PROBLEM OF STUDENT DEBT
Among the many issues facing higher education today, the student loan debt remains at the top of the list. That’s true nation-wide and equally true in Christian higher education. R. Albert Mohler Jr., president of The Southern Baptist Theological Seminary, warned his denomination, “If your concern is to get young people into the churches or on the mission fields, the greatest enemy other than Satan himself is educational debt because there are far too many young people graduating who are slaves to that debt when they need to be unfettered slaves to Christ.”
That problem certainly affects our national economic health. Many see student debt in the United States as troubling as the bank and mortgage crisis of 2008. Two-thirds of graduates in the United States in 2011 finished school with student debt, and the average was $26,600, 5% more than 2010 graduates. Even more startling: 20% of all households in the United States have student debt, a number more than twice as large as in 1989. The total student debt today totals over $1 trillion, more than the total in credit card debt. And, the default rate of repayment increases annually. Those numbers, though, strike most of us as so abstract to be meaningless. The media anesthetize us with such numbers that never relate to our daily lives. Families, or 18-year-old freshmen, can’t relate to $1 trillion. But they can understand the impact of starting life after college with a debt often greater than their annual salaries. To face those tasks with such indebtedness adds significant stress to the otherwise normal challenges of the new chapter in their lives. Unfortunately such awareness often occurs only after the fact.
HOW DID WE GET HERE?
How did we, our country, our colleges, and our families get in this predicament?
We did not do so all at once. But at the heart of the incremental move was the ease of getting into debt. And the federal government has made that extremely easy. In 1965 (the year after I graduated—thank goodness!), the federal government initiated the Federal Family Education Loan Program (FFELP) that began guaranteeing loans of private lenders to college students whether credit-worthy or not, subsidizing these lenders enrolled in the program, and insuring them against default. The private lenders then, bearing virtually no risk, enjoyed the benefits of the interest returned along with the federal subsidies—a sweet deal for them, but a high risk one for the government. For decades congressional oversight committees and administrative aides from both political parties recognized the problem with this program. But nothing was done until New York Attorney General Andrew Cuomo exposed blatant corrupt relationships between the private lenders and many of the colleges that participated in the program. Several lenders had been “buying off” loan officials in the colleges to push their loans.
Congress tried to reform the FFELP, but the economic crisis of 2008 caused the private lenders to back away from participation in great numbers. The result was that on March 30, 2010, President Obama signed the “Student Aid and Fiscal Responsibility Act (SAFRA),” which transferred the source of funds loaned to students from private lenders to the federal government, all in the name of efficiency (that’s their explanation, not mine). The federal government jumped directly into the banking business. The U.S. Treasury transfers the monies for SAFRA to the Department of Education, which then transfers funds through the institutional financial aid offices to the students. You know where the Treasury received that money—from you and me. Any student enrolled half-time or more who is a U.S. citizen and who has demonstrated need can borrow from this Federal Direct Loan Program at interest rates much lower than conventional loans. I don’t imply that everyone who acquires these loans acts irresponsibly. In fact, most do pay them back and on time. But that fact does not prevent the program from creating such a major problem for the U.S. economy.
HOW DOES IT AFFECT US?
What does all of this have to do with Johnson University? Much the same as with every other college that participates in the Federal Direct Loan Program. And it ties directly to our mission of education “to extend the kingdom of God among all nations.” The data should trouble all of us.
- Slightly more than 70% take out student loans each year, and that percentage creeps upward every year.
- Those loans averaged $20,600 for 2012 graduates who had loans. That number creeps upward most every year. When parents’ loans factor into the statistics of loan averages, the total amounts to over $24,000.
- When two of these “average” graduates who have loans marry and combine their loans, they face a debt of $40,000-$50,000. How, then, can they become independent of their parents and start a new family, relocate and provide for a new home, and start a new job with such a “Damocles’ sword” hanging over their heads?
- Most graduates enter lower-paying vocations with congregations or with mission and other parachurch agencies. Many who work with these agencies must raise their own support. Reality hits. How can students who have planned to teach in China or Africa or the Middle East, or to work with a U.S. urban church plant, or to start graduate education make such a choice when needing first of all to attend to repaying their student loans?
