What’s the solution to the student-debt problem?

One of the issues motivating the Occupy Wall Street movement is student-loan debt, which now equals the size of credit card debt in the United States. The average debt is $24,000, but many graduates carry a balance much larger than that. Today’s Question: What’s the solution to the student-debt problem?

  • Clark

    If you major in art history and take on $35,000 in student debt, your in big trouble. Illusion of the value of your degree vs. reality

    of how employers value your degree.

    As an employer, this is the new realty. Far too many students spending good money on majors that will not add much value to their job search.

    For those on the radical left who believe all education be “free”‘ recall we are already 15 trillion in debt. We can’t afford the proposed social welfare system, as Europe has learned.

  • http://spaceghetto.st GOD

    one word, FORGIVE

    if the money was never there to start with then why should people have to pay it back? If that happens our dollar might come back strong and anyway, if the United States of America can’t pay it’s own bills why should the graduates who can’t even find steady income? To top it off, restructuring our education culture would help too… you know, take away that whole idea that after high school you have to go to college and them get a job. It’s just not realistic to lead people to believe that is how life works… drop the American dream and live in the American reality.

  • Kurt

    One of the great ironies is how worked up people get about the price of gas vs the cost of college tuition. Since the mid-seventies a gallon of gas has gone up about 400% , tuition at the Uof M about 1300%. People rail against “big oil”, but the education system gets a pass. Why aren’t college adminstrators marched before the always available senate sub-committee? Another irony is that

    its entirely possible that all the grant money being thrown around has something to do with the steep rise in tuition.

    The price has ben artificially inflated just as happens on a larger scale when the Fed prints money.

  • John

    Stop giving out loans and/or taking loans. The Banksters are the problem again. Only 20% of freshman students graduate, so the investment in higher education for the 80% that don’t graduate isn’t very good. More focus on lower cost technical school education should be made.

  • Hedgie

    It’s too bad that students make these “rational choices” about going into debt, and then complain later.

    Myself, I had to work while attending college in the evenings. I had to forgo cable TV, cellphone, hippy-hoppity fashions, and make other sacrifices to put food on my table and a roof over my head. People had no shame in laughing at my lifestyle. (“You don’t have…” hahaha)

    I’m not in debt, so it was worth it. College debt can’t be expunged in bankruptcy. It’ll come out of their Social Security check if need be.

  • reggie

    The level of student debt (near $1 trillion) is a result of too many people making bad borrowing decisions and too many lenders making bad loans. It’s no different than the housing and consumer debt problems, and we ought to be unwinding them in the same way. Individuals will feel the pain, but the lenders (and the investors behind them) ought to get a haircut for their own roles in enabling poor decisions.

    Going forward it’s easier to control: students should choose schools they can afford. There are perfectly good schools at all price points, offering all possible majors. Most of us can’t afford the name-brand schools, and should not take on the debt to do so.

  • Beng

    I’ve been out of graduate school for some time now and I can barely afford to pay off the interest on my loans, let alone the principal. I might also point out that these days, especially at large research institutions in the US, fellowships are no longer even granted to Master’s students for teaching or tutoring. Essentially, these programs are cash cows for supporting the Ph. D. level classes on offer because the Ph. D. students by and large have a free ride. It’s been pointed out to me before that Ph. D.s having lower wages after the completion of their degree than a professional Master’s student makes some debt from the graduate school experience the arbitrage condition.

  • GaryF

    Once again, we are lending to people who are bad credit risks at lower than market rates and then wondering why people can’t pay it back? Kinda sounds like the mortgage problem we just went through.

    And now that the government took it over, well, they can just continue to lose money on it. It’s just money.

    And we wonder why college costs are going up? Well, simple economics, you push the demand curve with all the easy money and costs have to go up.

  • GaryF

    Wall Street Bankers=Emmanuel Goldstein

  • Steve the Cynic

    Another question about “the solution” to something! We need to open our minds and realize that most of the problems we face have a range of good enough solutions, and if we’re willing to negotiate and compromise we can settle on one. The idea that there’s only one correct way to address any given problem, together with ideological disagreements about what that is, is feeding the polarization of America today.

  • Rich

    @ Beng

    Having undergraduates work as lab slaves and interns with no compensation other than course credit is a violation of labor laws and should result in fines and jail terms for the academics involved. There is no more exploitive employer/employee relationship in America, with the possible exception of the serfdom experienced by some PhD candidates. Universities are a con game run by and for the academics in them.

