Rethinking student loans
Given the recent attention being paid to student loan debt, I wanted to weigh in on the matter from my perspective as a father, student loan payer and state lawmaker.
Because of changes incorporated under the Affordable Care Act, the federal government is the sole distributor of federally subsidized student loans. Private banks and states have largely moved away from offering student loans. That move places the responsibility of student borrowing almost entirely in the hands of the federal government and out of the hands of state government.
As a father, I see the growing burden that could be placed on the shoulders of my children. As a student-loan payer, I have firsthand knowledge about our own education mortgage. As a lawmaker, I search for solutions across the higher-education system to better prepare students for careers, while at the same time putting them in a position to afford both their lifestyles and student loan payments after graduation.
The conversation in Washington, D.C., seems to be centered on interest rates. We should remind ourselves that this “interest rate debacle” is a crisis created by federal government action, or more accurately, its inaction. From my point of view, fixing the interest rate issue does not even come close to addressing the real problem.
I believe the major problem with student loans stems from one primary imbalance — the value of the education versus the cost of the education.
Most of us can relate to applying for a loan to buy a home. The bank doesn't approve that loan based on what we want to pay for the home; it approves that loan based on the assessed value of the home. Banks do this to protect their investment to help ensure they are able to be repaid. This age-old concept protects the bank, but it also protects you from borrowing too much! The same protections are not in place for students who borrow to pay for college.
I feel that the value of a degree should be based on what that student can expect to earn with his education. If a history major will, on average, earn less than an engineering or accounting major, I think that it makes perfect sense to give him the protection against “over-borrowing” for his education.
If students were able to borrow based only on the value of their degree, wouldn't it cause students to think more closely about their course of study and what it will mean to them after college? Wouldn't it also require colleges and universities to reconsider the costs of their programs? And doesn't it make sense that if borrowing is tied to expected earnings, the student will have a more reasonable expectation to be able to afford his student loans when he graduates?
Student loan debt has surpassed the $1 trillion mark and will continue to grow as a percentage of income for the same generations that are also being asked to pay for the nearly $17 trillion federal debt, countless trillions of unfunded Medicare and Social Security obligations, and public-sector pension debts, among others.
We cannot afford to limit the scope of our national conversation about student loan debt and the cost of higher education to interest rates only — other ideas must be considered.
Eli Evankovich is serving his second term as state representative from the 54th District in Westmoreland and Armstrong counties.