5 Ways America Can Fix the Student Loan Crisis

It’s no secret that America has been suffering the plight of student loan debts. With the United States looking at $1.2 Trillion in debt and growing, the problem has extended far beyond students currently in college and those paying off or becoming delinquent on loans. The rate is stagnating the economy and, according to Barbara O’Neill, financial expert from Rutgers University, stated

There’s evidence entrepreneurial activity is down. When you have that big student-loan debt over your head, you’re less likely to take risks.”

With the rise of popularity in Bernie Sanders campaign (and his big ticket item in proposals being a drastic change in the college education) it’s important to look into realistic solutions to these economic issues. Each of these five solutions are possibilities to getting America on the road to recovery, but not all of them fit into the Free College initiative this candidate is proposing.

The beginning of this economic downhill began with the policy enacting government intervention into student loans to encourage students attending college. In 2003, there was a debate between guaranteed loans for college versus direct loans that were cheaper for the government as well as being more direct.  

The Ensuring Continued Access to Student Loans Act  (ECASLA), the act that first introduced the D.C. to take on subsidizing these education with loans, resulted in taxpayers eating the cost of delinquent loans rather than the private sector.

Subsidizing in essence, created the financial debt we now have as a country.

As glamorous as “free college” sounds, and at times unrealistic, a few things would have to happen for that to be a viable option,

 

  1. Making College More Economical

As usanews.com author Kevin James statedsubsidizing to bring price down or making something cost less to deliver. The focus of government policy for decades has been on the former approach. We need more of the latter.”

Instead of taking on college student’s debts to match the high cost ofpiggy bank

attendance, wouldn’t it make more sense to bring the cost of college down instead?

One option is using online services to better dispense information being taught in classrooms.

Online lectures, tests, and course material cuts down on faculty pay costs to have them present in the classroom, as well as general facility costs such as energy and air conditioning while class is held physically in the room.

Also, credit-by-examination allows a student to complete courses through their own motivation to study themselves and completely eliminates any faculty and administration costs without the quality of the education deteriorating for core classes in particular.

  1. Capping Tuitions on campuses

One way to reduce government spending on colleges in general is managing the hyperinflation of college tuition. The increase has drastically impacted the affordability of college. From 2000-2013, the cost of college has increased, on average, a staggering 87% while the average middle class income has only raised 24% within the time frame. It has been raised consistently 6% faster than the rate of inflation.

Because of amenities, student services, and college athletic programs, the cost of tuition has been skyrocketed incredibly beyond the scope of the reasonable increase for better staff and technology.

Accounting for some of that increase is colleges raising sticker prices to illicit the idea that their prestige has increased and will attract higher-income students willing to pay that tuition without question and raise funds to offset cost in scholarships to the rest of the student body. However, this method is ineffective because college profits have remained stagnant despite the excessive raise in tuition. It has only become less attainable to the general populace.

In addition to these perks to students, the financial paybacks from athletically successful schools led to a substantial increase in budgeting for athletic departments including scholarships to sports-gifted students. Even more, the raise in pay rates of higher-level teachers has raised 28%, double the rate in previous years.

While colleges raise the spending of their schools, after the recession, states cut funding tremendously, causing schools to budget the aid from the state to less than 2,500 per student, driving prices even that much more. Many schools that used to be entitled “state supported” now are adjusted be be called “state assisted.”college grad

One way to counter this would be for the government to cap the cost of tuition and give tax incentives for the colleges that do. An idea from Time magazine is “if universities raise tuition more than the Consumer Price Index, they should be required by Congress to take money from their endowments to fully fund grants for the corresponding increase in need for students on financial aid.”

This in turn would make colleges responsible for their budgets and tuition increases rather than the government paying for the gap.

  1.  Focusing on Lower Level Skill Shortages

The only way that Bernie Sanders plan could possible work is for a focus on lower level skill jobs that are in higher demand than ever. Having a surplus of college students flooding universities and the job market with low-demand jobs would only make  the financial loan crisis worse because of delinquent loans from recent graduates unable to find employment able to sustain their loan payments.

Instead, there should be a version of a quota-system to fill schools with a balance of degrees–including technical and vocational training to fill that demand. With a balance of worker, the oversaturation in college graduates being seen today would decrease enough for a difference to be seen, even if it is a quarter to half of a century from now. Only then would there be true success in a more educated country overall.