- Most schools depend on alumni for continued financial support. Yet, when the expense of college education stretches years, sometimes many years, beyond graduation, alumni don’t have the means of supporting their alma mater to the extent that previous alumni did before the expansion of student loans. Decreasing alumni support lessens the colleges’ ability to keep tuition and fees low, thus adding to problem of costs.
WHAT CAN WE DO ABOUT IT?
Frankly, colleges don’t like to talk about this problem of student loans. Most schools depend on student tuition, and the student loan process happens mostly outside of our control. But we must talk about it. It is an unsustainable model. But talk must lead to change, and we can’t do it by ourselves. As with many complex social issues, no easy answers emerge. Together, we could start with these practices:
- Parents should begin early preparing for the financial realities of their sons’ and daughters’ higher education expense. Only a small percentage of parents give evidence they have systematically saved for their sons’ and daughters’ education.
- Parents and students should explore shortening the time spent working toward a baccalaureate degree. I graduated in three years almost 50 years ago, and I was not an honor student. If I could do it, most anyone can. (In light of full disclosure, I must confess my motivation was not economic as much as it was marriage!) With the availability of online courses, hybrid courses, and on-the-ground summer courses, a baccalaureate degree can be finished fairly easily in three years with creative scheduling. Academic counselors can help facilitate such a plan.
- Students should learn to adjust their lifestyles realistically to fit their financial resources. Prioritizing college and living costs over against designer clothes, late model cars, the latest media equipment, and entertainment budgets could go a long way to reducing student loan debt.
- Students should learn to work. They should start early in high school with a job that requires punctuality and productivity. They should plan to work 14-20 hours per week in college to help offset their living expenses incurred from the choice of being a resident student. Students who work during college have a higher retention and graduation rate as a student category than those who do not work.
- Colleges should continue to work hard at keeping tuition low and increasing funded aid to worthy students. We have done that at Johnson through the help of many supporters, good fiscal management, and our own extensive work-study program. Our tuition and fees rival those of most public universities’ in-state tuition and fees. Students can attend our campus at about the same costs as if they attended and lived on the campus of the public universities in their home states. Johnson ranks among the least expensive accredited institutions in Tennessee, with undergraduate annual tuition and fees of $10,250 this year.
- Colleges should have financial management courses and workshops available, if not required, for all students early in their college experience. Many students have no experience with or knowledge about the impact of such loans. Colleges should consider alternative delivery models for educating students. While I believe that the four-year residential model will continue for years to come, this delivery system does not fit all students. Many schools have done a good job creating a new system for adults with two or more years of college. We’ve also created such degree completion programs that accommodate working adults’ schedules and financial means. But we need to have better models for traditional age students. This past year we responded by creating online degrees at the associate, baccalaureate, master’s, and Ph.D. levels, which serve both traditional and non-traditional students.
- Colleges should explore establishing “Christian community college” models, which could be similar to commuter schools in centers of populations of our constituencies. The costs of delivery of such education could be cut, while maintaining quality. The costs to students could be cut for one or two years. Then, those students could transfer to a campus residential program if they chose or finish with alternative delivery systems such as online or degree completion programs. Some of the Christian community colleges could possibly be joint efforts of several existing schools. Perhaps, some existing schools would even find it more feasible to follow this model than the traditional residential one.
- Alumni should begin soon after graduation including their alma mater in their charitable giving, however small the gift might be to fit their income. Even a token gift acknowledges the significant financial contribution that the schools and their constituencies made to the graduates’ education.
- Friends, churches, and foundations should continue to establish permanent scholarship funds for needy students to close the gap between the family contribution and the total expense of the education.
We don’t know what impact the November election will have on the national problem of student debt. But whatever that outcome, no easy solution remains. While we can’t impact greatly the national problem, we have the corporate means of making a dent in this problem for our constituency. Whether we have the will remains to be seen. Our mission compels us to try.
Johnson Magazine Feature Article Winter 2012
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