tag:theconversation.com,2011:/fr/topics/student-loans-8901/articles
Student loans – The Conversation
2024-03-19T12:25:19Z
tag:theconversation.com,2011:article/222691
2024-03-19T12:25:19Z
2024-03-19T12:25:19Z
$50K per year for a degree in a low-wage industry − is culinary school worth it?
<figure><img src="https://images.theconversation.com/files/582641/original/file-20240318-20-1k5k0h.jpg?ixlib=rb-1.1.0&rect=16%2C0%2C5618%2C3751&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Cooks and chefs regularly debate the merits of culinary school.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/increase-in-the-price-of-gas-concept-of-problems-in-royalty-free-image/1412088087?phrase=burning+money+stove&adppopup=true">Diy13/iStock via Getty Images</a></span></figcaption></figure><p>America’s culinary schools are feeling the heat. </p>
<p>When chef Gordon Ramsay appeared on an episode of the YouTube series “<a href="https://www.youtube.com/watch?v=ENhfIeZF_AY">Last Meal</a>” in January 2024, he described U.S. culinary schools as “depressing” places that “sandbag” students with tens of thousands of dollars in student loan debt before releasing them <a href="https://www.bls.gov/ooh/food-preparation-and-serving/chefs-and-head-cooks.htm">into a low-wage industry</a>.</p>
<p>He added that graduates are pressured to select jobs that will put them in the best position to pay off their loans, rather than ones that will give them opportunities to learn and grow as chefs. Ramsay singled out the Culinary Institute of America, one of the most prestigious cooking schools in the country, as it sets students at its New York campus back <a href="https://www.ciachef.edu/cia-tuition/">US$52,090</a> per academic year. </p>
<p>Then, at the end of February, The New York Times published <a href="https://www.nytimes.com/2024/02/27/dining/chefs-state-of-the-restaurant-industry.html">a compilation of interviews from 30 chefs around the U.S</a>. They chimed in on a range of topics, but they were pretty much in lockstep when it came to culinary degrees: </p>
<p>“People ask me, ‘What’s a good culinary school to go to?’” chef Justin Pioche said. “And I always tell them: Don’t go.” </p>
<p>Chef Robynne Maii added, “I always sing the praises of culinary school, but in community colleges only. All the for-profit schools need to go away. They’re completely unnecessary and they’re predatory.”</p>
<p>These sentiments are not unique to culinary schools. </p>
<p>Trade, technical and for-profit schools are routinely criticized for their lopsided cost-to-benefit ratio, with scholars such as <a href="https://thenewpress.com/books/lower-ed">Tressie McMillan Cottom</a> and <a href="https://www.press.jhu.edu/books/title/11594/diploma-mills">A.J. Angulo</a> arguing that many of them have predatory financial processes baked into their business models. There has been a similar critique – often tinged with political undercurrents – over <a href="https://slate.com/business/2021/07/masters-degrees-debt-loans-worth-it.html">graduate degrees in the humanities, arts and social sciences</a>, <a href="https://www.wsj.com/articles/financially-hobbled-for-life-the-elite-masters-degrees-that-dont-pay-off-11625752773">described by the Wall Street Journal</a> as “elite master’s degrees that don’t pay off.”</p>
<p>Yet thousands of aspiring chefs continue to enroll in expensive culinary schools, rather than learn on the job while being paid. And in <a href="https://www.rutgersuniversitypress.org/making-it/9781978840126/#generate-pdf">the research for my book on notions of success in the culinary industry</a>, I found that many graduates from these institutions actually feel their experiences were worth the price of admission. </p>
<p>What might explain this paradox?</p>
<h2>Beyond dollars and cents</h2>
<p>Cooks and chefs <a href="https://www.reddit.com/r/KitchenConfidential/comments/9qzw4g/is_culinary_school_worth_it/">regularly</a> <a href="https://www.foodandwine.com/lifestyle/culinary-school-worth-it-four-chefs-weigh-in">debate</a> the merits of culinary school. </p>
<p>It’s also a question I asked 50 U.S.-based kitchen workers during a study I conducted from 2018 to 2020. Of those 50 workers, 22 had attended culinary school. And of those 22 chefs, 17 believed their education was worth the cost – over three-quarters. </p>
<p>They were clear-eyed about how much they would earn after graduation – very little – and they also grasped that the debt would constrain their future work choices. </p>
<p>Yet, to them, the worth of their schooling didn’t hinge on wages and earning power. </p>
<p>Instead, they found immense value in the friendships and connections they forged – and in learning the culture of commercial kitchens. Social scientists have terms for these benefits: <a href="https://www.oxfordbibliographies.com/display/document/obo-9780199756384/obo-9780199756384-0076.xml?rskey=fvSHSB&result=1&q=social+capital#firstMatch">social capital</a> and <a href="https://www.oxfordbibliographies.com/display/document/obo-9780199756384/obo-9780199756384-0209.xml?rskey=UwFmGz&result=1&q=cultural+capital#firstMatch">cultural capital</a>. </p>
<p>Interviewees described being able to meet mentors through school events, gain experience in award-winning kitchens through internships, form relationships with classmates and always have a degree to point to as proof of know-how.</p>
<figure class="align-center ">
<img alt="Bird's eye view of culinary students standing around a piece of pork as an instructor demonstrates how to cut the meat." src="https://images.theconversation.com/files/582645/original/file-20240318-28-lgqhes.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/582645/original/file-20240318-28-lgqhes.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=468&fit=crop&dpr=1 600w, https://images.theconversation.com/files/582645/original/file-20240318-28-lgqhes.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=468&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/582645/original/file-20240318-28-lgqhes.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=468&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/582645/original/file-20240318-28-lgqhes.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=588&fit=crop&dpr=1 754w, https://images.theconversation.com/files/582645/original/file-20240318-28-lgqhes.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=588&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/582645/original/file-20240318-28-lgqhes.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=588&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A Culinary Institute of America instructor demonstrates how to cut pork chops.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/CadetsandCooks/635766166c68411b989beb7b1edb3e37/photo?Query=cadets%20and%20cooks&mediaType=photo&sortBy=creationdatetime:desc&dateRange=Anytime&totalCount=15&currentItemNo=2">AP Photo/Mike Groll</a></span>
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<p>Culinary school was particularly helpful for individuals who felt socially disadvantaged in some way. They may have lacked connections and experience, or they were a minority in an industry where <a href="https://restaurant.org/getmedia/21a36a65-d5d4-41d0-af5c-737ab545d65a/nra-data-brief-restaurant-employee-demographics-march-2022.pdf">white men are more likely to serve as executive chefs</a>.</p>
<p>“Because I am a female it was harder for me to get a sous-chef job,” one chef explained to me. “I mean, I saw kids who were not nearly as skilled as I was who got sous-chef positions, and I’d always get passed up. But I really feel that that education [from the Culinary Institute of America] – especially as a woman – really helped me. A lot. I would’ve never got the jobs I got without it.” </p>
<p>In her 2015 book “<a href="https://www.sup.org/books/title/?id=23351">At The Chef’s Table</a>,” sociologist Vanina Leschziner found that elite chefs claim to not weigh academic degrees highly while hiring, <a href="https://www.eater.com/2014/7/28/6184011/chefs-weigh-in-does-culinary-school-get-cooks-hired">a sentiment also found by the food website Eater</a>. At the same time, Leschziner found that 85% of elite chefs in San Francisco and New York were culinary school graduates, with 67% holding degrees from the Culinary Institute of America.</p>
