Hard truths about student debt

News stories about college student debt are plentiful. Some call the $1.4 trillion student debt total a scandal. We all should be concerned about the effects of costs and debt on access to higher education for talented students, but we also should be sure of our facts.

When many media outlets report on students with $100,000 in debt after earning a bachelor’s degree, they are relating incomplete reporting. Less than 6 percent of borrowers owe this amount or more, and they are mostly graduates of or graduate students in dentistry, law and medicine. The average student debt in New York State, for example, is $30,000 at both public and private institutions, with only a $3,400 difference between the sectors.

Nevertheless, debt for many college students is serious. Not only does the concern about debt lead some students and their families to decide against attending higher education institutions, but graduates also make career choices and major decisions about life — including marriage, housing and big purchases — because of the debt they have incurred.

A major factor in the issue is the role of often predatory proprietary schools promising successful careers. These schools focus on low-income, often older students and promote loans to cover tuition to prepare for jobs that simply do not exist. Earlier in this decade, enrollment in for-profit colleges tripled while the amount of loan debt for these students increased by more than 550 percent.

In addition, complaints about student debt do not take into account the practices of the federal government. In 2008, the government took some $20 billion from the federal loan program, reducing the amount of subsidized loan funds available. This encouraged the growth of so-called “alternative” loans with interest rates of up to 16 percent. Also, the government did not keep student loan interest rates at the commercial rate, but raised them higher. And the government charges interest on unpaid interest when students legally defer payments. All of these factors contribute to the total of debt.

Moreover, unlike other consumer debt, student loan debt is not dischargeable by bankruptcy, and the deductibility of interest payments is limited to $2,500.

A big problem with student debt is not college attendance but college graduation. About 40 percent of those who enter a four-year college graduate in four years. After six years, the figure jumps to about 60 percent. For proprietary colleges, the rate barely reaches 25 percent. Those who do not complete their degrees have very different employment and income prospects, making their debt even more of a burden.

As presently designed, the proposed solution to student debt, making college free, would do nothing for those who need it most. While lower-income students studying full time would be covered, the majority are studying part time because of family obligations.

Federal student loan programs were created to supplement state and federal grant programs to expand opportunities for advanced study by those from lower-income families. The problems with the programs are knowable and fixable. To improve the loan programs, the criteria for undergraduate and graduate loans should be revised for consistency, interest rates should be rationalized and colleges should be held accountable for graduation rates.

In addition, other programs should be expanded. There are the “pay as you earn” option and the “income-based repayment plan.” Both should become centerpieces in the next Higher Education Authorization Act. We need the will to ensure that the programs are designed to facilitate student access to higher education.

Robert A. Scott is president emeritus of Adelphi University.