Common Sense, Facts, and Good Strategies are the Best Ways to Lower Student Debt

Derek Thompson has an excellent article in the Atlantic about the student debt crisis. Thompson says Obama’s student-debt repayment plans won’t make much of dent in our embarrassing national $1.2 trillion student debt crisis. Most students aren’t even taking advantage of the current Pay As You Earn plan. 

Thompson says that the best way to reduce the student debt crisis is with “marketing.” In other words, students and their parents have to understand the best way to spend their education dollars.

Thompson is right. Parents need knowledge to be better higher education consumers. Here’s a couple of quick tips:

  • Learn about the student loan process and repayment options, including Pay As You Earn.
  • Beware of for-profit colleges (Thompson calls them student-debt factories.)
  • Once you’re are in, stay in! Finish in four years! Do not change majors or transfer!
  • Avoid graduate degrees, unless you have hard evidence that it will guarantee you a job promotion, raise, or access to a new career.

But parents and students alone cannot shift the course of the student debt debacle. We also need help from the eduction community. Colleges need to work on student retention, four-year graduation rates, and support for low-income students. Students need better counseling, while at school. We even need high schools in the game. They could be training their graduating seniors on the ins and outs of student loans and college selection.

Obama’s reforms must be combined with larger changes in higher ed and with education-consumers in order to work.

36 thoughts on “Common Sense, Facts, and Good Strategies are the Best Ways to Lower Student Debt

  1. I don’t these measures are going to have a strong impact because I think one of the biggest contributor to the worst of the problem is the lack of alternatives. Going into debt shifts the problems down the road. Education is being touted as the solution to all of societies problems. And individual action the only tactic. I’m feeling very cynical this rainy Monday morning.

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    1. I think you’re right. For all the talk about people with trouble paying back loans, people without degrees are in an even worse boat.

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    2. This is why I am so irritated with the “I didn’t know” narratives. They result in nothing but crap about how we have to educate people so they know more about loans and how they work. We already do that, so the ‘educate people about loans crap’ is just demanding we do it harder. We need to reduce credential creep – receptionists really don’t need college degrees (I have no idea how to do this) and we need to better fund higher education. UMCs won’t like this, but let’s stop funding private colleges and universities through state aid in terms of state sponsored loans and grants and put that money into state schools.

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      1. Yes, I agree that affordable public institutions are the first solution in my mind. But isn’t a main part of the problem that student loans are federal support while states have to come up with the state subsidies?

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  2. You can’t fix willful ignorance. I don’t think any of this will help. All the repayment option information is already provided. Everyone is required to go through loan counseling before funds are disbursed ( and this has been so for more than a decade) and yet borrowers insist they had no idea. They didn’t know how much they had borrowed, they didn’t know how long it would take to pay back, etc.

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  3. People are making bad decisions because they don’t have competent advisors.

    Require all public high schools to employ college counselors, at a reasonable ratio, say, 1 to 150 seniors. If the high school does not offer such services, it doesn’t qualify for accreditation. As an alternative, allow high schools to contract consulting firms to perform the same role.

    That’s probably not a role the federal government can play, unless it requires states to pass such legislation to allow their students to receive federal financial aid funds. As student loans are non-dischargeable, not taking out a loan you can’t pay back is much better than taking out said loan. You’re more likely to make a bad decision if you don’t have competent advice.

    Ah–even better–if the high school doesn’t offer college counselors, they aren’t allowed to field a football team.

    DO NOT ALLOW high schools to throw it all into the pot of “guidance counselor.” That’s what’s happening now. The schools which enroll students with the greatest needs are (according to newspaper articles) siphoning off guidance time into other duties.

    Set up a course of study at education schools for college counselors. They are only to receive the degree if they pass a rigorous test with perfect marks, or at least as competitive as the bar exam. Create a professional test with the same failure rate as the bar. College counselors must be able to calculate the overall cost of a degree, the long-term cost of debt, and be able to explain it to a high school student. They should also be conversant with local community colleges and trade schools, not only 4 year colleges.

    There’s a lot of information available, but it’s like the mortgage crisis. There are a lot of people who should have known that they would not be able to pay back their loan. Some of them were teachers. Most were adults.

    The student debt question is worse, because the teenagers taking on the debt have no frame of reference for the cost and trade-offs. Their parents may not have the sophistication necessary to advise them.

    At a minimum, colleges should not be able to dub student loans “financial aid,” or “part of the financial aid package.” See this presentation on College Board’s Big Future: https://bigfuture.collegeboard.org/get-started/for-parents/webinar-its-time-comparing-financial-aid-award-letters. (by the way, Big Future is a good source of things to think about.) In my opinion, the loans section of the financial aid letter should be clearly divided from the grants and work/study section. The interest rates should be spelled out.

