How President Biden Can Work With Colleges To Reduce Student Debt |
Colleges should be held accountable for high student loan debt, while those that improve affordability should be rewarded.
President Joe Biden has set an aggressive agenda for his first 100 days in office. At the top of that agenda is likely to be higher education reform to turn the tide of the country’s $ 1.7 trillion student debt crisis.
And rightly so.
The country’s nearly $ 2 trillion student debt balance makes it the country’s second-largest form of consumer debt. According to LendEDU, the average student loan borrower of the 2019 class owed $ 29,076 at the end of their academic career.
In addition to the startling numbers, student debt reform has finally become a high priority issue for both sides, as neither wants to lose the votes of the millions of young Americans who are most financially stranded by student debt.
This gives the president the opportunity to mark a major bipartisan political achievement in his first few months. He can achieve this feat by working with college and university administrators and holding them accountable for their own affordability.
The country’s student debt problem has evolved to its present state in large part because of the colleges and universities themselves.
Over the past 20 years, they have raised tuition fees to a level that exceeds the rate of inflation by at least three times. Higher tuition rates have forced most students to take out more student loans to cover costs.
Higher education institutions have gotten away with the unjustifiable increases because no one is stopping them. There is no accountability system. A college increases its tuition fees because all other schools have it and a student has little choice but to take out more student loans lest they decrease their value in the working world without a degree.
And the cycle continues.
But, President Biden can break the cycle if he passes bipartisan legislation that punishes colleges and universities that have a consistent history of high student debt and default numbers.
The idea is not new. In March 2019, the White House of former President Trump submitted proposals reform the law on higher education. Among these proposals was “to increase institutional accountability” by requiring that “post-secondary institutions that accept taxpayer funds share the financial responsibility associated with student loans.”
President Biden is expected to pursue this proposal and ultimately sign it with bipartisan support. If a college or university consistently has high student loan debt and defaults, it should become equal repayment partners with borrowers who have attended their institution.
This would require higher education institutions to reduce their tuition fees and keep them there.
In a similar vein, Biden is also expected to add to what his predecessor proposed by rewarding colleges and universities that have low tuition fees and low student debt and low number of defaults.
Any school and its administrators who actively work to keep tuition low and affordable and prove it by having excellent student debt numbers should be rewarded with additional federal funding.
This funding could be used to provide incoming students with more generous financial aid, mainly in the form of scholarships and grants. Or, it could be used by the institution to bolster research being done on campus or improve campus facilities.
A system of checks and balances exists for most other sectors or industries, but for some reason it does not exist in the American higher education system. It allowed colleges to go wild with tuition fees, which got us into the student loan crisis.
President Biden can change that by pushing for a bipartisan higher education accountability bill that he can eventually sign into law. This bill will finally establish a working relationship between the colleges and the federal government, because the former will ultimately have to report to the latter and be held accountable for its own affordability.
The student debt crisis has had a negative impact on students and government, but not on colleges and universities.
By creating a law that rewards affordability and low student debt and punishes the contrary, higher education institutions will actually have some skin in the game and will have an interest in minimizing student debt.
In his role as Director of Communications at LendEDUMike uses the data to identify emerging personal finance trends and tell unique stories.