“The Debt Trap” as Motivation for Investing in Low Cost, High Quality Online Degree Programs
The Debt Trap: How Student Loans Became a National Disaster by Josh Mitchell
Published in August 2021 (Simon & Schuster)
44.7 million Americans owe more than $ 1.7 trillion in student loans. Six in ten undergraduates will accumulate debt, the average amount currently being $ 29,850.
Only about a quarter of all student debt is owed by those with a higher education. This graduate student debt, however, is half of the total amount of money owed.
The average debt of students who earn a master’s degree is $ 71,000. Borrow for a law or medicine degree, and your debt is $ 145,500 and $ 201,490, respectively.
3.2 million borrowers, or 37% of all student debt holders, owe more than $ 100,000.
One in five student borrowers are in default, which means they don’t make any payments, but their total loan amounts increase as interest charges mount.
How did we get to this place where student loans are the second largest source of personal debt after mortgages? (We owe around $ 10 trillion on our homes).
The origins, consequences and potential solutions of the history of American student debt are complex. I thought I had a pretty good understanding of how student debt works and why students need to borrow so much money for college. It took reading Josh Mitchell’s essential new book, The debt trap, to fully understand the magnitude of our student loan crisis.
The big gap in my knowledge that The debt trap completed covered the history of student loan policies. Before reading the book, I hadn’t realized how much the federal government prioritized the profits of bankers and shareholders over the welfare of students.
Part of the story of student loans has to do with public disinvestment in higher education. Each successive generation of students from the 1970s had to fund more of their education in public institutions, as state support eroded. The tuition hike was funded not by taxpayer dollars, but by student debt.
Another part of the student loan crisis has to do with the growth of for-profit online educational institutions that have built their business models on student loans while straining their enrollees (many of whom have not obtained their diploma) a lifetime student loan debt.
Nonprofit colleges and universities have not escaped the blame for the history of student loans. There is debate about the relationship between the growth in student loans and the rapid increases in higher education prices over the past three decades. The debt trap makes a strong case for some shared guilt of nonprofit colleges and universities in our student debt crisis.
Reading The debt trap will make you angry with all the lost opportunities to create sane policies that would have increased the opportunities to get a college degree or higher without creating the conditions for unsustainable lifetime debt. Interest payments on student loans have historically been used to fund bank and banker profits and bonuses (for federally guaranteed private student loans) or to pay for other government expenses (for direct student loans). ).
Or The debt trap Could Have Been Expanded is less focused on diagnosing student debt disease, but more on solutions. The final chapter of the book contains Mitchell’s recommendations, which are valid as far as they go. The author recommends the following steps:
- Forgo interest on student loans.
- Get four-year schools to put in their own money.
- Make community college truly free.
- Review the idea of the American dream to respect and reward the alternatives to the four-year diploma, in particular apprenticeships.
- The government should stop subsidizing higher education.
- States, cities and communities should intervene.
All of these ideas make sense, but each has significant challenges and consequences. I wish Mitchell had taken the space to take a more in-depth look at each proposal.
For example, many of his ideas for dealing with the student loan crisis are aimed at shifting the risk of student attendance to schools. It is unclear where most colleges and universities will find the money to offer their own loans or how they would make up for lost tuition fees if loans for graduate programs were to end.
However, forgiving the interest on student loans and making community colleges really free seems to be exactly the right thing to do.
Completely absent from The debt trap is any discussion of the possibility of reducing the cost of higher education and therefore reducing future student debt.
Readers of this blog will know that the most important story in higher education today is the evolution of low-cost (and hopefully high-quality) online degrees.
Creating affordable master’s programs has the potential to dramatically change the conversation about degrees, quality, scale, and price.
Reading The debt trap is expected to provide huge motivation for college and university leaders to prioritize investment and experimentation in developing high quality, low cost online degree programs.
What are you reading?