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    1. Still just treating the symptoms, not the disease. The interest rates spelled out strikes me as no different from making the calorie count on the box of cookies bigger. It has no impact.

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  4. Yes. All the guidance counselors at my kid’s school seem to do is: conduct ‘interventions’ with students who have been accused of bullying; lots of counseling of pregnant teens.
    They don’t seem too interested in college, to tell the truth. Most of them are locals who went to the local university, and honestly don’t understand why anyone would want to do more than that.
    I wonder what would it happen if college counseling was outsourced to a third party — not Kaplan! who would send them all to University of Phoenix or Stratford or whatever “university” they hold a stake in.

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    1. I think it can be tempting for counselors to fall into ruts. My cousin claimed her son’s guidance counselor at their local public high school sent most of his students to the nearby local state university branch, or the community college in the area. That wasn’t necessarily the best financial choice for some of the kids. Our state has a peculiar system whereby tuition is set to be really low; the difference is made up by “fees.” There are some state scholarships which award “full tuition” to state universities for certain class rank and GPA.

      That counselor was apparently telling students who had a chance at the most generous, most elite schools that “you can’t afford it,” although the students in question (had they applied) would have had a shot at winning need-based full financial aid. I guess he hadn’t kept up with the changes in the field of financial aid since, oh, 2005 or so.

      A great deal has changed just in the last few years. I think almost everything is online, what with the Common App and the Universal Application. I would not be surprised to find some older guidance counselors need to catch up with the new tools which are available.

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  5. In most areas, some moderate regulation of lenders (e.g., no breaking kneecaps) is all that is needed, because lenders have an incentive not to make bad loans. (This axiom broke down somewhat with subprime, but it holds as a general rule.) No one relies on borrowers to know how much of their income they should be paying for housing. But because student debt can’t be discharged in bankruptcy, the incentives for sound underwriting are severely diminished. So the number one useful reform would be to change the bankruptcy rules, and see how the market responds.

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    1. Yes. The risk needs to go back to the lender. Evaluating risk is basically their only reason for existing.

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    2. Are lenders allowed to turn down student loan borrowers on the basis of GPA, test scores, or choice of major? Because if I were lending, I’d think the young Actuaries-to-be would be more likely to pay me back, whereas the students with below-average math skills might be more likely to default. (And less likely to understand the consequences of high interest rate, non-dischargeable debt.)

      Also, the presence of foreign students throws a monkey-wrench into the system. I do not think it is fair for students from outside the country to be accepted because they must pay full tuition, whereas good in-state students are not accepted, because their tuition rate is capped at a lower level (thinking of California, in particular.) Out-of-state students face this too, I gather, unless they have test scores & other qualities which would lead to merit aid offers.

      Capping tuition rates for in-state students makes those students less desirable to their in-state flagships. Out-of state public colleges are expensive. http://www.thecollegesolution.com/what-nonresidents-need-to-know-about-attending-state-universities/

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  6. As things currently exist, colleges have zero incentive to lower tuition or think about costs at all. They have zero incentive to worry about student loans. Gordon Gee, former head of Ohio State was asked about college costs and said, basically, “we don’t spend much time thinking about that.”

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    1. Do you have a citation? I couldn’t google anything like it and it doesn’t seem in character (except maybe the saying stupid things while others are listening phase right at the end). Gee was recently asked to head a commission on that very topic and Ohio State’s tuition and fees aren’t higher than other state schools in Ohio. Plus, when I was there, Gee was being reviled by a not-small section of the school for cutting costs by doing things like merging departments.

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  7. We’re in the ‘sour spot’ between poor enough that the kiddo gets a scholarship and rich enough not to care, the academical-bloodsucker complex will want full pay for each of our kids and that we retire on canned refried beans and baloney sandwiches. So we are following these discussions with high interest!

    Should my kids go to college? They are reasonably smart but don’t seem to have any vocation for the intellectual life. Each of them seems like a potential Home Depot manager or a restaurant inspector or a regional sports league president – jobs which in no way need college to do, but I guess will usually have college demanded as a prerequisite. So, bang!, there goes four years of lost wages and tuition to do something they coulda done out of high school.

    Put that way, the question answers itself: hafta, to get the job. I’m with y81 again: make the loans dischargable in bankruptcy, people will be less crazed in issuing them, and more of the folks who actually do go to college are the ones for whom it’s a good thing.