<p>At face value, it’s possible that degrees and certificates are dismissed or overlooked during the hiring process. But social connections are not. So perhaps the networks and friendships formed during schooling are a big reason why most high-status restaurants are staffed by culinary school graduates.</p>
<p>With these industry realities in mind, culinary school doesn’t seem to “sandbag” students; instead, it helps them overcome barriers that they ordinarily couldn’t.</p>
<h2>Not all culinary schools are alike</h2>
<p>Based on my interviewees’ enthusiasm, culinary school degrees seem like a no-brainer. But there are caveats.</p>
<p>First, these largely positive perceptions of culinary school came primarily from students who had gone to the Culinary Institute of America. Attendees of college or for-profit programs, such as the <a href="https://www.eater.com/2015/12/17/10401492/le-cordon-bleu-cooking-school-america-closing">now-shuttered U.S. Le Cordon Bleu campuses</a>, were less pleased about their experience, with just 66% feeling like their degree was worth it, compared with 90% of those I interviewed with degrees from the Culinary Institute of America. While some of this discontent was due to quality of instruction, a large part was related to schools’ prestige.</p>
<figure class="align-center ">
<img alt="Blue awning hanging over entrance to three story building reads 'Le Cordon Bleu College of Culinary Arts.'" src="https://images.theconversation.com/files/582649/original/file-20240318-28-1itan2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/582649/original/file-20240318-28-1itan2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=489&fit=crop&dpr=1 600w, https://images.theconversation.com/files/582649/original/file-20240318-28-1itan2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=489&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/582649/original/file-20240318-28-1itan2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=489&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/582649/original/file-20240318-28-1itan2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=615&fit=crop&dpr=1 754w, https://images.theconversation.com/files/582649/original/file-20240318-28-1itan2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=615&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/582649/original/file-20240318-28-1itan2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=615&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Le Cordon Bleu closed all 16 of its U.S. campuses in 2017.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/the-famed-le-cordon-bleu-culinary-school-plans-to-close-all-news-photo/1245992397?adppopup=true">Walt Mancini/MediaNews Group/Pasadena Star-News via Getty Images</a></span>
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<p>There are about <a href="https://datausa.io/profile/cip/culinary-arts-chef-training">260 culinary programs across the nation</a>. Schools at the top of the hierarchy, such as the Culinary Institute of America and the Institute of Culinary Education, are seen as places where high-status networks can be honed. This is, in part, a result of filtering out those who can’t afford to pay.</p>
<p>A degree from a top school is associated with the high-caliber restaurants and chefs that Leschziner wrote about; a degree from a lesser-known program likely yields far less social and cultural capital.</p>
<p>Second, I spoke only to individuals who still work in the industry, and that’s just a fraction of the culinary school population. Not all who attend remain in the industry. In fact, my interviewees estimated that only one-third of their classmates still cooked professionally. </p>
<p>Those who stick around likely present a more positive take: They had finished school and had found some measure of success <a href="https://jacobin.com/2020/12/restaurant-workers-covid-coronavirus-food-service">in a notoriously brutal industry</a>. Had I spoken to the two-thirds of graduates who had left the industry, this article might read differently.</p>
<p>Finally, because students devote a lot of time and money to an experience that yields little financial return on investment, adopting a rosy outlook on their schooling may smooth over <a href="https://www.britannica.com/science/cognitive-dissonance">any inner turmoil that might arise</a> as they judge themselves and their past decisions.</p>
<h2>A foot in the door</h2>
<p>Determining the value of expensive culinary education is tough. </p>
<p>It can also detract from the very real problem of predatory and overpriced schooling, especially as the cost of higher education – in all forms – <a href="https://educationdata.org/college-tuition-inflation-rate#:%7E:text=The%20average%20annual%20cost%20of,9.24%25%20from%202010%20to%202022.">continues to rise</a>, to the point of excluding large swaths of the population. </p>
<p>What’s clear to me, though, is that finances are not the sole – nor most important – reason why people choose to attend pricey culinary programs. My interviewees viewed culinary school as a social experience, one that provides meaningful networking and cultural opportunities to students and alumni. </p>
<p>As one award-winning chef told me, “If I wouldn’t have gone (to the Culinary Institute of America), I wouldn’t have gotten (my first) job as a personal chef. … Anytime people see (Culinary Institute of America) on the resume – whether it should or shouldn’t – it does open doors. So, I’m really glad I went there.”</p><img src="https://counter.theconversation.com/content/222691/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ellen T. Meiser attended the Culinary Institute of America's Napa campus from 2008 to 2009, where she obtained a certificate in Baking and Pastry. While she had a positive experience, her own opinions and anecdotes are not included in this article. All findings are derived from 50 in-depth interviews with kitchen workers across the US, collected from 2018 to 2020. Additionally, she did not graduate culinary school with student loan debt.</span></em></p>
Celebrity chef Gordon Ramsay recently pilloried these institutions for saddling students with debt prior to sending them off into a low-wage industry. But many graduates have no regrets.
Ellen T. Meiser, Assistant Professor of Sociology, University of Hawaii at Hilo
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/222840
2024-02-21T17:44:12Z
2024-02-21T17:44:12Z
Future graduates will pay more in student loan repayments – and the poorest will be worst affected
<figure><img src="https://images.theconversation.com/files/575972/original/file-20240215-26-nsgaaw.jpg?ixlib=rb-1.1.0&rect=0%2C12%2C8179%2C5444&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/frustrated-woman-shocked-by-bad-news-2391411187">IndianFaces/Shutterstock</a></span></figcaption></figure><p>Lots of people are hoping to see a tax cut in their payslips after the British government announces its annual budget in March. The prime minister, Rishi Sunak, has said he wants to <a href="https://www.theguardian.com/politics/2024/jan/07/rishi-sunak-says-he-wants-to-cut-workers-taxes-this-year-and-may-reduce-benefits">reduce the tax burden</a> on workers, at a time when the country is paying more of the money it makes to the Treasury than at any time since the second world war. </p>
<p>But in all the discussion about tax cuts, what’s rarely talked about is the fact that last year the government made a change to student loan conditions that means millions of future graduates will get less money in their pay packets – and pay much more to the government over their lifetimes. What’s more, this will affect mostly low and middle earners, while some of the highest earners will actually pay less.</p>