    One simple solution to the problem of overpriced universities is to make all of the state-owned universities non-profit corporations, and convert all of the subsidies into vouchers that travel with the students. Universities have little incentive to reduce costs when 80% of student spots in a state are run by a near monopoly, the state, with the other 20% of private spots forced to compete at the high end because of their lack of access to state subsidies.

  • Emery

    Better management would allow American universities to do more with less

    First, separate the funding of teaching and research. Research is a public good, but there is no reason why undergraduates should pay for it.

    Second, increase the student-teacher ratio. Business and law schools achieve good results with big classes. Why not other colleges?

    Third, puncture administrative bloat. The cost of administration per student soared by 61% in real terms between 1993 and 2007. Private research universities spend $7,000 a year per student on “administrative support”: not only deans and department heads but also psychologists, counsellors, human-resources implementation managers and so on.

    Students could complete their undergraduate degrees in three years (as is normal elsewhere), instead of four. In practice, most American students take even longer than four years, not least because so many work to pay their tuition.

    The cost of tuition cannot forever rise faster than students’ ability to pay. Industries that cease to offer value for money sooner or later get shaken up. American universities are ripe for shaking.

  • Kari

    First off- people my age (mid to late 20’s) need to realize that our loans will not just be forgiven and disappear. Sad, but true. And while the loan companies are by no means saints, we need to more and more start also pointing the finger at the colleges and universities. They are the ones that keep raising the prices.

    And while it’s great to hear again and again about people who worked to pay their way through college and come out almost debt free- those cases are few and far between today. I am paying for my own undergraduate and graduate education. And while it would be nice to be able to not have debt- it would take me much longer to complete my 2 year grad degree if I didn’t take out loans- one class costs around $2,000. It’s gone way too far out of reach for some of us. In the real world, if I tried to work and pay off grad school, I wouldn’t be able to afford my bills- so I’d have to probably go on public assistance like Minnesota Care or food stamps. And then be criticized for being lazy and using welfare. Wow, sounds like a win-win to me…

  • david

    Reading many of these post here so far, few of you are qualified to answer and should just keep your opinions to yourselves. You regurgitate your partisan views, but unless you have graduated in the last several years, or have a child in school now, you are out of touch. The comment about the art history major is ridiculous. That is a talking point with no basis in reality, it just doesn’t happen. I know several people with business degrees stuck working long hours for not much more then minimum wage managing at Starbucks, Super Americas, etc. None of these people “were living large” during school, some had families and went back to school to better their lives. Unless you have rich parents you just can not go to any school these days without taking out some loans. Grants are almost non-existent, and like Kurt mentioned the cost of college has gone up 1300% over the last 40 years. Pay hasn’t unless your a hedge fund manager or oil company executive.

    The right wings mantra of cutting spending to public schools is biting us all in the ass today, and will just be getting worse. You can not keep destroying the infrastructure of the nation and sustain growth.

  • Patrick

    I’ve been out of the student debt issue for a while now i’ll admit. I graduated in 1997 from a 4yr college with GI bill & in-state tuition – thanks to military selective residence. But even so, i was annoyed to find out that all the savings i had done over 2-4 years for college to reduce the need for loans and make the money i saved stretch over 3-4 years just meant i paid my freshmen year COMPLETELY out of pocket cause i had too much savings – not income – savings! to even qualify for a pell grant . my remaining 3yrs i had fed and school help but had to take out a few loans to make it – how come no one mentions that little fact when telling parents & students to save for collge. also just how much of your parents income & Assets should be delcared or considered to determine scholarships, shouldn’t we consider an inverse of loans only up to 40% maybe considered liable for payment to a kids college education?

  • CWG

    There seem to be a lot of smug people who’ve only made good decisions and had good luck here. Both my husband and I are the children of divorced parents who were unable/unwilling to contribute much in the way of our college. Both of us worked our way through college and took out student loans. I worked as many as three jobs at a time while going to school full time. The result of this was that I neither did justice to my studies nor came out debt free. Our college/grad school loans plus the interest that accumulated while we were getting established are roughly the same as the cost of our modest home. We will be paying on this debt like a mortgage, we are on the thirty year plan. Unlike our mortgage, we cannot refinance to a lower interest rate even though we have a great credit score and pay all our bills on time. Also- note the tax deduction for student loan interest, it phases out just as you are reaching an income where you can justify the debt you took out. This deduction is also the same no matter how many members of your family have student loans that you are paying on, one spouse, two spouses, both spouses and children….

