Reducing student loan debt–even a baby step matters.

ImageAs someone who spent time working in the 529 space, I know that state officials promoting college savings were always talking about the challenge of getting people to save when the cost of higher education was constantly on the rise.  In crafting marketing messages, if you went too far in highlighting the huge cost of a 4-year degree, you took the risk of encouraging parental non-action by making the likelihood of saving the necessary funds so remote there was no point in even trying.  One of the things we started to do after the 2008/early 2009 financial meltdown, was to start focusing on the idea of the aspirational value of saving–the power of letting a child know “We want you to go to college and we believe in you” and the importance of reinforcing good savings behaviors.

It seems to me there’s a similar dynamic at work with the President’s new proposal to address the student debt crisis.  The Obama administration has advanced a plan to rate colleges based on such metrics as tuition, graduation rates, debt levels and earnings rates for graduates, and the percentage of low-income students.  Those ratings would then be tied to federal student aid, with students at the highly-rated schools getting larger federal grants and more favorable federal loans.

It’s an interesting effort to try to find some way to reward those institutions which are serious about taking steps to make education affordable and provide a product of value to students.  The Institute for College Access & Success applauded the President’s plan, as did a number of college presidents and higher education experts.

But the initiative is not without its critics and Rolling Stone’s Matt Taibbi ripped the proposal as a weak attempt to distract attention from the White House’s terrible, horrible, no good, very bad week with the NSA scandal.  I think Taibbi’s take is a bit overstated, as I’m not sure the NSA story is at the forefront of most people’s attention–even though it should be.

In an environment where the Republican House wouldn’t pass an Obama proposal seeking to clarify that water is wet, it’s more than a little unrealistic to expect the White House to offer up grand, sweeping changes in our approach to student loan debt.  Hell, it took all sorts of heavy lifting to avoid seeing the interest rate on new subsidized Stafford loans double last month, when the White House and Congressional Democrats wanted to extend the 3.4% interest rate and the GOP wanted to link the student loan rates to Treasury notes and recalculate rates annually, a move which many financial experts thought would lead to a steep increase in the cost of borrowing.

Is it any wonder then that the President’s proposal waits until 2015 to put the rating system in place and delays linking it to the awarding of federal loans until 2018?  The latter will require Congressional approval and by that point, there will be a new administration in place.  While Taibbi suggests this is kicking the can down the road to make it someone else’s problem, it strikes me as a realistic approach to ensuring Congressional buy-in.  It’s going to take time to come up with the metrics and having them in place for a few years before tying them to the federal loan rates will hopefully build public support for the idea.  And one can hope that by 2018, we will have a Congress with a House leadership that functions as a mature political body, capable of accepting an idea from across the aisle and governing in a fashion that involves building consensus and crafting compromise rather than reflexively saying “No” to everything.  Well, everything but repeatedly trying to defund Obamacare.  I can see House Republicans taking that vote into the 2030’s.

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One thought on “Reducing student loan debt–even a baby step matters.

  1. Very important that our country shed a light on the increasingly high cost of a four year College education. I enjoyed your perspective on the subject. Something desperately needs to be done in order to bring these costs under control. Universities need to have a bigger foot in the game when it comes to saddling student and their parents with these exhorbnant loans.

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