizing the HEA. While higher education institutions are currently mandated to disclose a great deal of data, it is often overwhelming and convoluted.
Colleges and universities throughout the U.S. must look inward if the student loan debt crisis is to be remedied.
Any reauthorization of the HEA must include new practices in terms of how college and universities provide financial aid information so that both current and prospective students, as well as parents, can more fully grasp how student loan debt will impact their lives.
In a clear and concise manner, schools should provide the current debt load for students, in addition to projected debt at graduation and how many years it would take to repay. For potential students and parents, schools must outline their average student loan debt figures and be straightforward when it comes to what type of financial aid can be provided.
As it stands today, you can go to any number of sites and get back a few different average student debt figures for the same school; this nonuniformity creates confusion and leads to families taking on a student loan debt burden that they simply cannot handle.
Finally, colleges and universities throughout the U.S. must look inward if the student loan debt crisis is to be remedied. Can insanely high tuition rates be justified? Is providing more scholarships and grants a possibility? Higher education institutions should be focused on catalyzing the blossoming of young minds, not pinching pennies to preserve the bottom line.
Thankfully, we are seeing behavior change happen on some campuses. Wayne State University in Detroit has introduced the Warrior Way Back Program, which offers “incremental amounts of debt forgiveness to students who left without graduating if they re-enroll and make progress toward earning a degree. And in Rhode Island, Brown University successfully hit their goal dubbed the “Brown Promise,” which raised $120 million to replace all student loans with scholarships and financial aid awards.
The student loan debt crisis in the U.S. is not an irreversible one, and fixing it starts and ends with the institutions that put us in this current mess due to inexplicable tuition rates.
Mike Brown is a research analyst at LendEDU. In this role he uses data from surveys and publicly-available resources, to identify emerging personal finance trends and tell unique stories.