When college loan debt in the U.S. surpassed all other commercial debt – including credit card debt – Americans fell into the sobering new normal outlined in a report by the State Higher Education Executive Officers Association.
Currently, almost half of all college students borrow, and those who earn bachelor’s degrees leave school with an average of $26,600 in debt. Possible solutions to the crisis are found in “Doing Away With Debt: Using Existing Resources to Ensure College Affordability for Low and Middle Income Families,” a new report from the Education Trust. The report’s biggest takeaway is the need to redesign the federal financial-aid system in order to increase college completion rates, reduce student debt, and close the opportunity and degree attainment gaps.
The Washington, D.C.-based think tank also calls for a shared responsibility of college costs among the federal government, state governments, institutions of higher education, and students themselves. The goal is for low-income and working-class students to be able to afford college without loans and for middle-income students to be able to access no-interest loans and affordable, income-based repayments. Ed Trust’s president, Kati Haycock makes the case in this Huffington Post piece.
When talking about what colleges can do, Ed Trust suggests spending more of their endowment, pointing to the University of Washington’s more than $2 billion endowment of which it spends only 4% annually, according to Ed Trust. If the UW increased its endowment to 5 percent, more than $21 million would be available to help 3,445 students avoid high debt. The school is further criticized with failing to provide students with the no debt or low-debt policies offered by peer institutions, including Michigan State, UC San Diego and UC Irvine. But is that really a fair argument?
This New York Times story shows how much schools have come to depend on the returns on endowments to pay for operations, salaries, scholarships and building projects. Many colleges budget 4 to 6 percent of the endowment’s value for current spending. The UW’s four-percent annual shift from its endowment gives the school $80 million, dollars critical in the past to countering the state Legislature’s steep budget cuts. The UW’s 2012 endowment report offers a deeper explanation. The UW is not cheap when it comes to financial aid. On the website for its Husky Promise financial aid program, the school says it awards more than $344 million in aid to 60 percent of its undergraduate students. Nearly 30 percent of UW students pay no tuition. Half receive some sort of financial aid, including federal Pell grants. That’s not nothing. But the question is can, and should, they do more.
This issue goes beyond one school and one sector of our economy. New York Times columnist Charles Blow warns compellingly of the long-term implications for our economy, as staggering debt begins to affect financial decisions, including when and if young people start families, buy homes and do other things that help fuel our economy.