BERNSTEIN: Debt mitigation needs to attack sources of problem


Column: Mind You

With approximately 20 million students enrolling in American universities yearly, few U.S. families live without the shadow of tuition costs looming overhead.

As an undergraduate student at Rutgers University, I should know. I spent the last four years of high school listening to friends gripe about the sledgehammer of debt poised above their heads as they apply to and enter U.S. universities. Sometimes their complaints are shallow, but all too often their joking demeanor veils deep-seated financial dread. 

The only more anxious group of people in middle-class suburbia seems to be their parents. And why should they not be anxious? Student loan debt affects the daily lives of Americans on a scale that few other contemporary issues can match. 

Today, our country wallows in $1.4 trillion of student debt, and that number grows by the second.

The student loan crisis has created an untenable situation for the next generation of working Americans, and only a multifaceted solution can hope to remedy its disastrous effects.

The ballooning costs of college education in America is itself puzzling, disturbing and difficult to account for. Many have attributed the sharp cost increases — 344% for public universities and 241% for private universities since 1980 — to a growing demand for public education. This cannot fully account for the change in costs. 

Although the number of students who enroll in universities every year has drastically grown, the percentage of Americans who enroll in public and private universities yearly has barely increased since 1980 — roughly 1%. From 2000 to 2017, likewise, the percentage of 18 to 24-year-olds enrolled in a university increased by 5%: A significant increase, but not sizeable enough to explain the cost increases of universities.

There is, of course, a second explanation. College prices have silently skyrocketed in recent years because college-bound Americans have bought into a fantasy about higher education, one that values undergraduate prestige over financial prudence and academic quality,  therefore enabling “prestigious” schools to drive up costs beyond the scope of reason.

For example, twice the number of students applied to Ivy League schools for the Class of 2023 as compared to the Class of 2007. The demand for a college education may not have changed much over the years, but the demand for elite schooling has.

To combat student debt, we must first encourage in-state matriculation over private or out-of-state enrollment. The tuition and fees of the average private school cost more than three times that of in-state costs — despite the fact that many private schools rely significantly less on tuition fees for their funding than public universities. 

While in-state costs can still incur a serious financial burden on lower-income and middle-class families, they pale in comparison to the average cost of a private school. This is especially true for the middle class — a demographic colleges should embrace, not drive into debt — who rarely qualify for substantial need-based aid, despite having limited financial resources.

An increase in in-state matriculation has the potential to improve the state of education and student debt from myriad directions. That the average family will pay significantly less on college education is a given, but there are many other benefits that have the potential to arise from such a matriculation shift. 

For example, an increase in funding to state schools would further improve the quality of education at public universities, and a decline in matriculation to private schools would incentivize these schools to lower tuition costs in order to maintain students. 

Additionally, with increased funding, state schools could expand specialized academic programs and honors programs, allowing them to remain competitive with elite schools in attracting academically outstanding students.

Of course, strategies that minimize future debt accumulation do not change the fact that Americans are already drowning in $1.4 trillion of student loan debt. A number of high-profile politicians have weighed in on the prospects of loan cancellation. 

Sen. Elizabeth Warren (D-Mass.) has proposed a debt cancellation plan for families making a household income of less than $250,000 a year by taxing “ultra-millionaires” (those whose net worth exceeds $50 million). 

Warren’s plan is ambitious — she hopes to cancel $50,000 of debt for everyone with a family income less than $100,000 — and worthy of study. But, it could be a disaster if incorrectly implemented. First, a debt cancellation plan will entail no long term benefit without additional strategies intended to lower university costs. 

In fact, cancellation alone may encourage private universities to raise their prices and disincentivize future undergraduates from making realistic financial choices with regard to their higher education. Second, Warren’s proposed source of funding — “ultra-millionaires” — will certainly push back on her legislation. If they succeed, Warren’s cancellation plan will lack funding, and the country’s student debt crisis will remain as urgent as before. 

Politicians other than Warren have also weighed in on the student loan crisis. Presidential candidate and entrepreneur Andrew Yang’s “Freedom Dividend” policy — which would give every American citizen at least 18 years old $1,000 every month — is yet another prospective “semi-solution” to the student loan crisis (as well as a slew of other economic problems ailing the U.S.). 

Sen. Bernie Sanders (D-Vt.), another presidential hopeful, hopes to cancel student debt via taxes on financial transactions, such as stock and bond trades. We ought not act surprised that so many presidential candidates talk of student loan cancellation. 

Approximately 7 in 10 of college students are graduating in debt. Whether these candidates’ particular plans are feasible or folly, they underscore the importance of stabilizing the current situation in tandem with long-term solutions.

The student loan crisis will not disappear on its own. If we want to live in a country with an affordable higher education system, we cannot be complacent in the face of growing costs, and we have to address student loan debt on multiple levels. Not just by supporting federal policies, but by changing the matriculation culture of America.

Daniel Bernstein is a School of Arts and Sciences first-year looking to major in cognitive science and biomathematics. His column, "Mind You," runs on alternate Fridays. 

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