Student loan debt now tops 1.4 trillion, and legislators continue to look for new solutions to ease the burden for borrowers who struggle under monthly payments. But many experts agree that few of these solutions look at fixing the problem of the increasing rise in tuition costs or eliminating unnecessary borrowing.
Evidence has shown that more government assistance for higher education actually increases tuition costs. Yet legislators continue to come up with solutions that seem to encourage not only universities to increase their costs but students to borrow more money.
When the income-driven repayment program began in 2007, repayments were capped at 15 percent of the borrower’s monthly income. Under the Obama administration, the monthly cap has been lowered to 10 percent and after 20 years of repayments, all student loan debt is forgiven.
One of the biggest initiatives to ease the burden to borrowers is the Public Service Loan Forgiveness program (PSLF). PSLF forgives the debt of borrowers after 10 years of qualified payments while working in a public service job. The definition of “public service” is broad enough that it encompasses roughly a quarter of the workforce.
In a paper written for the Brookings Institute, “The Coming Public Service Loan Forgiveness Bonanza”, Jason Delisle explains how PSLF incentivizes students to take out higher interest loans for graduate school, knowing all the money borrowed will be forgiven. This leaves the unpaid student loan debt to the taxpayers; Delisle estimates PSLF will end up costing taxpayers about $12 billion over the next 10 years.
PSLF removes the financial responsibility of repayment from the borrower who agreed to take out the loan in the first place and places the burden on taxpayers — many of whom don’t have college degrees and earn far less money.
Presidential candidate Hillary Clinton’s higher education plan calls for students coming from families that earn less than $125,000 a year to pay little or no tuition at in-state public universities. The objective is to allow Americans from lower-income families the opportunity to attend college and graduate.
In an article written for Forbes Magazine, George Leef, the director of research at the John W. Pope Center for Higher Education Policy, stated that Clinton’s plan rest on two incorrect beliefs: “that the cost of attending is the main reason why many students from non-wealthy families don’t graduate from college and that getting a college degree would be very beneficial to them.”
Leef acknowledges that tuition fees are unnecessarily high but points out this is not synonymous to being unaffordable. There are a number of less expensive options such as a 2 year community college and less expensive state schools. Students can also apply through the federal government for Pell grants and other scholarships. Leef argues that many Americans are either uninterested or unprepared for more schooling and trying to incentivize them to attend with the promise of free college is a bad idea.
As students continue to take out federal loans to pay for college, policymakers should begin to look at what is continuing to drive up the costs of higher education and examine ways to deter students from unnecessary borrowing. To do this, legislators can reform the existing accreditation system to offer more innovative models and restructure the student loan program to better help those who need them.