<p>In 2023, the <a href="https://educationhub.blog.gov.uk/2023/08/01/how-are-student-loans-changing-everything-you-need-to-know/">government introduced</a> the biggest reforms to the student loans system in England in over a decade, in order to increase the proportion of student loan debt that is eventually repaid.</p>
<p>Students starting university from August 2023 will have to make loan repayments for longer – 40 rather than 30 years. And they will start repaying when their salary reaches £25,000, rather than nearly £30,000 under the previous system. </p>
<p>How <a href="https://educationhub.blog.gov.uk/2023/08/01/how-are-student-loans-changing-everything-you-need-to-know/">interest is charged</a> has also changed. Previously, higher earners paid more interest, but now new borrowers will pay the same rate, which is linked to a measure of inflation (the rate at which prices go up). </p>
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<img alt="Quarter life, a series by The Conversation" src="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em><strong><a href="https://theconversation.com/uk/topics/quarter-life-117947?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">This article is part of Quarter Life</a></strong>, a series about issues affecting those of us in our twenties and thirties. From the challenges of beginning a career and taking care of our mental health, to the excitement of starting a family, adopting a pet or just making friends as an adult. The articles in this series explore the questions and bring answers as we navigate this turbulent period of life.</em></p>
<p><em>You may be interested in:</em></p>
<p><em><a href="https://theconversation.com/why-young-workers-are-leaving-fossil-fuel-jobs-and-what-to-do-if-you-feel-like-climate-quitting-214759">Why young workers are leaving fossil fuel jobs – and what to do if you feel like ‘climate quitting’</a></em></p>
<p><em><a href="https://theconversation.com/how-to-challenge-toxic-behaviour-and-help-someone-being-bullied-or-harassed-at-work-214524">How to challenge toxic behaviour and help someone being bullied or harassed at work</a></em></p>
<p><em><a href="https://theconversation.com/trust-is-important-if-you-want-to-succeed-at-work-heres-how-to-build-it-200095">Trust is important if you want to succeed at work – here’s how to build it</a></em></p>
<hr>
<p><a href="https://ifs.org.uk/articles/student-loans-england-explained-and-options-reform">Research from</a> the Institute for Fiscal Studies estimates that 79% of new borrowers will repay their student loans in full, compared with just 49% of those who took out their loans before August 2023.</p>
<p>Good news for the government, which will get more money back. But some economists have described the reforms as “<a href="https://londoneconomics.co.uk/blog/publication/alternative-options-for-higher-education-fees-and-funding-for-england-may-2023/">deeply regressive</a>” for penalising poorer graduates. </p>
<p><a href="https://ifs.org.uk/publications/student-loans-reform-leap-unknown">One analysis</a> estimates that low-to-middle earners could end up repaying on average around £30,000 more over their lifetimes due to the extended repayment period. Meanwhile, high earners could repay £20,000 less due to the lower interest rate and their ability to pay off their loans quicker.</p>
<h2>Things are getting worse</h2>
<p><a href="https://researchbriefings.files.parliament.uk/documents/SN01079/SN01079.pdf">Most students</a> in England borrow from the Student Loans Company to cover the cost of tuition fees and receive a maintenance loan to use towards their living costs. They later repay loans by having a certain amount taken out of their wages every month, meaning they experience repayments like a tax. </p>
<p>And, like tax, the amount they pay is calculated based on what they earn above a certain threshold. If they don’t earn enough, they don’t have to pay. </p>
<p><a href="https://www.gov.uk/guidance/previous-annual-repayment-thresholds">The threshold</a> at which repayments start used to rise every year in line with average earnings growth. But in 2021 it was frozen at £27,295. </p>
<p>My colleagues and I <a href="https://cls.ucl.ac.uk/wp-content/uploads/2017/02/CLS-Working-Papers-2024-1-Sample-representativeness-and-data-quality-in-the-linked-Next-Steps-survey-and-Student-Loans-Company-administrative-data.pdf">have estimated</a> that the repayment threshold would have been £29,860 this year if the freeze had not been implemented. And so those with loans are paying a higher proportion of their income in repayments each month. </p>
<p>For students starting university from August 2023 things look even worse, because the repayment threshold has been reduced to £25,000 and frozen for at least the next three years. With the repayment period extended to 40 years, this means borrowers will be forced to repay even more of their income each year and could be repaying student loans <a href="https://ifs.org.uk/articles/student-loans-england-explained-and-options-reform">into their sixties</a>.</p>
<p>A <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1058933/Higher_education_policy_statement_reform_consultation_-_Equality_analysis.pdf">government analysis</a> reported that those with lower lifetime earnings would be the most negatively affected, including more women and people from ethnic minority groups. </p>
<p>Our <a href="https://cls.ucl.ac.uk/wp-content/uploads/2017/02/CLS-Working-Papers-2024-1-Sample-representativeness-and-data-quality-in-the-linked-Next-Steps-survey-and-Student-Loans-Company-administrative-data.pdf">new research</a>, suggests that those who will have to make repayments under the new system who wouldn’t have before, are more likely to be from marginalised groups or in precarious work.</p>
<p>The study, which has not yet been reviewed by other academics but released as part of UCL’s Centre for Longitudinal Studies working paper series, used data from the <a href="https://cls.ucl.ac.uk/cls-studies/next-steps/">Next Steps</a> study which, since 2004, has followed the lives of over 16,000 people born in 1989-90 up to the present day. We focused on data collected in 2015-16, when participants were aged 25. </p>
<p>We found that compared with higher earners, those drawn in to making repayments under the new system were more likely to be from an ethnic minority or a more disadvantaged background, such as those previously eligible for free school meals. They were much more likely to work part time or have a temporary or zero-hours contract, and were also more likely to be in education while also working.</p>
<h2>What can be done?</h2>
<p>Some researchers have proposed a <a href="https://londoneconomics.co.uk/wp-content/uploads/2023/05/London-Economics-Options-for-English-HE-fees-and-funding-03-05-2023.pdf">stepped repayment system</a>, similar to tax thresholds. Low and middle earners would repay a lower proportion of their income (for instance 3%-7%), while high earners would repay at the maximum rate of 9%. </p>
<p>However, they also recommend introducing a higher interest rate on student loans, in order to support the aim of increasing the proportion of student loan debt that is eventually repaid. This would slow down the rate at which high earners pay off their student loans, and could even fund the re-introduction of means-tested maintenance grants for students from poorer backgrounds attending university. </p>
<p>Another option would be to raise the income repayment threshold, at least in line with inflation. The threshold exists to protect borrowers with no or low income. But, especially given the recent rise in the cost of living, it is unclear whether the reformed threshold is serving this purpose. </p>
<p>As they currently stand, the recent reforms mean that new graduates will be losing a higher proportion of their income than before and will be paying back loans for much longer.</p><img src="https://counter.theconversation.com/content/222840/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Charlotte Booth does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Forget tax cuts: students will pay more of their future income in loan repayments – and for up to a decade longer.
