Myths & Facts: Student Debt CrisisApril 25, 2014 9:19 AM EDT ››› CRAIG HARRINGTON & HILARY TONE
Student Loan Debt Reached $1 Trillion In 2012
AP: "Surging Above $1 Trillion, U.S. Student Loan Debt Has Surpassed Credit Card And Auto-Loan Debt." The Associated Press reported in 2012 that student debt "surpassed credit card and auto loan debt," resulting in a "debt explosion." The AP continued:
Surging above $1 trillion, U.S. student loan debt has surpassed credit card and auto-loan debt. This debt explosion jeopardizes the fragile recovery, increases the burden on taxpayers and possibly sets the stage for a new economic crisis.
Lifting student debt higher and higher is the escalating cost of attending schools, with tuition increasing far faster than the rate of inflation. And enrolment has been rising for years, a trend that accelerated through the recent recession, fueling even more borrowing.
Mark Zandi, chief economist at Moody's Analytics, argues that government loans and subsidies are not particularly cost-effective for taxpayers because "universities and colleges just raise their tuition. It doesn't improve affordability and it doesn't make it easier to go to college."
"Of course, it's very hard on the kids who have gone through this, because they're on the hook," Zandi added. "And they're not going to be able to get off the hook."
It's not just young adults who are saddled.
"Parents and the federal government shoulder a substantial part of the postsecondary education bill," said a new report by the Federal Reserve Bank of New York. And some of the borrowers are baby boomers, near or at retirement age. The Fed research found that Americans 60 and older still owe about $36 billion in student loans. [Associated Press, 4/3/12]
Forbes: Student Loan Debts In 2013 Accounted "For Second Highest Form Of Consumer Debt Behind Mortgages." Forbes reported in August 2013 that "student loan debt has reached a new milestone, crossing the $1.2 trillion mark -- $1 trillion of that in federal student loan debt." It also noted that these "dizzying new heights" meant that student loan debts "now account for the second highest form of consumer debt behind mortgages." [Forbes, 8/7/13]
American Student Assistance: "There Are Approximately 37 Million Student Loan Borrowers With Outstanding Student Loans Today." Private nonprofit American Student Assistance reported data from the Federal Reserve Board of New York showing that "[t]here are approximately 37 million student loan borrowers with outstanding student loans." [American Student Assistance, accessed 4/24/14]
Urban Institute: "Student Loan Debt Follows One Of Every Five Americans Age 20 Or Older." A report from The Urban Institute titled "Forever In Your Debt" stated that "[s]tudent loan debt follows one of every five Americans age 20 or older and roughly two of every three college seniors who graduated in 2011." [The Urban Institute, June 2013]
Demos: Rising College Costs Sapping Wealth From Future Workforce. According to an August 2013 study from Demos, the more than $1 trillion in "outstanding student loan debt" could create a "lifetime wealth loss of $4 trillion" as current borrowers struggle for decades to make interest and principle payments. [Demos, August 2013]
Since 2012, Fox News Has Pushed Numerous Myths About Student Loan Debt
Fox's Liz Claman: Parents Should Focus On "Finding A Less Expensive College." On the May 31, 2013, edition of Fox News' America's Newsroom, co-host Bill Hemmer and Fox Business anchor Liz Claman discussed the specter of mounting college debt in the United States. While acknowledging that college costs are "skyrocketing" across the country, Claman argued that parents and students should focus on "finding a less expensive college." [Fox News, America's Newsroom, 5/31/13 via Media Matters]
FACT: College Costs Have Escalated And Even "Less Expensive" Colleges Are More Expensive
National Center for Education Statistics: Cost Of Attendance Is Up For Virtually All Institutions Of Higher Education. According to data compiled by the National Center for Education Statistics, after adjusting for inflation the average total cost of attendance at "all institutions" (including public, private, 4-year, and 2-year) increased from $8,438 in 1982 to $19,339 in 2012. This represents the average cost after factoring in tuition, fees, and room and board. [National Center for Education Statistics, accessed 4/23/14]
Demos: "Funding Cuts Have Led To Large Tuition Increases." According to a report from Demos, there have been "unprecedented declines in state funding for higher education and steep tuition increases" as a result of the economic downturn, with average tuition costs continuing to rise at four- and two- year universities:
ESCALATING TUITION: Funding cuts have led to large tuition increases. Nationally, average tuition at 4-year public universities increased by 20 percent in the four years since 2008 after rising 14 percent in the four years prior. In seven states, average tuition increased by more than a third, and two states--Arizona and California--have raised it by more than two-thirds, or 66 percent. At public 2-year colleges, average tuition has risen by more than a third in six states.
FAMILIES PRICED OUT: Average tuition at 4-year public schools now consumes more than 15 percent of the median household income in 26 states. Average total cost--including room and board--consumes more than one third of the median household income in 22 states.
