Student Loan Forgiveness - The Path Forward

This week, I’m going to wade into the debate regarding student loan forgiveness. Instead of feeding into the fury swirling around the fairness, timing, and cost of President Biden’s loan forgiveness plan, I’ll be focused on constructive dialogue and recommendations for the path forward. 

With that said, I do hope we can reduce the temperature of the rhetoric surrounding the loan forgiveness debate. I find narrow, caustic, politically-motivated talking points to be unhelpful at best. If you’re angry about the student loan forgiveness plan because some talking head is hammering away at a specific talking point that serves a partisan agenda, I suggest that you get educated about the complexities of the market for post-secondary education in the United States before formulating your own opinions. Like most politically-charged issues, there are no easy, pithy solutions to the challenges we currently face as we attempt to educate our populace for a bright, robust, competitive future.

What we know for certain is that there are distinct generational differences in attitudes toward the costs and benefits of higher education. For those who would like a quick primer on income growth and wealth differentials between generations, I recommend starting with this New York Times article. Making experiential inferences across generations as it relates to higher education just gets us into trouble. The data is clear that both the costs and benefits of higher education are markedly different between what my generation faced (late boomer) versus what a Millennial or Gen Zer can expect. Today, costs are exceedingly higher on an inflation-adjusted basis. Outcomes are also questionable in many cases.

What Can We All Rally Around?

Hopefully we can all agree that living in a more educated society is better than living in one that is less educated. Does everyone need to go to college? The answer is an emphatic “no.” Should everyone commit to continued learning and growth throughout their lifetimes? Absolutely. Limited educational backgrounds lead to more fixed mindsets and societal participants who are unsympathetic toward groups that don’t look or think the way they do. They are also more easily swayed by group-think and the psychology of crowds. 

More education and learning lead to more productive workers and more meaningful political debates that leverage the beauty of diversity and the benefits of inclusion. We are stronger together. Local-only viewpoints and division just serve to tear us apart. We all live on a small, pale blue dot and we must behave as such.

The next thing that we should be able to agree on is that the cost of education beyond high school is far too high. According to a 2018 Organization of Economic Cooperation and Development (OECD) study, U.S. post secondary educational institutions spend more per student than nearly every other country—surpassed only by Luxembourg. If we only focus on the U.S., the cost of tuition and fees has increased at a 6.2 percent annual rate over the last 20 years (according to Education Data Initiative), significantly outpacing the ~2 percent annual rate of inflation over the same period.

To illustrate just one of the many reasons that underlie the ballooning cost of higher education, a 2021 article in the Yale Daily News shows that managerial and administrative staff at Yale has risen three times faster than the student population over the last 20 years!

What Can We Do Now to Make a Difference?

The reality of the Biden loan forgiveness plan is that it does not address the root cause of higher borrowing rates and debt accumulation of Millennials and Gen Zers. That root cause is the cost of higher education in the U.S. While the issues surrounding why it costs so much to get a degree in the U.S. are complex, the Biden plan should have included a provision for getting after the cost issue. If we don’t address costs at the source, then we’ll just be having this same conversation again and again—kicking the can down the road.

Some readers might be saying that college should be free or heavily subsidized. Again, that’s not our purpose here. Even if a politician were able to wave a magic wand and get a free tuition plan passed, the underlying issues of cost and inefficiency would remain. We must get to root cause and not simply wallpaper over it.

So what can we do now?

I recommend that a nonpartisan commission be established that is composed of higher education leaders, representatives from various governmental agencies that regulate post-secondary institutions, and the business community to evaluate the current post-secondary education regulatory environment and make recommendations for efficiency gains on college campuses. 

The charter of this commission would be to determine which regulations are necessary and those that are outdated, overly cumbersome, or excessively restrictive. The business leaders on the commission would lead the discussion regarding continuous improvement, with the aim to free up resources to (a) reduce costs, and (b) improve outcomes.

The toolkit of recommendations and actions proposed by this commission would be used as a set of guidelines and “best practices” for public and private institutions to follow. Government regulatory agencies would alter their practices based upon the outputs of the commission. Businesses would change their hiring practices and work to clarify skill needs and career paths for graduates. None of the three constituent groups that comprise the commission (educational institutions, government agencies, and business leaders) would be exempt from implementing change.

In lieu of an economy-wide solution on cost containment, college and university leaders can tear a page from Mitch Daniel’s playbook at Purdue University. Under his leadership, Purdue froze tuition for seven straight years and maintained a high quality product. If a national solution is pursued, then leaders that follow in his footsteps will have a significant head start on bringing costs under control. 

Note: For those that pursue a meaningful path toward getting costs in line, the solution is not cuts in faculty salaries and other direct instructional costs. Look for opportunities for efficiency in other places first. Student outcomes rely heavily on excellence in teaching. While reducing faculty salaries or increasing class sizes may be the easy way out, those budget line items should be protected.

Conclusion

More education is preferred to less. Unfortunately, many economic participants in the U.S. are effectively “priced out” of the market to further their education. If they do participate, a significant subset are left with debilitating debt balances that make it difficult to buy homes, build families, and invest in new businesses—all of which are essential to a high-functioning global economy.

Instead of getting angry and incessantly complaining about narrow political talking points, let’s do something constructive and begin the work that’s necessary to bring down the cost of post-secondary education. A healthy and thriving United States of America depends on an educated populace. We cannot afford to take steps backward—the only way is forward.