Charlotte Booth, Research Fellow in Quantitative Social Science, UCL
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/216973
2023-12-08T13:34:35Z
2023-12-08T13:34:35Z
Government and nonprofit workers are getting billions in student loan debt canceled through a public service program
<figure><img src="https://images.theconversation.com/files/563452/original/file-20231204-15-zm4iap.jpg?ixlib=rb-1.1.0&rect=565%2C125%2C6308%2C2609&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The cost of that diploma could fall, depending on this little piggy's career path.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/piggy-bank-with-college-graduate-cap-grey-royalty-free-image/1358219903?adppopup=true">Rawf8/iStock via Getty Images Plus</a></span></figcaption></figure><p><em>The <a href="https://apnews.com/article/pslf-public-service-loan-forgiveness-program-student-loans-e840af29f8879512199ed6fce226c722">Public Service Loan Forgiveness program</a>, which the <a href="https://independentsector.org/resource/public-service-loan-forgiveness-informatio">George W. Bush administration created</a> in 2007 to encourage people to work for the government and nonprofits, has grown significantly during Joe Biden’s presidency. The Conversation asked <a href="https://scholar.google.com/citations?hl=en&user=eP0xZ1kAAAAJ&view_op=list_works&sortby=pubdate">economist William Chittenden</a> to explain what this student loan program is, who is eligible and what has changed lately.</em></p>
<h2>How does the Public Service Loan Forgiveness program work?</h2>
<p>To qualify, borrowers must currently work for the government or a nonprofit.</p>
<p><a href="https://www.laurelroad.com/public-service-loan-forgiveness/what-jobs-qualify-for-pslf/">Americans getting this debt relief</a> include many nurses, teachers, first responders, <a href="https://www.peacecorps.gov/volunteer/benefits/student-loan-information/">Peace Corps volunteers</a> and social workers.</p>
<p>Once enrolled, borrowers can have their remaining student loan balance forgiven if they remain employed in public service and <a href="https://apnews.com/article/pslf-public-service-loan-forgiveness-program-student-loans-e840af29f8879512199ed6fce226c722">make 10 years of monthly on-time payments</a>.</p>
<p>The government can <a href="https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service#eligible-loans">cancel only the balance of the direct loans</a> the Department of Education makes through this program. Any student debt that borrowers <a href="https://www.salliemae.com/student-loans/private-student-loans/">owe private lenders remains</a> outstanding.</p>
<h2>Why are many more loans being forgiven now?</h2>
<p>Borrowers began to apply in 2017, after the requisite decade of on-time payments, for their remaining balances to be forgiven. However, <a href="https://www.cnbc.com/2018/05/31/heres-what-you-need-to-qualify-for-public-service-loan-forgiveness.html">nearly all of these applications</a> were <a href="https://repository.uclawsf.edu/hastings_law_journal/vol72/iss3/6/">rejected – about 98% of them</a>. </p>
<p>The <a href="https://theconversation.com/what-is-public-service-loan-forgiveness-and-how-do-i-qualify-to-get-it-106138">vast majority of these denials</a> were <a href="https://www.cnbc.com/2018/08/30/this-man-joins-a-small-crowd-of-public-servants-to-get-their-student-loans-forgiven.html">due to technicalities</a>. <a href="https://protectborrowers.org/public-service-loan-forgiveness-2/">Many borrowers felt cheated</a> after holding up their end of the deal but <a href="https://www.usatoday.com/story/opinion/2021/03/18/biden-student-loan-forgiveness-column/6944144002/">still finding themselves burdened</a> with debts they didn’t believe they should have to repay. Some of them filed a class-action lawsuit, which <a href="https://www.aft.org/news/aft-settles-student-debt-lawsuit-wins-big-gains-borrowers">the Biden administration settled</a> in 2021.</p>
<p>Recognizing these concerns, the government <a href="https://www.ed.gov/news/press-releases/fact-sheet-public-service-loan-forgiveness-pslf-program-overhaul">streamlined and overhauled</a> the Public Service Loan Forgiveness program.</p>
<p>The Department of Education <a href="https://www.ed.gov/news/press-releases/fact-sheet-public-service-loan-forgiveness-pslf-program-overhaul">announced several important changes</a> in 2021. The federal government expanded the types of loans that are eligible for forgiveness and <a href="https://www.ed.gov/news/press-releases/fact-sheet-public-service-loan-forgiveness-pslf-program-overhaul">gave borrowers a way to get credit for past payments</a>.</p>
<p>However, most student loan borrowers did not see the impact of this change until October 2023, when <a href="https://studentaid.gov/manage-loans/repayment/prepare-payments-restart">student loan payments resumed</a> for other borrowers after being paused starting in March 2020 because of the COVID-19 pandemic.</p>
<h2>How much debt has been forgiven so far?</h2>
<p>An estimated <a href="https://finance.yahoo.com/news/student-loans-biden-administration-discharges-additional-48-billion-in-student-debt-205956077.html">750,000 Americans have gotten US$53.5 billion in student debt erased</a> through this program. That’s more than one-third of the roughly <a href="https://www.ed.gov/news/press-releases/biden-harris-administration-prepares-third-student-debt-relief-negotiation-session">$132 billion in student debt relief</a> the Biden administration says it has approved through late 2023 for <a href="https://finance.yahoo.com/news/student-loans-biden-administration-discharges-additional-48-billion-in-student-debt-205956077.html">3.6 million borrowers</a>, through several programs.</p>
<p>But the deleted debt has chipped less than one-tenth of the total outstanding debt off the government’s ledgers. About <a href="https://studentaid.gov/sites/default/files/fsawg/datacenter/library/PortfolioSummary.xls">43.6 million Americans owe a total of $1.64 trillion</a> in federal student loan debt. Some of the Biden administration’s efforts to cancel larger chunks of this debt have <a href="https://theconversation.com/now-that-president-bidens-student-loan-cancellation-program-has-been-canceled-heres-whats-next-208551">failed because of legal challenges</a> that went all the way to the Supreme Court. </p>
<p>The total amount of student debt, including both the federal and private varieties, <a href="https://fred.stlouisfed.org/series/SLOAS">declined slightly in the second and third quarters of 2023</a> because the value of the student loans paid off or forgiven exceeded the value of new student loans being issued. </p>
<p>There is currently no expiration date for the Public Service Loan Forgiveness program. However, some borrowers have only <a href="https://studentaid.gov/announcements-events/idr-account-adjustment">until Dec. 31, 2023</a>, to try to consolidate their student loans so they can qualify for this program and some other kinds of student loan forgiveness.</p>
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<h2>What about people in college now or going soon?</h2>
<p>Current and future college students will also be able to apply to the program if they embark on public service careers.</p>
<p>There are also several <a href="https://studentaid.gov/manage-loans/repayment/plans/income-driven">income-driven repayment plans</a> that student loan borrowers can apply for. The monthly student loan payment under these plans is typically <a href="https://studentaid.gov/articles/faqs-idr-plan/">between 5% and 20% of the borrower’s</a> monthly discretionary income, depending on the specific plan.</p>
<p>Any remaining loan balances will be forgiven <a href="https://www.nerdwallet.com/article/loans/student-loans/idr-waiver">after 20 to 25 years</a> of on-time monthly payments. People who participate in an income-driven repayment plan can also apply to the Public Service Loan Forgiveness program.</p>
<p>An estimated <a href="https://www.nytimes.com/2023/11/11/business/student-loans-debt-cancellation.html">855,000 borrowers currently qualify to have $42 billion</a> in loans forgiven based on making their student loan payments for the past 20 years.</p>
<h2>What else is going on with student debt forgiveness?</h2>
<p>Over the past few decades, many Americans took out student loans to attend a <a href="https://www.cnbc.com/2023/04/17/who-qualifies-for-6-billion-student-loan-class-action-settlement.html">college or technical school that defrauded them</a>. Others took out loans to enroll in schools that went out of business before those borrowers could complete their degrees. The Biden administration has made it easier for these people to have their loans canceled through the <a href="https://www.nerdwallet.com/article/loans/student-loans/borrower-defense-repayment">borrower defense to repayment program</a>.</p>
<p>And the Biden administration has canceled $11.7 billion in debt owed by almost 513,000 borrowers with a <a href="https://studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge">total and permanent disability</a>.</p>
<p>In addition, many borrowers have loan balances that have <a href="https://www.nbcnews.com/politics/white-house/biden-administration-revamps-student-debt-forgiveness-plan-rcna122935">grown to a sum that exceeds</a> what they originally borrowed. And there are Americans who have been paying on their <a href="https://www.cnn.com/2023/10/30/politics/biden-student-loan-forgiveness/index.html">student loans for at least 25 years</a>. The Department of Education is also considering making these former students eligible for loan forgiveness.</p><img src="https://counter.theconversation.com/content/216973/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>William Chittenden does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Many of the Americans getting this debt relief are nurses, teachers, first responders, Peace Corps volunteers and social workers.