The decreasing affordability of higher education is eroding the last relatively secure path into the middle class, as more students take on larger amounts of debt to finance their higher educations, or forego it altogether. With $1.2 trillion in outstanding student loan debt and climbing, student loan debt is now substantial enough to affect our overall economy as indebted graduates find it harder to buy a home or a car. [Demos, 3/6/14]
Fox's Andrea Tantaros: Expanding Student Loan Availability Drives Up College Costs. On the November 30, 2012, edition of Fox News' The Five, co-host Andrea Tantaros argued that making "cheap credit readily available" allowed colleges and universities to "hike up [their] tuitions every year." Tantaros went on to ask, "should every kid really be going to college?" Co-hosts Eric Bolling, Brian Kilmeade, and Dana Perino all agreed that expanding loan availability for students and families was a fiscally irresponsible decision. [Fox News, The Five, 11/30/12 via Media Matters]
FACT: Increased College Costs Are Not A Result Of Student Aid
National Association Of Student Financial Aid Administrators' Justin Draeger: Theory That Increased Student Aid Drives Up College Costs "Is Not Founded In Reality." In a post for University Business, Justin Draeger of the National Association of Student Financial Aid Administrators stated that the myth that "increases in student aid drive up college costs" is one that lawmakers use "when justifying proposals to cut federal student aid spending." Draeger continued:
Essentially, the budget resolution would reduce federal funding for student aid by eliminating student loan subsidies and limiting student eligibility for Pell Grants and other federal aid.
But this theory is not founded in reality. In testimony before the House Education and the Workforce Committee, Education Secretary Arne Duncan noted that college costs increase even when the government reduces student aid spending or keeps it level. There is conflicting evidence on the correlation between the federal student aid spending and increases in college costs and absolutely no research that indicates a causal relationship.
There are several factors that drive up college costs. Two economic professors at The College of William & Mary conclude that the primary forces driving up college costs are the technological changes that have reshaped the entire global economy over the past century. David Feldman and Robert Archibald are co-authors of Why Does College Cost So Much? (Oxford University Press, 2010). Their book explains that the most important engine of cost growth in higher education is the very thing that is driving costs down in other industries: technological advancement. Technology advances have caused productivity growth in some industries, like manufacturing, to overshadow productivity growth in other industries, including higher education. [University Business, May 2012, empahsis added]
State Higher Education Executive Officers: Lack Of State Funding Support Driving Tuition Increases. According to an April 2014 report by the State Higher Education Executive Officers (SHEEO), state and local funding for higher education reached its lowest point in more than two decades in 2012. Funding recovered slightly in 2013, but was still far below funding levels of the previous 25 years. To make up for these funding cuts, many public colleges have raised tuition and fees, which now account for nearly half (47.4 percent) of total revenue. [State Higher Education Executive Officers, State Higher Education Finance FY 2013, 4/17/14]
National Association Of Independent Colleges And Universities' David Warren: "Not A Shred Of Empirical Evidence" That Student Aid Increased College Costs. David Warren, president of the National Association of Independent Colleges and Universities, wrote in The Washington Post's Answer Sheet blog that there was no merit to the idea that student aid has made higher education less affordable:
The re-emergence of the so-called Bennett hypothesis in policy discussions, media coverage, and federal appropriations threatens to make a bad situation worse. According to the hypothesis, named after former Education Secretary William Bennett, who promoted the notion in the 1980s, student aid has allegedly given colleges and universities "license" to increase tuition, meaning that federal student aid has not made higher education more accessible or more affordable.
There is not a shred of empirical evidence of a causal relationship between federal student aid and tuition increases at public and private nonprofit institutions, including institutions with high published prices and large endowments. [The Washington Post, Answer Sheet blog, 6/1/12]
New America Foundation's Kevin Carey: Excessive Spending By Colleges And Universities Drives Up Tuition. In an interview with NPR's Fresh Air program, Kevin Carey, director of the Education Policy Program at the New America Foundation, claimed that higher college costs were due to "excessive spending" by colleges and universities:
Just days before student loan rates are set to double for millions of Americans, President Obama and congressional leaders haven't reached an agreement on legislation to keep those rates at 3.4 percent.
The debate reflects the growing concern over the debt burden many take on to get a college education. About two-thirds of bachelor's degree recipients borrow money to attend college, and collectively, student debt has topped $1 trillion.
Kevin Carey, the director of the Education Policy Program at the New America Foundation, believes the student debt crisis reflects larger, troubling trends in higher education -- among them excessive spending by colleges and universities, which drives up tuition, and declining government support for public universities as state and local governments face budget crises.
