Student Loans: “Best Value”(?!), An Erroneous Idea, and Next Steps

By: Donald L. Swanson

“We don’t want loans.  We want grants!”

     —Yours truly, circa 2000s, on paying for college

“We are creating a ‘lost generation’ of young adults; they’re overwhelmed by their student loans!”

 —Recent comment from a friend

This article identifies two things that are wrong with our student loan system (Exhibits “A” & “B”) and next steps for changing them (Exhibit “C”).

“Best Value”(?!):  Exhibit “A”

A recent publication in U.S. News & World Report is titled,

“Best Value Schools—National Universities.”  

I don’t know what, exactly, “value” means in this publication.  But its meaning apparently includes something like this:  

—assuring that students have a heavy, if not oppressive, debt load after graduation (unless the student’s family can afford exorbitant prices).

Get this:  one-year budgets for graduate education in universities at the top of this U.S. News list include [Fn. 1]:

     $95,800, 

     $85,294, and 

     $84,277.

I protest!  There is no way on God’s green earth that these one-year budget numbers are anywhere near a “good value” . . . let alone “best value.”  

–Granted, some will come out of those graduate schools with high paying careers where getting-started costs won’t be oppressive.  But the bulk of their graduates will struggle with student loans for a very long time.

How does U.S. News & World Report get off calling these high-priced colleges “Best Value”?  [Fn. 2.]

 —They’ve not disclosed long-term effects of heavy college debt on students’ lives.

  —They’ve, obviously, never had to counsel a high-earning, young professional who can’t afford interest accruals, let alone principle payments, on student loans.

—They’re promoting the idea, perhaps inadvertently, that high price equates to high value.  This is a great disservice!

 —They’re lending credence and normalcy to the idea that huge student loans are reasonable and can be managed.

This list is Exhibit “A” on what’s wrong with our student loan system: exorbitant-prices are extolled as “best value.”

An Erroneous Idea:  Exhibit “B”

I recently read an item bemoaning cutbacks in loan amounts available to students.  The bemoaning makes two final points:

—Students will not be able to fund their education; and

—Colleges will go out of business.

[Note: Only one of these two points is about students, and the ultimate point is about colleges.]

The error of those two points is their focus on, (i) keeping high-price colleges afloat, and (ii) ignoring affordability for students. 

This demonstrates that the true beneficiaries of loans for high-price education are colleges—not students.  It’s the students who bear the burden of oppressive loans, and they do so for the benefit of high-price colleges!  

This is a tragedy!  And it is Exhibit “B” on what’s wrong with our student loan system: the economic interests of colleges are valued over the economic interests of students.

Next Steps:  Exhibit “C”

What student loan programs should do is this: 

(i) demand that colleges provide affordable education, and 

(ii) provide a student loan only when reasonable chances exist for repayment of the loan in a reasonable time.

Such steps would mean that high-price colleges, who are unable to adjust, might go out of business. To this possibility I say, simply:

“That’s too bad.  Affordable education is a higher priority than propping up colleges.”

—Beginnings

Student loan reform should begin with a requirement that lenders analyze the student’s financial condition and prospects before making a loan:

–When a student applies for a government-backed loan, the lender should make reasonable projections on, (i) whether the student will be able to repay the loan within a reasonable time, and (ii) what will happen to the student if he/she can’t.  

Denying a burdensome student loan (like normal lenders would do in prudent lending environments) may be bad for colleges — but is, ultimately, in the students’ best interests.

Such beginning steps are Exhibit “C” for solving the problem.

Conclusion

We’ve created a student loan crisis by promoting exorbitant-price education and by providing government-backed oppressive loans.  And in the process, we’ve managed to prop up expensive education on the backs of our students.  

This needs to change! 

We need to, (i) demand affordable education, and (ii) stop making oppressive student loans!

Footnote 1:  These numbers are from each school’s official website and are for one academic year, not including summer school.

Footnote 2:  They say the focus is on undergraduate education and includes scholarships and grants in the value equation.  But it’s unclear, and you have to dig around the publication to get this inference.

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