I originally wrote this article for BostInno, and it appears here.
The New York Times quoted Education Secretary Arne Duncan as saying people need to “think more creatively, and with much greater urgency” about ways to shrink the cost of college and therefore the potential for future student debt. I agree. The question, though, is how we really reform the system and not just perpetuate the same-old debt burden in a new way.
First, a few depressing facts:
- Student loan debt has surpassed credit card debt this year. That means we collectively have an unpaid balance of more than $1 trillion.
- Student loans aren’t discharged by bankruptcy; they stay with us for life.
- Forgiving student loan debt in its entirety via government bailout may alleviate the pressure temporarily, but it doesn’t fix the problem.
- Tuition rates tend to increase at twice the rate of general inflation.
- To cover the gap between family income and the increasing cost of college, students are borrowing more than ever. According to FinAid.org, that’s now about $10 billion privately and $100 billion federally—each year.
- And banks are making a killing off it.
Since privately held student debt is particularly burdensome — interest rates can be higher than federal alternatives, lending terms are less favorable, and there are fewer opportunities for loan forgiveness — the education debt crisis, which is clearly dire no matter your politics, is only getting worse.
The oversimplified causes of said dire situation, which you can likely infer from the above list:
- Tuition costs are rising significantly faster than inflation, creating an increased need for private student loans.
- The high interest rates and inflexible lending practices of private lenders make said loans more difficult to pay back.
A possible solution to both: All public institutions of higher education become their own “bank,” meaning student loans taken to pay for tuition at a specific school originate at that school. Said school is not an actual bank. There are no debit cards, checking accounts or little bowls of candy. Nor will they be allowed to use money, even profits from loan interest, for speculative investing.
The plan: Public universities offer low-interest, federally-backed student loans meant to fill the gap between proper federal aid, like Pell grants and Stafford loans, and the cost of tuition, which is usually covered by private loans. Forget regulation and trying to reform private banking. Cut banks and their aggressive lending out of the equation entirely by virtue of using their own capitalist devices against them: federal loans, coupled with equally cheap loans originating directly from a particular college, eliminates the desperation that drives many students to borrow privately. We’ve always been taught that education is worth any incurred debt. But is that true anymore? Thankfully that question doesn’t have to be asked if the burden of debt isn’t crippling. And this plan is a step in that direction.
Why and what it would mean: Schools would essentially be paying their own tuition bills via loans that would, over time, accrue interest. And thus profit. Meaning schools would be making interest on their tuition costs, which they’d eventually be paid back for. Think of it as a more profitable version of tuition payment plans, which already exist. Think of it as an extension of federal student aid, except managed by each individual school and not the Department of Education. Furthermore, it would not be the U.S. treasury that would benefit from accrued interest, but the school itself, which could use the cash flow to cover expenses, reducing the need to increase tuition prices.
The reasons it could work:
- If schools are responsible for their own set of loans, as opposed to the government as a whole, and that school would reap both the rewards and the risks of said loans, they’ll naturally be inclined to improve their system: the more students they graduate and prepare adequately, the more likely those loans will be repaid and they’ll profit, meaning more cash flow for reinvestment into their school. It’s self-perpetuating and small. The federal loan program suffers from one primary flaw: nobody specifically has a vested interest in the repayment of student loans except the treasury, which has no control over the quality of education. In addition, federal aid is burdened by subsidized loans and free money like Pell grants, which make it harder to profit. Schools already offer scholarships and tuition waivers, so introducing student loans into their system is just an injection of potential profit.
- The problem with repayment isn’t laziness or students’ unwillingness to pay. It’s their inability. It’s a lack of jobs. This plan provides a real motivation for our system of higher education to adapt to a changing economy. Because universities will, in essence, be paid to do so.
- There’s suddenly less need to raise tuition prices faster than inflation, since the student debt taken to pay for tuition will accrue interest. That interest will be paid to the school, not a private bank.
The question: Where do you get the huge influx of cash needed to fund all originating student loans from the get-go? If President Obama signed a $787 billion stimulus package in addition to Bush’s $700 TARP bailout of Wall Street, my first inclination would be to say, “The banks that owe our government billions can pay those billions back and that money can translate into relief for students instead of relief for bankers.”
And most importantly, what it means for students: Hopefully, a better education for less money. Also, an entire loan burden that has low, fixed interest rates and more lenient terms for repayment than private alternatives. That means you have less debt and the debt you do have is easier to pay back. Not to mention, there’s a huge influx of cash into the higher education system and no increased cost to the public—i.e. in the form of taxes. Banks will take a hit, but, in all fairness, isn’t it about time?
All of that said, I am not an economist and I welcome all critiques, inevitable rants about socialism and complete dissections of the above theory.
- Harvard t-shirt
- Old, zip-up sweatshirt
- Flip flops
- Name tag
Write “CEO” on your name tag and, voila, you’re the father of Facebook.
Estimated cost: $24
- 3-5 boxes of Peeps or rubber ducks
- Fabric glue
- Old sweatshirt
- Old pants
Glue the peeps or rubber ducks all over the pants and shit. Allow two to four hours for the glue to dry.
Estimated cost: $12
- 6 friends
- 7 white t-shirts
- Fabric paint
- 7 headbands
- Super glue
- Gray construction paper
First, write a weekday on each t-shirt. Next, cut triangle “fins” out of the construction paper-glue two pieces together so that it doesn’t get floppy. Fold the bottom 1/2 inch of each piece in opposite directions, creating feet on the bottom of each fin. Glue the feet to the headbands.
Estimated cost: $10 per person
- Empty cereal boxes
- Safety pins
- Fake blood
- Knife or fake ax
Pin the cereal boxes to whatever you’re wearing. Paint fake blood on your hands, clothes or arms. Carry a knife or fake ax.
Estimated cost: $10
- All black outfit
- White headphones
- White accessories (belt, bracelet, sunglasses, etc.)
- Black face paint
Cover yourself in black from head to toe and feature a couple white accessories. The key here is to use white sparingly. Throw on your headphones and you’re ready to go.
Estimated cost: $5-$15 (assuming you’re already an iPod owner)
Have any affordable ideas of your own? List them in the comments section below!
Rae Gomes, a freelance journalist and co-editor of the “Ten Things” column at The Nation magazine, recently wrote an article every student should read. Called Five Ways Young Americans Can Fight Back Against Student Loan Debt, the article outlines the reasons why, even with movements like #OccupyWallStreet picking up steam, America isn’t headed toward a Western version of the Arab Spring, which was sparked in Tunisia by a lack of opportunity and jobs for the youth–something we as a country also face.
Read the article and discover how drugs, corruption, and even our own apathy is keeping us in debt. And learn how to fight back.