Solving the student debt crisis instead of prolonging it
President Biden announced Wednesday that he will use executive power to cancel up to $20,000 in higher-education student debt for millions of Americans. There is the obvious legal question of whether loan forgiveness counts as spending, and therefore would need direct congressional approval. There is significant skepticism from experts in the president’s own party. And while the idea generally tests well with the public, 59 percent of Americans worry that student loan forgiveness could make inflation worse.
Despite the federal government trying to swoop in as the savior in the student debt crisis, it is a large source of the problem. As federal grants and loans expand, the total amount students are charged for tuition and fees also skyrockets, increasing the burden of obtaining a college degree on those who don’t qualify for outright aid and obscuring the real opportunity cost of going to college over other post-secondary options. If this investment, by both the government and private individuals, was creating a more educated and work-ready population, it might be worthwhile. But graduation rates within six years of starting a bachelor’s degree stand at just 62 percent — and one-third of those students are underemployed after graduation.
While those numbers might suggest a sizable number of Americans have debt from underutilized education holding them back, only about 14 percent of Americans currently hold student debt. Furthermore, total amounts of debt are significantly higher among those studying for jobs in high-paying fields like law, medicine and business, which will likely leave those borrowers well-suited to pay back the loans that set up their long-term financial success. This distorts the $1.6 trillion student loan figure, knowing much of it is held by Americans well on track to “pay their fair share.”
With President Biden’s announcement, more statistics about student debt will swirl around the internet. One figure that might be overlooked is buried in a recent survey from the left-leaning Data for Progress: 43 percent of those who have student loans don’t have a college degree. This highlights the uncomfortable fact that even if the president’s bold order is legal and makes a difference to students unduly pushed to college, it does not fix the incentives or mechanisms that lead to overborrowing.
In fact, many analysts predict that the government cancellation of student debt will ultimately lead to an increase in tuition, exacerbating the crisis in the long-run. And Biden’s plan does nothing to address the current or future post-secondary education and training needs of the 51 percent of Americans who reasonably question whether college is worth the investment for them.
All told, the estimated price tag of $300 billion could be spent in a way that reaches more Americans and provides the country more value. One way (which has the added benefit of reducing political friction) would be to return that federal money to the states so they can enact enrollment programs that are responsive to the specific needs and resources in local communities.
Washington state has the Running Start program, which lets high school students enroll in community and technical colleges, thus reducing the time and cost of completing a degree after high school. The program also exists in a similar form in Hawaii, Montana, New Hampshire and Illinois. Oklahoma’s “Skills to Rebuild” program trains un- and underemployed workers, including those who already had a college degree, for critical technical jobs unfilled in local communities. These programs barely skim the surface of ways states are working to equip Americans with the skills and knowledge they need to be successful in today’s world.
There is a higher education crisis in America, but cancelling existing student debt will not solve it. Our education system is failing to prepare students for the jobs that need to be filled and doing it in a way where the investment is worth the return for the individual. The states are well ahead of the federal government on this front.
If President Biden and Democrats really want to solve the post-secondary education crisis, they should let states keep the $300 billion for investment in programs that provide useful and affordable education and training.
Erin Norman is the Lee Family Fellow and a senior messaging strategist at State Policy Network.
Source: TEST FEED1