William Chittenden, Associate Professor of Finance, Texas State University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/209917
2023-07-20T11:35:26Z
2023-07-20T11:35:26Z
Student number caps on ‘rip-off degrees’ overlook their potential benefits for social mobility
<figure><img src="https://images.theconversation.com/files/538063/original/file-20230718-27-atlaun.jpg?ixlib=rb-1.1.0&rect=29%2C29%2C6085%2C4469&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/graduation-achievement-student-school-college-concept-502693336">Rawpixel.com/Shutterstock</a></span></figcaption></figure><p>The <a href="https://www.gov.uk/government/news/crackdown-on-rip-off-university-degrees">government has promised</a> to crack down on “rip-off degrees” in England. It will place a cap on student numbers for courses that deliver “poor outcomes” for students – because they have high drop-out rates or do not lead to well-paying jobs. </p>
<p>The intention of the government intervention is to ensure that students get appropriate value from their courses. It also intends to make sure taxpayers aren’t left to foot the bill when students don’t earn enough to repay all of their student loans. </p>
<p>But capping student numbers on these courses may well penalise students from disadvantaged backgrounds.</p>
<p>The courses which face capped numbers are likely to be ones <a href="https://news.sky.com/story/which-university-courses-could-be-deemed-low-quality-by-new-government-policy-according-to-the-augar-review-12922241">offered by universities</a> that are more accessible to students from disadvantaged backgrounds, who are <a href="https://www.ucl.ac.uk/news/2019/dec/disadvantaged-students-less-likely-attend-more-selective-university-courses">more likely to attend</a> less selective universities local to them. But less-selective universities – and the courses they offer – play a significant role in driving social mobility and supporting the <a href="https://theconversation.com/how-universities-can-support-local-businesses-and-communities-155520">local economy</a>.</p>
<p>Educational charity the Sutton Trust has produced <a href="https://www.suttontrust.com/universities-and-social-mobility-data-explorer-rankings/">rankings</a> that measure universities’ impact on social mobility, looking at the degree choices and earnings aged 30 of people born between 1985 and 1988.</p>
<p>Universities are ranked by comparing the proportion of disadvantaged students who attended with the proportion of those students who went on to achieve high earnings. This ranking places newer, less selective universities, such as the University of Westminster and the University of Greenwich, in the top five. </p>
<p>What’s more, <a href="https://ifs.org.uk/publications/which-university-degrees-are-best-intergenerational-mobility">research carried out</a> by the Institute for Fiscal Studies, the Sutton Trust and the Department for Education looked at the social mobility impact of particular university courses. </p>
<p>Because the outcomes for particular universities or courses are affected by the characteristics of the students taking those courses – their academic ability, for instance – this research controlled for factors such as GCSE results. It found that courses that might be considered to have low outcomes <a href="https://www.suttontrust.com/wp-content/uploads/2021/11/Universities-and-social-mobility-final-summary.pdf">actually contributed</a> strongly to social mobility, because of the lower previous achievements of students taking those subjects. </p>
<p>Highly ranked institutions – such as Oxford, Cambridge and the most selective Russell Group universities – are generally <a href="https://www.suttontrust.com/our-research/universities-and-social-mobility/">less accessible</a> to those from <a href="https://www.officeforstudents.org.uk/news-blog-and-events/press-and-media/universities-pledge-to-reduce-equality-gaps-dramatically-within-five-years/">disadvantaged backgrounds</a>. </p>
<p>These institutions admit <a href="https://www.timeshighereducation.com/news/participation-gap-remains-poorer-pupils-despite-steady-improvement">higher proportions</a> of students from more privileged backgrounds, who are more likely to have the social capital, financial resources and professional experience to help them both graduate from their course and go on to a well-paid job. This might be one reason for their very good performance on measures of quality such as those used in the regulatory framework. </p>
<p>Overall, a student from a low-income background is <a href="https://www.suttontrust.com/our-research/universities-and-social-mobility/#:%7E:text=%E2%80%A2%20Higher%20education%20is%20a%20key%20driver%20of,disadvantaged%20backgrounds%20and%20their%20peers%20compared%20to%20non-graduates.">four times</a> more likely to be socially mobile if they attend university. </p>
<h2>Student outcomes</h2>
<p>Universities are already regulated based on their student outcomes. In 2022, England’s university regulator, the <a href="https://www.officeforstudents.org.uk/">Office for Students</a> (OfS), introduced a new <a href="https://www.officeforstudents.org.uk/publications/securing-student-success-regulatory-framework-for-higher-education-in-england/">regulatory framework</a>, which assesses how many students go on from their first to their second year, graduate, and go into a professional job or further study within 15 months.</p>
<p>The OfS <a href="https://www.officeforstudents.org.uk/data-and-analysis/student-outcomes-data-dashboard/data-dashboard/">publishes data</a> on these student outcomes. It can intervene when universities do not meet minimum expectations, and has the power to impose a range of penalties. These range from additional monitoring or fines to de-registration as a provider of higher education. The cap on student numbers for particular courses now planned by the government is an additional penalty.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1680868430629466112"}"></div></p>
<p>The government is moving quickly in introducing additional sanctions. There has been little time to assess whether the penalties introduced in 2022 have led to improvements in higher education.</p>
<p>The government’s own <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1170749/Higher_education_policy_statement_and_reform_-_government_consultation_response_-_equality_analysis.pdf">equality analysis</a> on the proposed changes suggests that the context of the provider and the characteristics of its students will need to be taken into account when imposing number controls.</p>
<p>Going to university can be transformative for young people. It provides a window of opportunity that leads to employment, earnings and life success. What’s more, students enter universities with very different backgrounds, prior experiences and academic interests. They graduate with their own notions of success and with different ambitions for their lives and careers.</p>
<p>Despite the fact that the highest earners subsidise those who do not fully repay their student loans, we end up with a workforce that is rich and varied in background and skills and diverse in its make up. The value a degree course has to provide opportunity is perhaps its greatest benefit.</p><img src="https://counter.theconversation.com/content/209917/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew Aldrich has previously received funding from the Economic and Social Research Council.</span></em></p><p class="fine-print"><em><span>Helena Gillespie receives funding from the European Union and has previously been funded by Wellcome, AdvanceHE and HEFCE. </span></em></p>
A better measure of success could be to judge the impact a university has to change the course of a student’s life.
