A Happy Student Loan Monday

An investment in knowledge pays the best interest. ~ Benjamin Franklin

Today I also wrote a post on my other blog, the Ministry of Happiness with the same title, A Happy Student Loan Monday. That post is a discussion of my own personal journey with student loans. Today, 41 years after I took my first college class I paid off my student loans. But for this blog I want to talk about a couple of aspects of student loans.

Should students take student loans? – Like almost anything else in the world, it depends. For me, student loans were necessary for me to be where I am today, a dean with 20 years experience. As a first generation college student, college was my ticket to a level of quality of life no one in my family had ever achieved before and loans were a necessity for me to get there. But this isn’t the answer for every student. I will never forget once seeing an interview with a student complaining about the burden of their student loan debt. This student, like I was, was well over $100,000 in debt, in fact they were approaching $200,000. The student was attending Cooper Union in NY, a very expensive college, and was majoring in photography. The idea that a student was going into this level of debt for a job that has a starting salary of around $40,000 doesn’t make sense. My total debt was $140,000 and my payments over a 30 year repayment were almost $800 per month, $10,000 per year. That would effectively be 25% of the photography student’s salary and likely given double the debt, they would likely owe up to 50% of their monthly gross pay. Given that take home pay is typically 60% of gross pay after taxes, this is an untenable situation.

I’m not saying students should only get loans if they are going into high paying fields. What I am saying is that students and families need to do a better job of doing a cost-benefit analysis when they are deciding on what institution for students to attend, given what major they are intending to follow. For students going into lower paying fields, it will likely be wiser to go to lower cost institutions like community colleges for their first two years in order to lower the overall cost of their education. That way, if they need loans for their upper division undergraduate or graduate education, the total debt will be lower.

The second thing I want to talk about is loan forgiveness. – To be clear, I don’t think anyone should be absolved wholly of their responsibility to pay back money they willingly took while understanding the circumstances. As such, I absolutely support loan forgiveness for those students who were completely mislead, basically they were victims of fraud. I also support the Public Student Loan Forgiveness Program. People who take loans in order to get degrees that allow them to earn the credentials to serve the public, should have the opportunity to have some or all of their loans forgiven. But there needs to be reform with this program, the criteria for loan forgiveness in this program is far too restrictive and helps far too few people who serve the public good.

I also support the idea of income related loan forgiveness, this currently does not exist. I support the idea of lower front end interest rates for student loans to low income students. And then, I support income linked repayment plans for those students that parallel the current methodology for the Public Student Loan Forgiveness Program.

The issues with our current high level of student debt in this country, over 1.76 trillion dollars, gets solved going forward by doing work on both the front and back end of the process, with a higher level of education on the front end. Let’s make sure students and families have greater access to education before taking out student and parental loans for education costs. Let’s do a better job at colleges and universities of helping students find more efficient pathways through their education, shortening the time and lowering their overall cost. Guided Pathways work on many campuses is a great start, but we also need to do a better job of helping undecided students find their way to a pathway that works for them. Efficiently helping students find a major, while allowing for a proper level major exploration, then efficiently getting students through their programs reduces the cost of education. Providing appropriate loan support and loan forgiveness, can help reduce the burden of student loans on students and the resulting impact on our society.

What do you think? Please share your thoughts in the comments.