That how much students get out of a college education is directly proportional to how much they spend on it is a pernicious but persistent myth. This belief has helped lead to the student debt crisis in the United States that has already cost the country $1 trillion, and could end up draining an additional $4 trillion out of the economy in the coming years.
Although politicians have been pointing to student loan interest rates as the culprit, but the schools themselves are a source in need of reform. Specifically, they should take to task colleges and universities that push students into debt instead of helping them afford education by offering them financial aid in form of grants.
That is one of the four ideas proposed by John Wasik of Forbes Magazine to lower the burden of college debt on country’s students. And the burden is substantial. According to a study by Demos, a progressive think tank, borrowers can lose as much four times their balances in lifetime income – with the impact higher among lower income families, who can afford this loss the least. The Demos report, authored by Robert Hiltonsmith, says that the solution is for lenders to offers borrowers a chance to refinance at lower rate and more favorable terms. However, Wasik believes that the impact of this change will be too far in the future, and some steps need to be taken now.
What can we do now? There are some immediate steps that can be taken, in addition to Hiltonsmith’s recommendations.
* There needs to be a priority in finding — and rewarding — colleges that award grants over channeling students into loans. These are typically the colleges with the best endowments. If you’re like me, a parent on the cusp of vetting colleges, look for schools that offer a higher percentage of “merit-based” aid to students.
* Seek out colleges that promote work-study programs. I worked my way through college while holding two part-time jobs. Most colleges have some kind of work-study option. They should be expanded and pay more.
Wasik also recommends that students seek out paid internships and scorn unpaid work. He believes that such internships are so vital that students should pressure their representatives to make more of them available. He also notes that high school graduates give their local community colleges a second look as they remain the best deal going in higher education.
At the very least, there should be some rigorous “truth in lending” rules before student loans are granted. How much will the debt impair their ability to achieve a middle-class lifestyle? What will they likely be earning given their intended degree? All of this needs to be put on the table long before the loan documents are signed.