Based on a post I wrote last fall, “Solving the Student Debt Problem,” and a recent Op Ed by the economics journalist, Robert Samuelson, “Good News on the College Debt Front,” here is where I think we are on this serious problem:
- The unemployment rate is very low for college graduates, about 2.5%. We should strongly encourage post-secondary education for all.
- Since 1996 outstanding student loans have risen from $200 billion to $1.3 trillion.
- Counting both community colleges, four year colleges and universities, 56% of college students borrow money to pay for college costs.
- For undergraduates who attended two and four year colleges, more than half of loans were less than $20,000. Only 10% exceeded $40,000.
- The highest default rates occur at community colleges (23% in 2012) and at for-profit colleges (18%). Hurt worst are low-income and minority students who never graduated but have unpaid debts.
- The Federal Reserve Bank of New York has found a close correlation between subsidized loan and Pell Grant limits and the rapid increase of college tuition costs.
- Place a strict lid on the total amount of subsidized loans available for undergraduates, say $25,000 to $30,000 per person.
- Use the savings achieved in doing this to increase the size of Pell grants for the lowest income students who need help the most.
- Overall faster economic growth will help college graduates and dropouts alike find better paying jobs and make it easier for them to pay back their college debts.
- On an individual basis, urge all students, but especially low-income and minority students, to avoid debt as much as possible in the first place!
Conclusion: Careful analysis of the student debt problem shows that there are very useful steps to take which will not cost the federal government more money.