Matthew Aldrich, Associate Professor in Microeconomics, University of East Anglia
Helena Gillespie, Associate Pro Vice Chancellor for Student Inclusion and Professor of Learning and Teaching in Higher Education, University of East Anglia
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/208551
2023-06-30T23:08:24Z
2023-06-30T23:08:24Z
Now that President Biden’s student loan cancellation program has been canceled, here’s what’s next
<figure><img src="https://images.theconversation.com/files/535057/original/file-20230630-17-t6th2o.jpg?ixlib=rb-1.1.0&rect=58%2C91%2C5501%2C3609&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Supreme Court rejected President Joe Biden’s plan to eliminate $430 billion in student loan debt</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/supporters-of-student-debt-forgiveness-demonstrate-outside-news-photo/1364662050?adppopup=true">Olivier Douliery/AFP via Getty Images</a></span></figcaption></figure><p>The Supreme Court has struck down the Biden administration’s student loan forgiveness plan. In <a href="https://www.oyez.org/cases/2022/22-506">Biden v. Nebraska</a>, the court ruled 6-3 on June 30, 2023, that the secretary of education <a href="https://www.supremecourt.gov/opinions/22pdf/22-506_nmip.pdf">does not have the authority</a> to forgive US$430 billion of student loans under the <a href="https://www.forbes.com/sites/alisondurkee/2023/02/28/student-debt-forgiveness-at-supreme-court-tuesday-heres-what-you-need-to-know/">Health and Economic Recovery Omnibus Emergency Solutions Act</a>. </p>
<p>That kills the president’s proposed plan to forgive <a href="https://apnews.com/article/supreme-court-affirmative-action-student-loans-gay-rights-elections-a3007709350cd1606d5ce9ac4de957a6">up to $10,000</a> in student loans per borrower for those with incomes under $125,000 per year, or $250,000 per year for couples. Under the president’s plan, those who <a href="https://studentaid.gov/debt-relief-announcement">received Pell Grants</a> would have been eligible to cancel up to an additional $10,000 in student loans.</p>
<p>Just hours after the decision, <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2023/06/30/fact-sheet-president-biden-announces-new-actions-to-provide-debt-relief-and-support-for-student-loan-borrowers/">President Biden announced a new effort</a> to <a href="https://www.nytimes.com/2023/06/30/us/politics/higher-education-act-student-loans-biden.html?action=click&module=Well&pgtype=Homepage&section=US%20Politics">forgive student loans under the Higher Education Act of 1965</a>.</p>
<p>To give borrowers time to “<a href="https://www.nytimes.com/live/2023/06/30/us/student-loans-supreme-court-biden/63644601-96e5-50cb-85d5-ef0a657c09d3?smid=url-share">get back up and running,</a>” Biden stated that the Education Department won’t refer borrowers who don’t pay their student loan bills to credit agencies for 12 months.</p>
<h2>Secretary lacks authority</h2>
<p>In the majority opinion, Chief Justice John Roberts – joined by his five other conservative colleagues – stated “The HEROES Act allows the Secretary to ‘waive or modify’ existing … financial assistance programs under the Education Act, but <a href="https://www.oyez.org/cases/2022/22-506">does not allow the Secretary to rewrite that statute</a> to the extent of canceling $430 billion of student loan principal.” </p>
<p>Currently, <a href="https://studentaid.gov/sites/default/files/fsawg/datacenter/library/PortfolioSummary.xls">over 43 million Americans owe $1.64 trillion</a> in federal student loans, with an <a href="https://www.foxbusiness.com/personal-finance/student-loan-payments-resume-impact-on-credit">average balance of $46,000</a>. Student loan borrowers haven’t had to make payments on their federal loans – or accrue interest on those loans – <a href="https://studentaid.gov/announcements-events/covid-19/payment-pause-zero-interest">since March 2020</a>, when the Trump administration put the payments on pause due to the COVID-19 pandemic.</p>
<figure class="align-center ">
<img alt="Supporters of student debt forgiveness demonstrate outside the US Supreme Court in Washington, DC." src="https://images.theconversation.com/files/535060/original/file-20230630-29-e4vl0c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/535060/original/file-20230630-29-e4vl0c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=380&fit=crop&dpr=1 600w, https://images.theconversation.com/files/535060/original/file-20230630-29-e4vl0c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=380&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/535060/original/file-20230630-29-e4vl0c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=380&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/535060/original/file-20230630-29-e4vl0c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=477&fit=crop&dpr=1 754w, https://images.theconversation.com/files/535060/original/file-20230630-29-e4vl0c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=477&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/535060/original/file-20230630-29-e4vl0c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=477&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Roughly 1 in 8 Americans will have to restart loan payments as soon as September 2023.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/activists-and-students-protest-in-front-of-the-supreme-news-photo/1247556593?adppopup=true">Andrew Caballero-Reynolds/AFP via Getty Images</a></span>
</figcaption>
</figure>
<p>But that will change on <a href="https://studentaid.gov/announcements-events/covid-19">Sept. 1, 2023</a>, when interest will once again begin to accrue on outstanding student loans. Payments on the actual loans is set to resume in October 2023.</p>
<p>When payments resume, the average student loan payment is expected to be between <a href="https://www.wsj.com/articles/who-could-be-left-behind-in-the-supreme-courts-student-loan-ruling-in-six-charts-d5d3d637">$200</a> and <a href="https://educationdata.org/average-student-loan-payment">$500 per month</a>. For those that resume making their federal student loan payments on time, this may lead to an <a href="https://www.vantagescore.com/major-credit-score-news-new-federal-debt-ceiling-law-ending-student-loan-forbearance-to-impact-credit-scores/">increase in their credit score</a>, while those that miss the first payment after payments resume can expect their credit score to fall.</p>
<p>Prior to the student loan pause, approximately <a href="https://www.nerdwallet.com/article/loans/student-loans/fresh-start-what-student-loan-borrowers-in-default-need-to-know">7.5 million borrowers</a> – out of 43 million – were in default on their federal student loans.</p>
<p>These borrowers can apply for the <a href="https://studentaid.gov/announcements-events/default-fresh-start">Fresh Start program</a>. For borrowers who are behind on their federal student loan payments, this program allows student loan borrowers to reset their loan so they won’t be considered past due anymore. </p>
<p>In addition, any negative entries on their credit report due to being behind on their student loans will be removed. About 80% of Fresh Start borrowers enroll in an <a href="https://studentaid.gov/manage-loans/repayment/plans/income-driven">income-driven repayment plan</a>. Such a plan calculates a borrower’s monthly federal student loan payment <a href="https://studentaid.gov/announcements-events/default-fresh-start#questions">based on the borrower’s income, spouse’s income and family size</a>. Monthly payments under this plan will not exceed 20% of the borrower’s income. Those with <a href="https://www.debt.org/students/income-based-repayment-loans/">larger families and lower incomes</a> have lower monthly payments. Currently, about half of the Fresh Start borrowers pay $0 a month.</p>
<p>It is estimated that student loan borrowers pay about <a href="https://www.forbes.com/sites/simonmoore/2023/06/29/resuming-student-loan-payments-may-slow-economic-growth/">$70 billion a year</a> on their federal student loans. Any economic benefit that borrowers may have gotten from the suspension of student loan payments is likely to have already been <a href="https://theconversation.com/who-benefits-from-a-break-on-federal-student-loan-payments-an-economist-answers-3-questions-174228">absorbed into the economy over the past three years</a>. In other words, any money borrowers had to spend as a result of the student loan pause has already been spent. </p>
<p>With the resumption of student loan payments, there will likely be a small but <a href="https://www.forbes.com/sites/simonmoore/2023/06/29/resuming-student-loan-payments-may-slow-economic-growth/">negative impact on the economy</a>. This reduction in spending on goods and services is estimated to <a href="https://www.forbes.com/sites/simonmoore/2023/06/29/resuming-student-loan-payments-may-slow-economic-growth/">reduce economic growth by about 0.4%</a></p>
<p>When student loan borrowers begin to repay their loans in October, those dollars will no longer be available to pay for other things like food, rent, clothing or gas. So it won’t only hurt the economy, but it will hurt people, too.</p><img src="https://counter.theconversation.com/content/208551/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>William Chittenden does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
The Supreme Court rejected President Joe Biden’s student loan program that aimed at delivering up to $20,000 of relief per borrower.