    We live in a world where it is drummed into us that a college education in necessary and that we will be left behind by the knowledge economy if we do not go to college. We see that low skilled jobs are a ticket to job insecurity, low wages and low benefits. At the age that most students enter college, there is very little true experiential knowledge of what it will take to pay back those student loans. When you combine the pressure to go to college with the financial naivety of students and the No Exit quality of student loans- you end up with a recipe for an easy road to lifelong indentured servitude and fiscal despair. Even in a good economy, student debt is a ball and chain. In a bad economy, it is a Dickensian nightmare.

  • GaryF

    I do have a son in a private high school who will be approaching college in 3 years.

    I also work in the construction industry and make less money than I have say 5 years ago.

    We make tough decisions on how are money is spent and feel the sacrifices we make to send our kid to a private high school and to college.

    I look at it as an investment in my future and my kids future.

    But I also know economics, and that money isn’t free, the laws of supply and demand, and that the world isn’t fair. The fair is in August, ends on labor day.

  • Chris

    I’m a lawyer with over $100k in student loan debt. I have no qualms about paying back what I borrowed. What do take strong issue with, however, are the terms under which I have to repay. The student loan industry has a sweet heart deal with Uncle Sam.

    For example, I am not allowed to refinance my student loans. This means I must pay 8% for 30 years (or less if I’m able to ramp up repayments all while supporting a family and saving for retirement). If I default, Uncle Sam guarantees servicers the loans and will even allow the servicers to tack on upwards of 25% penalties and STILL allow them to collect. Heads they win; tails I lose.

    The silver lining is that if I die, they go away. Even a person underwater on his/her home can refi or walk away from it. I’m stuck with my debt.

    The solution for me and other professionals would be to simply allow a refinance. The motive to or possibility of default would drop and a drop in interest rates to 4% would free up around $400/mo for me. I’m sure I’d spend some and that would go a long way to helping the country recovery financially.

  • Chuck

    The solution is reduce the cost of higher education and make tie course completion and graduation to any form of partial cost reimbursement.

    As a former department head at a large urban public teaching college, I saw, first hand many of the things that colleges, public and private, waste money on. 1) teacher’s load – usually 9 semester hours per semester (3 -3 hour classes spring and fall semesters). Professors fought to arrange their teaching schedules so that they taught on Wednesdays and Thursdays only if at all possible (senority based). Teaching release time – professors were released from teaching time to pursue other activies – sometimes as high as 50%. Some professors had no teaching assignments at all.

    2) Classes with next to no enrollment (5-6 students) were taught time and time again.

    3) Huge investments in varous redundant and unneccessay technolgies and facilities.

    4) Duplicative programmes with other nearby and accessible colleges and universities.

    5. Unnessarily large and, by and large, well paid, administrative staffs. We had an Academic Affairs officer reassigned to no job at $165,000.00 a year.

    Take a good look at the MNSCU system and you will see much of this repeated here in MN. How many public colleges just in Anoka county?

    Can the cost of public education come way? The private sector is a goldmine for The answer is surely yes.

    The private sector is a goldmine for education.. The costs are very high, the drop rates are high and graduation rates low. But private instituions make it very easy for almost anyone to get student loans.

  • CWG

    @ Chris the Lawyer

    Amen to that!

  • kimMN

    Why does the Government increase it’s aid to universities each year as based upon the school’s raise in tuition? That seems like a recipe for the school’s self serving waste and abuse of tax dollars for nothing than to increase yearly college tuition.

    Now that our government controls all student loans, tax payers are on the hook for default, just as most mortgages are as well, being backed by Fannie Mae.

    The mortgage bubble came and now the student loan bubble about to break is again proof that when the government manipulates the system and when big business is in bed with the ruling power in order to gain favor from gov’s excess regulations, most of America suffers sooner or later.

  • kimMN

    In my world, with my specious reasoning, if one government program is bad (Fannie Mae) then all government programs (the whole public education system) are bad and should be abolished. And you simple minded morons will not think it through any further then that. Am I correct? It works for the dittoheads.

    I wouldn’t dare mention that even though yes government aid to schools keeps increasing, that aid when compared to the rising pupil population is actually going down. And in my world schools don’t have to deal with inflation like the rest of use either.

  • kimMN

    Define the problem first:

    1. Does anyone known where within the Constitution it says the federal government has the power to make and control higher education student loans?

    2. The bubble in student loans was created by who? How much direct influence on the banks to make those past loans do the schools have?

    3. Why do colleges insist that a basic career that can be learned within 2 years require 4 -5 years of useless non productive courses that can be self taught; such as the liberal arts courses? And too many colleges can’t offer or won’t offer classes necessary in order to meet all of the four year course requirements because unions dictate how many ( or few) classes a professor can teach in a semester?