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    1. dave s.’s children would be best-advised to drop down the college level to where they can get merit scholarships. I don’t know what their level is, but if you can get into Harvard, you can get a merit scholarship at Vanderbilt; if you can get into Vanderbilt, you can get a merit scholarship at BU, etc.

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  8. I kind of think their good bet, or at least Number One, is Directional State. Someplace with good sports, which he can get excited about. Maybe go to a JC and transfer after two years. Middling grades, middling boards. Right now I think you put him down in front of an enormously exciting and charismatic prof and his question will be, ‘will this be on the exam?’ Discouraging. Buddy of mine went to Harvard undergrad, said he knew some kids who had clearly been gotten in by dint of parental influence and money. He said, ‘we knew who didn’t belong there’. I think it is likely no favor being done for those kids to be gotten in where they cannot thrive. So, if Directional is where our guy can be in the middle of the pack or maybe a little ahead, it’s okay.

    Numbers Two and Three, we don’t know enough about yet. Well, you have kids, you feed them, you water them, you see what you get. And you back them, because they are yours.

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  9. With our enrollments dropping at the community college, it’s not likely that we’d be the ones to say to students, no you can’t possibly do four online classes this summer. So we take the money and, yes, two weeks in, I’m down to 13 students (out of the 28 who who started). Not sure if those credits/withdrawals are all on loans? But the students do not believe the advisors and counselors who say that it’s not likely to end well; no, they’re sure they can do four classes while working full-time with three kids home. How hard can an online class be?

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  10. What bothers me most is that knowledge about higher ed is siloed up in middle class communities and doesn’t trickle in lower income communities. Parents who never attended college aren’t able to pass down info to their kids. There’s unrealistic expectations about post-college salaries and employment. They don’t know how to advocate for themselves with the bursor’s office and with their college advisors. They don’t understand how to graduate in four years. Many of those kids have complicated lives and need hand-holding before they start the college process and during it. Meanwhile, college can be a $100,000 expense. We don’t let people buy homes without going through the mortgage process. College loans shouldn’t be that difficult, but there should be some protections for those kids.

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    1. “What bothers me most is that knowledge about higher ed is siloed up in middle class communities and doesn’t trickle in lower income communities.”

      I was on a thread elsewhere today, where a 17-year-old kid was lamenting the fact that his mom won’t allow him to sign up for Army Reserves right now. He has a 2.7 GPA but wants the army to pay for a doctorate in psychology for him. He thinks that he shouldn’t do community college classes right now while he waits to turn 18 because they mostly won’t transfer.

      Some friendly adults are pointing out the issues with his plans.

      http://forums.catholic.com/showthread.php?t=890399

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  11. The problem is, potential college applicants are deluged with marketing. We’re going through the process for the second time. Your kid’s name is sold, and it’s off to the races.

    One of our kids did not check the box to allow the testing services to share contact info with colleges. She got mail from colleges anyway. The other kid was curious, so he checked the box. He’s getting mail too. It’s all mass-produced, sent to students who match whatever profile the colleges are willing to pay for.

    You can avoid filling out the whole student profile bit for the SAT, in that you can register for the exam without giving your shoe size and blood type. This is a good thing, as the profile includes things such as what you want to major in in college, your grades, years of study, etc. Students start filling this out with the first SAT, which for some is sophomore year or 8th grade, depending on how high-pressure the parents are.

    I do think there’s some lying going on. 36% of students self-report they’re in the top 10% of their high school. 48% have an A average. At any rate, it includes student-reported family income. See “Crazy You,” by Andrew Ferguson, for more info. No such luck for the ACT, as you can’t sign up to take the test without filling out a long questionnaire. (This should be changed.)

    But anyhow, even if you don’t agree to sell colleges your scores and questionnaire, they seem to use zip-code data and other marketing info to target students. So be ready for college brochures, invitations, and emails to reach the house.

    Long response, I’ll break it up.

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    1. I think the 36% in the top 10% and the 48% A averages are a deeper problem than just the students lying — I think there’s a purposeful plot on the part of high schools (maybe worse at high performance HS) to hide relative performance until the exit phase of high school. So, a kid at the beginning of junior year, doesn’t know where she is in the performance hierarchy, and neither do the parents. I feel like we get a version of this issue in tests that have “extra credit” so that scores are not out of 100%.

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  12. I try to keep the kids from giving out their cell phone numbers. I gather from online research that admissions people can and will call prospective students at home. Or they send texts. I’d put up with that for their favorite colleges, but not from every college. It’s distracting. From my standpoint, colleges seem to treat senior year as a needless barrier to customers. You text my senior during a calculus exam, that’s a problem. He misses a mandatory meeting because he can’t sort out real emails from college spam, that’s a problem.