  1. Limiting the Numbers Actually going into college.

As grim of a reality as this is, the only feasible way to avoid $6.26 billion in tax dollars a year to fund public college and make us have the social-justice aspects of many european countries, it would require us adopting their process of admittance–more standardized testing. The only way countries like Germany can afford tuition for it’s citizens is for all those applying to pass an exam that would indicate whether or not that would be successful. This goes against the warm, fuzzy, land-of-opportunities vibe that most Americans are going for when they think of social-justice and equal opportunity. Studies have also shown that this tests fail to truly be indicative of success in the workforce.

  1. Raising Taxes

Maybe an even fouler curse than standardized testing to establish quality is also the raising of taxes. Most voters “feeling the Bern” recognize this as a reality and accept it as a move towards social justice in America.

However, as nice as it would be to increase spending and magically educate people, the reality, according to these studies, “the most educated workforces in the world” today don’t have free college. And countries that do have free public universities don’t necessarily have more educated workforces than we do.

Germany, one of the models for free education in America, also has the second highest tax burden in the world. While some would argue that it is a small price for an educated society, it is a reality to all of America–even those far beyond benefiting from it and still can’t afford those taxes. We would be, in essence, increasing the poverty rate to pay for this venture.

Even with this increase in taxes, it would only enable the colleges to increase spending and would only transfer the debt from the families putting children through college to the taxpayers.

If all these options were to be put in place, would Bernie Sander’s plan work? The simple answer is no, and here’s why:

With these five different way to address the student loan crisis, think wisely when picking your candidate. This issue applies to everyone and the efforts to end the student loan crisis being made now will affect your financial decisions for the rest of your life. Your vote truly matters.

 

Sources:

Attn Staff. “How Does Germany Afford Free Tuition For All of Its Citizens?” attn. Attn, inc. 27 Mar. 2015. Web. 22 April. 2016.

Berman, Jillian. “What’s Really Causing the Student Loan Crisis According to Sheila Bair.” MarketWatch. Marketwatch, Inc, 17 Oct. 2015. Web. 22 Mar. 2016.

Berman, Jillian. “A High-School Diploma is Pretty Much Useless These Days” Huffpost Business. TheHuffPost.com inc, 28 May. 2014. Web. 22 Mar. 2016.

“It’s Time to Make College Tuition Free and Debt Free.” Bernie 2016. Bernie 2016, n.d. Web. 22 Apr. 2016.

Eskow, Richard. “Free Education is a Human Right.” Campaign for America’s Future. N.p. 19 Mar. 2014. Web. 22 Apr. 2016

Goodmen, Steven. “Why College Tuition Should Be Regulated.” Time. Time, inc, 27 Oct. 2011. Web. 8 May, 2016.

Gorman, Ryan. “How Student Loan Debt is Dragging Down the Economy.” Business Insider. n.p., 1 May, 2015. Web. 22 Apr. 2016.

James, Kevin. “Bernie’s Bad College Idea.” U. S. & World Report News. n.p., 27, May 2015. Web. 22 Apr. 2016.

Kamentz, Anya, Westervelt, Eric. “Fact-Check: Bernie Sanders Promises Free College. Will it Work?” nprEd. N.p., 17 Feb. 2016. Web. 8 May 2016.

 

Lermen, Robert, Schmidt, Stefanie. “VII. The Low Skilled Labor Market.” United States Department of Labor. United States Department of Labor, n.d. Web. 8 May 2016.

Lips, Dan. “Ways to Make Higher Education More Affordable.” Webmemo. The Heritage Foundation, 29 Jan. 2010. Web. 22 Apr., 2016.

Photograph. Online College News. n.p., 26 Apr. 2014. Web. 22 Apr., 2016

Roark, Lisa. “Over the Cliff.” Cartoon. WebPoetherersGroup, Inc. 27 Apr. 2014. Web. 22 Apr. 2016.

Shoen, John W. “Why Does a College Degree Cost So Much?” CSNBC. csnbc, 2016. Web. 19 Mar. 2016.

History of Federal Student Loan Programs. Atlas, 7 Jul. 2015. Web. 22 Mar.  2016.

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