William Chittenden, Associate Professor of Finance, Texas State University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/197552
2023-01-16T13:45:20Z
2023-01-16T13:45:20Z
Nigeria’s university system needs radical reform: student loans for more than 100 million people might be a good place to start
<figure><img src="https://images.theconversation.com/files/504407/original/file-20230113-15-rju7ae.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There should be a rethink of Nigeria's public university system. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/dozens-of-students-packing-out-of-the-campus-of-the-lagos-news-photo/52021181?phrase=university%20students%20in%20nigeria&adppopup=true">Pius Utomi Ekpei/AFP via Getty Images </a></span></figcaption></figure><p>Amid <a href="https://businessday.ng/news/article/asuu-set-for-action-over-part-salary-payment/">strikes by Nigeria’s Academic Staff Union of Universities</a>, one thing is clear: the current funding model for the country’s public universities is broken. The government’s new <a href="https://von.gov.ng/national-assembly-passes-student-loan-bill/">Higher Education Bill</a> aims to fix it. </p>
<p>Our view, based on over 30 years of working in the academy, including holding positions as university administrators in Nigeria and the UK, is that the bill won’t fix the many problems facing the country’s higher education system. Unless we rethink the whole system, it is unlikely to deliver the change that’s needed.</p>
<p>The biggest challenges facing the higher education sector include financial sustainability and investment, alignment of courses to the specific industrial and societal needs of Nigeria, and support with graduate employability. These need a rethink of the current funding arrangements for the sector. The new bill, with enhanced governance processes, offers the nation an opportunity to deliver a new financing model, with enhanced quality assurance, for the sector.</p>
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Read more:
<a href="https://theconversation.com/nigerias-universities-can-find-funds-and-produce-job-creators-heres-how-190155">Nigeria's universities can find funds and produce job creators: here's how</a>
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<p>.</p>
<h2>What’s in the bill, and what’s missing</h2>
<p>First, a summary of what’s in the bill.</p>
<p>It proposes an interest-free student loan for payment of tuition fees at universities, polytechnics, colleges of education and vocational schools established by federal or state governments. Eligibility applies to applicants with an income, or family income, less than N500,000 per annum (US$1,117), qualifying over 133 million Nigerians. Applicants require at least two guarantors. And they must begin repayment two years after completion of their National Youth Service Corps term.</p>
<p>Reasonable enough, maybe. But digging deeper we have uncovered hidden problems.</p>
<p>The first is value for money, or a lack of it. The student loan model in the UK has, at its core, the customer rights of students. This means fee-paying students have the right to question the quality, service and support provided by their university. Credit hours have to be met in full, course content must be delivered to the letter, and course delivery rigorously scrutinised.</p>
<p>In addition, for science and laboratory-related subjects, students are entitled to expect equipment that complements their lectures. Stipulated lab experiments, workshop, studio and field exposures must be met in full. </p>
<p>For the scheme to work in Nigeria, fee-paying students would rightly expect equipment that ensures they get value for the money they have invested. The reality is that such equipment is often inadequate or non-existent in many of Nigeria’s public universities, as is evident from <a href="https://businessday.ng/news/article/explainer-asuus-demands-and-what-government-has-met/">one of the lecturers’ demands</a>. </p>
<p>In its present form, the bill lacks a governance framework that would support the complaints of fee-paying students. </p>
<p>The Nigerian government must then consider which public body is responsible for setting the expectations and outcomes students should receive from their universities, along with the level of satisfaction they should be entitled to. </p>
<p>The government must consider, too, the types of skills, attributes and employment opportunities students are expected to receive. </p>
<p>Which brings us to the second fundamental problem with this legislation: employability.</p>
<p>Graduate employment is a cardinal principle upon which repayments are premised and structured. There need to be jobs for graduate students to go into before they begin paying back their loan. But with <a href="https://www.statista.com/statistics/1119227/forecast-unemployment-rate-in-nigeria/">unemployment at 33%</a>, there aren’t the jobs for graduates to enter. </p>
<p>Even for those who get work, there ought to be a minimum threshold of income prior to the commencement of repayment. Without such a threshold, future graduates may be abandoned to a vicious cycle of indebtedness.</p>
<p>Further attention should be paid, too, to how the government manages the flow of public money to universities. The bill, for instance, makes no reference to future levels of tuition fees based on inflationary pressures. A cost-sharing mechanism between the government and students, with a cap on tuition fees, would not, in our view, address the funding challenges of the nation’s universities. </p>
<p>Nor does the bill provide the option for universities to provide maintenance grants that cover the living expenses of students. The new government Education Bank, which will manage the distribution of subsidised tuition fees, may be an attempt to solve this. But it is unclear why funding can’t be allocated to public universities without the need for such an intermediary. This isn’t cost effective or value for taxpayer money.</p>
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Read more:
<a href="https://theconversation.com/nigerias-university-strikes-winners-losers-and-ways-forward-179698">Nigeria's university strikes: winners, losers and ways forward</a>
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<p>.</p>
<h2>Blue-sky thinking</h2>
<p>We believe there should be a rethink of Nigeria’s entire public university system.</p>
<p>For example, what about a free market-style system, driven by supply and demand?</p>
<p>The government would have to remove any cap on tuition fees and allow universities to charge fees that reflect their own values and mission. This would ensure both value for money and future employment opportunities. </p>
<p>Under this scenario public universities would be fully commercialised. Students would demand more of their universities, which would drive improvements in student support, teaching practices and employability. New contracts for staff employed at universities would be struck, and new management hired, ending union strikes. </p>
<p>But such an approach would sound a death knell for the provision of public university education, one of the directives of state policy enshrined in the country’s constitution. And because of that it would be unworkable.</p>
<p>Nevertheless, Nigeria can’t duck the need to find a way to balance value for money and employability, with demand for a public university education.</p>
<h2>Where to next?</h2>
<p>Nigeria needs a model that combines the public university concept with a cost-sharing mechanism that involves government, universities and students.</p>
<p>A good starting point would be to adjust the bill. It needs a governance framework which addresses the problems we have identified. In exchange for government funding, universities should improve their teaching and support to match student expectations, align academic courses and research to the needs of the national economy, work closely with the public and private sectors, and provide evidence of value for money.</p>
<p>These changes should be considered as part of a comprehensive overhaul of the current public university model.</p><img src="https://counter.theconversation.com/content/197552/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
In its present form, the new Higher Education Bill lacks a governance framework that addresses the complaints of fee-paying students.
David Mba, Deputy Vice-Chancellor (Research, Knowledge Exchange and Enterprise), University of the Arts London
Val Ekechukwu, Professor of Mechanical Engineering, University of Nigeria
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/193520
2022-11-23T18:46:33Z
2022-11-23T18:46:33Z
Don’t cut them off: low-performing students benefit from continued access to loans
<figure><img src="https://images.theconversation.com/files/496593/original/file-20221121-18964-1clq6g.jpg?ixlib=rb-1.1.0&rect=30%2C7%2C4997%2C3333&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>Over the past decade, there has been a growing debate about the value of student loans and the long-term impact of debt for those entering the workforce – particularly for students who struggled to complete their studies. </p>
<p>In the United States, where the average student loan is US$30,000 per borrower, the Biden administration recently announced plans to cancel <a href="https://www.forbes.com/sites/zackfriedman/2022/08/16/biden-cancels-39-billion-of-student-loans">US$32 billion</a> worth of loans. This move has been <a href="https://www.cnbc.com/2022/11/14/biden-student-loan-debt-relief-plan-appeals-court-rules.html">blocked indefinitely by the courts</a> but it has put the spotlight squarely on student debt both in the US and elsewhere.</p>
<p>In New Zealand, some <a href="https://www.educationcounts.govt.nz/__data/assets/pdf_file/0020/213752/GAV-0741-Student-Loan-Scheme-Annual-Report-2021_web.pdf">70% of all students</a> borrow from the government to study. The collective student <a href="https://www.renews.co.nz/how-we-racked-up-16-billion-in-student-debt-in-nz/">debt is NZ$16 billion</a>, with the average debt per borrower sitting at around $24,000. </p>
