Many of those hapless students were mismatched at even the low-demand schools where they enrolled. Poorly prepared for anything like college-level work and often lacking in discipline and motivation, they were wasting their time and money on college. As Baum writes, “The fundamental question is why the government made these loans in the first place.”
Yes, that is the question and the answer is that government officials, unlike private lenders who stand to lose money if they make bad lending decisions, will not suffer any adverse consequences from their extremely lax college lending.
Federal loans are virtually an entitlement and the official stance of the Department of Education under President Obama has been that the national interest is served getting as many young people into and through college as possible. Student loan defaults is of minimal concern to them.
Still, the Education Department has made an effort toward helping students with college financing — a mandate that schools provide debt counseling for students who plan to take out government loans. These counseling sessions may be done in person, but usually they’re done online. They are formalistic and, crucially, take place only after the student has decided to enroll.
Heather Jarvis, an attorney who specializes in student loan matters, is quoted in this Consumer Reports article that “Counseling is not personalized in a way that makes sense or is useful.” Naturally. The last thing a college wants at that point is for a student to reconsider the wisdom of attending from a cost versus benefit angle.
Furthermore, this counseling is not supposed to deter students from borrowing. In the same Consumer Reports article, Betsy Mayotte, director of consumer outreach at the non-profit organization American Student Assistance says, “The government and universities aren’t allowed to say you can’t borrow money because they think it’s too much.”
Honest counseling would entail assessing a student’s academic abilities and educational prospects, but instead all the government wants to do is to accentuate the positive. That is of no help to the large numbers of students who should be told that the cost of their education (whether or not it entails borrowing) could exceed the probable benefits.
Real counseling might, for example, have dissuaded the young man who was intent on a career as an organic farmer (where he earns only $12,000 per year after taxes) from borrowing to earn a degree from pricey Wesleyan University. (Read about that and other similar stories in this piece.)
Despite the so-called debt counseling, many students remain remarkably ignorant about their debt obligations. In their 2014 Brookings paper “Are College Students Borrowing Blindly?” Beth Akers and Matthew Chingos answer that many are. Akers and Chingos find that slightly more than half of student borrowers are badly misinformed about their repayment obligations. What’s even more remarkable is that some are not even aware that they have any student loan debt.
The U.S. has many organizations (such as Student Loan Ranger) that will help students get out of the debts they have agreed, however mistakenly or foolishly, to repay. What it does not have is any to help them avoid bad debt decisions in the first place.
That should be something for the Trump Education Department to explore. Betsy DeVos, his nominee for Secretary of Education, has a lot to learn about the federal role in the malfunction of higher education and the way we ladle out large sums of money for college to anyone who wants it should be near the top of her list.
First and foremost, the new administration should stop pushing the “college for everyone” mindset. Getting a college degree is not the only path to success. Borrowing to pursue one can be a terrible decision.
It isn’t possible for the feds either to provide or mandate real counseling for students considering college. (High school counselors should do that, but sadly they’ve mostly bought the “college for all” line and hesitate to advise students against it.) What the government could do, however, would be to put something equivalent to the Surgeon General’s warning about cigarettes on all its loans.
That “warning” would refer prospective borrowers to facts showing that college is not always a good use of time and money. Students should be encouraged to ponder the high rates of underemployment among recent graduates, loan default rates, and postsecondary options other than college that may give them better results at lower cost. They might be told to read over something like this pro and con treatment before choosing.
For several years, the number of students borrowing to begin college has been falling, which suggests that the message that college isn’t a good idea for everyone is slowly filtering through the country. The government, however, should do more to make students aware that college debt can be hazardous.