    It’s gotten to the point that some high schools encourage students to use aliases on Facebook and other social media during junior and senior years, so that admissions people can’t find them. Do I want my kids to friend admissions officers? Ah, no. That would be no. Do I want them to worry that if they don’t accept the friend request, they’re not showing “demonstrated interest?” (Search for “demonstrated interest college admission.”)

    The odd thing is, many of the colleges use the same marketing company. So what’s intended as a flattering sign of interest on the college’s part falls flat when college A’s admissions director uses the same text as college B’s admissions director.

    We have to pay attention to these things because we would not qualify for any financial aid. Which makes our children very attractive to many colleges, no matter what their test scores. It’s not as flattering to hear about your “strong academic accomplishments,” when a warm body of the right age from the right zip code would be just as interesting.

    The middle class/UMC knowledge which helps is to filter out the marketing. Know when to say No. We definitely had a limit on what sort of colleges would come into question. Our nearby state university branch would be a commuter school for our children. It has better test scores than some of the colleges sending colorful post cards of their climbing walls. I could not justify sending my children far away to college for a more expensive and less rigorous experience than they could get a few miles from home.

    And if my kid wanted to be a chef, carpenter, or electrician, I’d send them to the appropriate school. College is not the only answer. Our kids had classmates who enlisted.

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    1. “I gather from online research that admissions people can and will call prospective students at home. ”

      Our uni is asking faculty to call! Gah, no! I’m trying to lay low so no one asks me so I don’t have to say no, I won’t do it.

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      1. Our college actually has faculty helping freshmen move in and hosting dinners at home.

        We’ve ducked that so far.

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      2. I don’t mind socializing with accepted students, but trying to sell to people at their homes like I’m trying to get them to buy a carpet cleaning service is not what I signed up for.

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  13. This year’s theme in the early spring was, “respond now to get our best advice for how to apply to college! The things which make your application stand out!” (multiple colleges sent the same thing.)

    So even if you increased marketing of common-sense behavior to high school students, I don’t know how it would stand out from the flood of college marketing.

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    1. We’ve been getting those from private schools. I really don’t know how the kiddo got on the mailing lists. Fortunately, I’m getting them in my email box. My younger kiddo says that because he’s played in catholic league sports, he’s getting emails directly from the CYO, to his school email box. My 10yo year old is really not ready to dismiss the marketing that comes addressed to him, with his name, with “You have been selected to be . . . .”

      I cannot imagine how people who are less savvy manage to separate the real stuff from the fake stuff (especially when real/fake is a pretty small ratio). I’ve heard of people throwing away information from Questbridge because they thought it was just another marketing ploy, and parents who didn’t believe their children when they were told that *this* program was for real.

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  14. I agree with you completely, Cranberry. Our middle child is a bit of an underachiever, and she has seen the stack of postcards and concluded that “my grades are just fine. THere are plenty of colleges that can’t wait to accept me with these grades.” The problem here is that lots of places send you postcards when they actually have no intention of accepting you — they just want to boost the number of applications so they will move up in the US News rankings, and, like you, we’re not interested in paying boatloads of money for a school that’s not particularly rigorous. But all the kid knows is that there are lots of people interested in accepting her at college.

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    1. What does she say when you tell her, “No, honey, they want to REJECT you so that they can push their acceptance rate down to 10% and look more selective.”

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      1. Well, I think there are different outcomes for different kids. Yes, definitely, some colleges have been pushing up applicant numbers through mass marketing. But I wonder how many of those applicants intend to attend if admitted? Things change quickly; I’m now hearing of kids with good grades and test scores applying to 15 – 20 colleges. Thank you, Common App! Driving up pressure for everyone!

        So it’s harder to get into “match” schools than ever, but it’s not as if the admitted classes are academically stronger, either. I found some document online showing chances of admission to, ah, maybe Penn State? The interesting thing is the kids admitted had stronger grades & test scores than the enrolled class. So there are huge numbers of academic & financially secure students whose applications to multiple schools are inflating the numbers of applicants. But they can only enroll at one college.

        My eldest received emails from colleges through the summer, until the start of freshman year. I don’t know why, as she never replied or opened any of them, once she committed to the college she’s attending. Gap year students? Students who lost out on the application lottery, but were academically strong, i.e., they applied to all Ivy League schools, but would be at the top of any college in the country?

        Or did they just want her test scores to buttress their statistics for “admitted students?”

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  15. Iowahawk has been participating in #RuinaKidsMovie.

    His entry: Harry Potter and the Hogwarts Student Loan Repayments.

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