In the past three decades, Carey says, college tuition has consistently increased much faster than both inflation and incomes. [NPR, 6/26/12, emphasis added]
Fox Business' Lauren Simonetti: Loan Forgiveness Encourages Widespread "Abuse." On the April 22 edition of Fox Business' Varney & Co., host Stuart Varney described what he called "an explosion in the forgiveness of federal student loan debt" in the United States. Fox reporter Lauren Simonetti replied that the availability of long-term forgiveness after 10 or 20 years would encourage current borrowers to "manipulate the system," eventually leading to taxpayer funded "abuse" of college loan financing. [Fox Business, Varney & Co., 4/22/14]
Fox Business' Stuart Varney: Current Borrowers Are "Giving The Taxpayer The Bill." On the April 23 edition of Fox News' Fox & Friends, co-host Steve Doocy asked Fox Business' Stuart Varney about the alleged negative economic impact of student loan forgiveness. Varney claimed that President Obama's initiative to expand eligibility for student loan forgiveness resulted in hundreds of thousands of current borrowers "giving the taxpayer the bill" for college education. [Fox News, Fox & Friends, 4/23/14]
FACT: Student Loan Borrowers Are Taxpayers
Urban Institute: Only 15 Percent Of Current Borrowers Are Unemployed. According to data from The Urban Institute, only 15 percent of student loan borrowers as of June 2013 were unemployed, indicating that the remaining majority pays federal taxes through their income from full-time, part-time, or self-employment. [The Urban Institute, June 2013]
FACT: Student Loan Borrowers Don't Have Certain Debt Protections
Student Debt Crisis' Kyle McCarthy: "Bankruptcy Is Not An Option For Student Borrowers." In an article at The Huffington Post's College Blog, Student Debt Crisis Co-Founder Kyle McCarthy enumerated "10 Fun Facts About the Student Debt Crisis," including that "giant corporations can file for bankruptcy, but bankruptcy is not an option for student borrowers." He continued:
Unfortunately, if Americans with student loan debt find themselves owing money on their student loans, it is nearly impossible to file for bankruptcy. In fact, debts from gambling and other consumer debts can be erased, but not education debt. These debts can continue to grow when a borrower is unable to pay, and can even follow a borrower to the grave. Removing bankruptcy protection from student loans has only benefited the lenders. In a leaked memo, Sallie Mae officials have listed preserving the inability to discharge education debt in bankruptcy as their second-most important goal. [The Huffington Post, 1/22/14]
NY Times: Student Loans Can Suddenly Come Due When Co-Signers Die. The New York Times reported on a recently released report by the Consumer Financial Protection Bureau (CFPB) which found that "for students who borrow on the private market to pay for school, the death of a parent can come with an unexpected, added blow." The article continued:
The problem, described in a report released Tuesday by the Consumer Financial Protection Bureau, arises from a little-noticed provision in private loan contracts: If the co-signer dies or files for bankruptcy, the loan holder can demand complete repayment, even if the borrower's record is spotless. If the loan is not repaid, it is declared to be in default, doing damage to a borrower's credit record that can take years to repair.
The bureau said that after a co-signer's death or bankruptcy, some borrowers are placed in default without ever receiving a demand for repayment. [The New York Times, 4/22/14]
FACT: Loan Forgiveness Doesn't Forgive Everything
USA Today: Borrowers Can't Escape Student Loan Debt "Scot-Free." In an article about student loan forgiveness, USA Today pointed out that "there is no way to escape student loan debt scot-free":
Many humanitarian and public-sector jobs are eligible for loan forgiveness, Mayotte says, so that "borrowers can follow their passions instead of their bills." That way, someone who wants to be a public defender, for example, will not be deterred by an expensive law degree.
Of course, there is no way to escape student loan debt scot-free, as many federal programs require qualifications, research and lots of fine print. [USA Today, 12/6/13]
FACT: Loan Forgiveness Allows Borrowers To Serve In Needed Positions
U.S. News & World Report: Coming Years Will See Shortage In Teachers And Nurses. An August 28, 2013, article in U.S. News & World Report outlined the Consumer Financial Protection Bureau's (CFPB) initiative to urge public service organizations to inform employees about "loan repayment and forgiveness options," detailing the low salaries typical of public service jobs as well as the shortages certain sectors will see in coming years:
In a report issued in tandem with the initiative, the CFPB reports that one in four American workers may be eligible for student loan debt forgiveness programs open to public service employees, such as teachers, health workers, police officers, firefighters and social workers.
"People give up higher incomes to serve their city, their state, or their country," said CFPB Director Richard Cordray in a call with reporters Wednesday. "We believe that people who contribute part of their talents, part of the benefits of their education, to society as a whole should not be mired in debt because they stir themselves to the calling of public service."
Cordray and other state and local officials stressed the need to recruit and retain well-educated public service employees, as many professions are expected to face a shortage in the coming years.
The National Center for Education Statistics projects that the United States will need 425,000 more teachers by the end of the decade to replace the wave of retiring baby boomer teachers. And the nation's shortage of advanced practice nurses and nurse practitioners is expected to grow to more than one million by 2020, according to the Health Resources and Services Administration.
But public service jobs typically have much lower salaries than many other jobs, and it's possible that the amount of student loans a person can accumulate in college could be equal to or more than a year's pay. [U.S. News & World Report, 8/28/13]