IHEP: Rethinking Higher Education Debt

The Institute for Higher Education Policy (IHEP) has released a new report, co-authored by higher education finance experts Sandy Baum and Saul Schwartz, which discusses how to approach the concept of college affordability.

“Rising college prices, stagnating incomes, and diminished asset values have led to the widespread perception that college is ‘unaffordable’ for more and more people. Understanding the complex factors affecting the actual price of college, perceptions of that price, and the very real struggles facing today’s students is vital to efforts to increase educational opportunity,” says IHEP President Michelle Asha Cooper, Ph.D.

The report recommends adopting the following policies: That financial aid and higher education pricing systems should be simplified and made more transparent; that students and their families should be made more aware of the benefits of postsecondary education; that student loan programs should include adequate protections for borrowers; and that grant aid provided through the tax code be better targeted towards disadvantaged students.

Cooper continued:

“This report, Is College Affordable? In Search of a Meaningful Definition, is meant to serve as a foundation for more constructive policy discussions about the financial barriers to postsecondary education.”

The main thrust of the report is that the way people view education debt should be revised. Currently education debt is perceived by many to be an unacceptable burden as it is viewed as a lump sum and compared to current incomes. The report reviews lessons learned from approaches to the affordability of housing and health care and believes that education debt should be viewed in the same way: as a long term investment paid for with installments over time.

On average postsecondary education is an investment with significant benefits, but it is an uncertain investment that does not pay off equally well for all. A weak economy increases the uncertainty associated with the level and timing of the return to investments in postsecondary education, but does not alter the reality that for most people, financial outcomes are far better than they would be without the investment.

The Institute for Higher Education Policy is a nonprofit based in Washington DC which promotes access to and success in higher education for all students.

Sandy Baum is an economist and senior fellow at the George Washington University’s Graduate School of Education and Human Development, as well as a senior associate at IHEP. She has written extensively about college access and affordability and other higher education finance issues including multiple reports co-authored with Schwartz over the past twenty years. Saul Schwartz is also an economist and professor at the School of Public Policy and Administration at Carleton University in Ottawa, Canada.