    4. If unions say they exist to help our public schools prepare students for college, then why___ why__ do most high school grads have to take remedial courses in English and math in their freshman college year? Aren’t the public schools supposed to teach these basics before a student reaches college age?

    More time in school = more student debt.

  • Chris

    @ kimMN

    “1. Does anyone known where within the Constitution it says the federal government has the power to make and control higher education student loans?”

    Point of reference: the federal government, through the Commerce Clause, has the power to make and control higher education student loans (within some limitations). And just like mortgages, the federal government could set terms under which it will purchase student loans or create other incentives.

    It has the power to do so. What it lacks is the will.

  • KIMmn

    Can anyone here argue with my unsubstantiated facts? All this is posted on rightwingrhetoric.com so it must be true. Just cause it’s so ridiculous and asinine won’t anyone be bated into disputing anything I say? If not hen I must be correct!

  • kimMN

    Moderator: Please advise the imposter that continues to use other’s names for posting as was recently done, as shown below at:

    “Posted by kimMN | October 24, 2011 10:04 AM”

    This is but another cheap radical non tolerance tactic to discredit discussions and it ruins the spirit of the Question of the Day for MPR. Thank you.

  • Silence kimMN

    KimMN’s first inane comment at 9:34. Four comments by 10:22. The over/under today reamains 5.

  • kimMN

    And don’t think I’m a hypocrite when I say “This is but another cheap radical non tolerance tactic to discredit discussions and it ruins the spirit of the Question of the Day for MPR. Thank you.” when I’m here using this forum to post an overtly anti-Obama propaganda regardless on how actually concerns the actual question of the day. My dupes and dittoheads agree with me. and the shinny new nickle david koch pays be for each of my posts is how I afford rent on my trailer. Leave me alone please before you make me cry.

  • James

    Tough issue.

    The solution to the “existing” debt problem is jobs, low interest rates, long payback terms and no forgiving of the debts.

    To keep the problem form mushrooming, credit worthiness has to enter the discussion. Does the applicant have grades that suggest he/she might graduate? Is the applicant enrolled in a program with reasonable (any?) job prospects?

    Finally, costs cannot continue to escalate. The “arms race” for big-name professors, resort-like facilities and other expensive perqs for students and staff has to slow down.

    A personal note. One of my daughters goes to Madison. Tuition is certainly at the reasonable end of the current scale. However, it appears that she will take 4 years to accomplish what sould be doable in 3. And she pays about $500/month to a shark-like landlord who must be grossing in excess of $60,000 per year from a house (with 11 bedrooms) that probably cost him $200,000 to buy and about $50/year to maintain. It’s not just the university that is inefficient and/or gouges!

  • GaryF

    I have no problem with the original kimMN to be part of the discussion. She adds DIVERSITY to the conversation. That is, if right of center political thought is included in your definition of DIVERSITY.

    She makes good points. If you don’t have a good counterpoint as part of a good discussion, that is no reason to vilify her.

  • Dave

    There is no silver-bullet solution to the student debt problem. Anyone could just as easily ask, “What’s the solution to greed?” or “What’s the solution to ignorance?”

    Because really, that’s what it comes down to. Greed of higher-level educators and administrators going after easy money by raising tuition rates, and ignorance of students and their parents who believed paying those tuition rates wasn’t a choice, but rather a necessity.

    There will be scoffing and defense about how post-secondary education IS necessary in today’s world, and I won’t argue that. But the parents who believe their children need to go to college to achieve anything are the same ones who make the decisions about hiring college grads in their day jobs. By requiring exorbitant post-secondary levels of education for the people they hire, they have effectively sealed the fate of their children.

    The system is cyclical and will continue to grow until it completely (and catastrophically) fails.

  • Justin

    Being smart, curious and having a little moxie go a lot farther than a degree, sometimes.

    I’ve seen supposedly “well educated” people flame out spectacularly in a lot of work situations because they were dolts who just worked their way through the system.

    Conversely, I know a lot of people, myself included, who have less formal education, but read widely and have a genuine curiosity about the world and can think critically and solve problems creatively.

    I’d rather have an employee who lacks a degree, but is genuinely bright than one who has the sheepskin, a pile of debt and no clue about how the world actually works.

  • Jon

    Make Sallie Mae a governmental entity again.

    Require for-profits schools to meet strict standards or lose accreditation.

    Pay for everyone going to school for a STEM discipline through their Ph.D. if they attend a state institution.

  • Shane

    I don’t understand what the problem is? You have a bunch of people who voluntarily signed a contract to borrow money to pay for a college degree. They knew, or should have read, the terms and conditions before they signed the contract. Why should it be anybody else’s concern about their debt. It seems to me you have a bunch of people who want a free ride. What a surprise.

  • Steve the Cynic

    “Wall Street Bankers=Emmanuel Goldstein”

    This is really interesting. George Orwell wrote 1984 as a critique of totalitarian regimes that use the ideology of socialism to legitimize their tyranny, the Soviet Union being the chief example. In the novel, Newspeak is used to keep people from thinking and speaking clearly about what what the regime is doing, while the apparently fictitious Brotherhood, headed by Emmanuel Goldstein, is held forth as a perpetual threat that citizens must be on their guard against. It is quite ironic, therefore, that it’s the right wing in this country that has made masterful use of those very techniques in distracting people from the real threat of plutocratic tyranny. The right wing’s Emmanuel Goldstein is George Soros, or “liberal elites” or “mainstream media” or “Saul Alinski” or some conspiratorial cabal of such folks. The vocabulary of the right wing’s Newspeak includes “job creators” for the uber-rich, “government meddling” for regulations, “job-killing” as the never-to-be-omitted modifier for taxes, labeling as “socialism” just about any suggestion that the government has a legitimate role in promoting the common good, GWB wanting to “strengthen” Social Security by privatizing it, and attempting to gut the EPA under his “Clear Skies Initiative,” etc. Because of 1984, the left wing doesn’t easily get away with using such tactics, since people almost immediately notice and react skeptically. The right wing, though, seems to be getting a pass.

  • Steve the Cynic

    I actually agree with KimMN about the inappropriateness of impersonating other writers. Folks like KimMN have a right to their opinions, and as much right to post them here as I do mine, no matter how ridiculous those opinions are. When folks like Impostor KimMN do such things, it doesn’t persuade anyone of anything. In fact, it tends to prompt people to dig in their heals and cling even more stubornly to their positions. When you persecute ideologues, it only encourages them, because they see it as evidence that they must be right. It’s one thing to ridicule ridiculous ideas and absurd rhetoric, but ridiculing people does your own cause more harm than good.

  • kimMN

    IMHO the answer to the solution to the student-debt problem is be responsible for your loans. ..and the OCW protesters should also follow suit and be responsible as they are asking Wall Street ( but they ignore the White House and Congress’ involvement for creating this poor economy.

    While th protesters occupy NYC, the NYPD’s Task force is not patrolling in high risk neighborhoods as usual but they are handling the crowds of Occupy Wall Streeters..result of this sleep over is just more misplaced angry people while the number of crime shootings was recently reported as 154% increase in the past few months in NYC.

    Their student loan debt was never forced on anyone. I paid my loans over 10 years , went without a new car and rented instead of bought a home during that period. I didn’t get a free ride from my home country either to not pay my obligations. Too many Americans are spoiled or/and they feel entitled to a free ride, for others to make up for their bad judgments; including a degree that holds no marketable skills.

  • Steve the Cynic

    “…but they ignore the White House and Congress’ involvement for creating this poor economy.”

    Are you referring to the gradual dismantling of the post-1929 banking reforms under the Reagan, Bush, Clinton, and Bush II administrations, pushed by Republicans in Congress, that set the banks loose to run amok?

  • Jonathan

    Legalize nature. Understand that the Prohibition of Hemp is Unconstitutional. Most problems will be solved when we figure out how people have been duped by the 1%. The only moral option it to occupy this planet and live happy and well with each other and nature.

    Seek that first, and all the rest will follow. Debt and lack are temporary and illusory. The plenitude is the reality we need but awaken too.

    As we do that, may we learn a lot and have fun!

  • Steve the Cynic

    “Understand that the Prohibition of Hemp is Unconstitutional.”

    I don’t disagree that cannabis should be legal, but what provision of the Constitution prohibits its prohibition?

  • T

    Not allowing a student to borrow more than they are qualified for as one would have to do for a car or credit of any other kind. While this would deter many students from attending college as they see fit, and possibly make them have some sort of income initially, it would also stop the same students from using their student loan money to fund their shopping habits a I have witnessed in the past.

    I simply cannot understand how someone can get into debt $40,000 to $100,000 for a studen loan but cannot qualify for a $1,000 line of credit.

    Hmmm, maybe qualifying guidelines should be more stringent but then again the student loan corps wouldn’t have anyone under their thumb now would they?