<p>As students rack up ever-increasing levels of debt, the question has been raised about whether low-performing students should have their loan access cut off. </p>
<p>Considering the debate around borrowing for study and calls for the debt to be wiped, my colleague and I investigated the <a href="https://openaccess.wgtn.ac.nz/articles/journal_contribution/Do_Academically_Struggling_Students_Benefit_Fr%20om_Continued_Student_Loan_Access_Evidence_From_University_and_Beyond/21100480">effects of access to student loans</a> on university re-enrolment, graduation and earnings for academically struggling students. </p>
<h2>The student loan debate</h2>
<p>Despite <a href="https://www.stuff.co.nz/business/opinion-analysis/128585237/why-student-loans-need-to-come-with-a-serious-financial-health-warning">concerns around using student loans for study</a>, funding higher education through government-funded loans can have advantages. At their most fundamental level, student loans reduce the cost of the tertiary education system on the broader tax base, striking a balance between <a href="https://www.newyorkfed.org/newsevents/speeches/2015/mca150205">public investment</a> and individual responsibility.</p>
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Read more:
<a href="https://theconversation.com/advanced-degrees-bring-higher-starting-salaries-but-also-higher-debt-133328">Advanced degrees bring higher starting salaries – but also higher debt</a>
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<p>Student loans give students more choice as to where to study and thus can enhance <a href="https://www.sciencedirect.com/science/article/pii/S0272775716302643">competition across education institutions</a>. Loans also offer an incentive for students to <a href="https://www.sciencedirect.com/science/article/pii/S0047272721001298">put more effort into study</a> as they share some of the education cost. </p>
<p>Sharing costs allows the government to fund more students. Student loans can also <a href="https://www.educationcounts.govt.nz/publications/maori/english-medium-education/2191">reduce barriers to study</a> resulting from tuition fees, offering students from lower income families access to tertiary education. </p>
<p>While most students who complete their qualifications will <a href="https://www.universitiesnz.ac.nz/latest-news-and-publications/degree-smart-investment">increase their earning potential</a> and be able to pay off their debt, there is a concern for low-performing students who may accumulate a <a href="https://www.stuff.co.nz/national/education/118854795/student-loan-arrest-debt-at-crisis-level">large amount of debt</a> but fail to graduate.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1564346724281634816"}"></div></p>
<p>Student loans account for nearly half of government expenditure on tertiary education. Students borrow roughly $10,000 for one year of full-time study, costing the government about <a href="https://www.educationcounts.govt.nz/statistics/financial_support_for_students">45 cents</a> on the dollar. The introduction of free tuition for the first year has reduced the total amount borrowed by students but hasn’t changed the <a href="https://www.educationcounts.govt.nz/__data/assets/pdf_file/0020/213752/GAV-0741-Student-Loan-Scheme-Annual-Report-2021_web.pdf">average borrowing per year</a> – partly because the government allows students to borrow more in living and course-related costs. </p>
<p>Considering the significant cost to both students and taxpayers, many experts advocate <a href="https://www.wsj.com/articles/should-anyone-be-eligible-for-student-loans-1456715824">restricting loan access</a> based on student performance and expected future earnings to reduce the risk for borrowers. But is this really the best option?</p>
<h2>Long-term benefits of student loans</h2>
<p>The linked administrative records from the New Zealand Integrated Data Infrastructure (IDI) allow us to follow students for up to nine years, from the start of university into the labour market.</p>
<p>We began our analysis looking at the data from all students starting university in 2008-2011. Our main analysis focused in on a small subset of students whose grades were around the 50% cutoff. </p>
<p>To continue qualifying for a student loan in New Zealand, students must pass at least 50% of their classes after two years of study. Some 10% of students fail this requirement and are considered low-performing students. </p>
<p>We compared outcomes for students just above the 50% pass rate threshold to those just below. These students are similar in all aspects except for loan access. Therefore any differences in outcomes can be attributed to whether or not they were able to access a student loan. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/from-public-good-to-personal-pursuit-historical-roots-of-the-student-debt-crisis-79475">From public good to personal pursuit: Historical roots of the student debt crisis</a>
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<p>Several findings emerged from our work. First, in what may not be a surprise, three-quarters of students struggled to find other funding and were not able to re-enrol in study without loan access. </p>
<p>Second, low-performing students with loan access – those who just made it over the 50% threshold – were about 60 percentage points more likely to graduate than those without, even though they take roughly six years to complete a three-year bachelor’s degree. </p>
<p>Third, those low-performing students who retained access to student loans earned $2,000 more per month and rose 40 percentile points in the earnings distribution of earners around age 25. This finding suggests the earning returns from a university degree for low-performing students are similar to an average degree holder. </p>
<p>Finally, while students who retain access to student loans initially accumulate significantly greater student loan debt – around $30,000 more than students who lose access – the student loan balance goes down rapidly once students enter the labour market. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1272755786108882944"}"></div></p>
<p>Its important to note that New Zealand’s tertiary education sector is generally well-regulated. This is different from some other countries grappling with the issue of student loans. Our findings suggest that, instead of limiting individuals’ loan access, regulating low-quality education providers and their access to student loan dollars is more effective in places such as the US.</p>
<h2>Individual responsibility and a public good</h2>
<p>Even after repaying the debt, the net present value of a student loan for someone who works 30 years is estimated to be around $300,000. </p>
<p>Considering the life-long benefits of higher education, there is an argument to be made that low-performing students should retain student loan access, even if they are struggling to pass. </p>
<p>In fact, our calculation shows that providing these students with loans is a good public investment because the generated income tax will exceed the cost to the government. </p>
<p>Ensuring students access through the loan scheme is an effective way to guarantee access to tertiary study and, consequently, economic potential in the long run, regardless of grades.</p><img src="https://counter.theconversation.com/content/193520/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yu-Wei Luke Chu receives funding from the Royal Society Marsden Fund. </span></em></p>
Student loans offer access to higher education, but should low performing students face restrictions on borrowing? Our research suggests not.
Yu-Wei Luke Chu, Senior Lecturer, Te Herenga Waka — Victoria University of Wellington
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/194973
2022-11-22T13:27:18Z
2022-11-22T13:27:18Z
Student loan cancellation got blocked. Now what? 3 questions answered
<figure><img src="https://images.theconversation.com/files/496583/original/file-20221121-26-kfjb1d.jpg?ixlib=rb-1.1.0&rect=0%2C23%2C7889%2C5231&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Questions remain about whether President Joe Biden has the authority to cancel student loan debt.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/student-loan-borrowers-stage-a-rally-in-front-of-the-white-news-photo/1417997650?phrase=student%20loan&adppopup=true">Paul Morigi via Getty Images</a></span></figcaption></figure><p><em>When the Biden administration <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/24/fact-sheet-president-biden-announces-student-loan-relief-for-borrowers-who-need-it-most/">announced in August 2022</a> that it was canceling up to $20,000 in student loan debt per borrower, it said the idea was to provide families with “breathing room as they prepare to start repaying loans after the economic crisis brought on by the pandemic.” But two federal courts recently blocked President Joe Biden’s student loan relief program, ruling it unconstitutional. Here, <a href="https://scholar.google.com/citations?user=eP0xZ1kAAAAJ&hl=en">William Chittenden</a>, a professor of finance at Texas State University, explains why and what’s next for student loan borrowers still hopeful that their loans can be forgiven.</em></p>
<h2>1. Why was Biden’s student loan cancellation program blocked?</h2>
<p>It was found to be <a href="https://www.cnbc.com/2022/11/10/federal-judge-in-texas-declares-bidens-student-debt-relief-plan-unlawful-.html">unconstitutional</a>. That determination was made on Nov. 10, 2022, by Judge Mark Pittman of the U.S. District Court of Northern Texas, who ruled that the <a href="https://www.congress.gov/bill/108th-congress/house-bill/1412">Higher Education Relief Opportunities for Students Act of 2003</a> – or Heroes Act – <a href="https://www.insidehighered.com/news/2022/11/14/biden-administration-appeals-debt-relief-ruling">“does not provide the executive branch clear congressional authorization”</a> for a student loan forgiveness program. He said further that the program was <a href="https://news.yahoo.com/bidens-student-debt-forgiveness-plan-012246385.html">“an unconstitutional exercise of Congress’s legislative power and must be vacated.”</a></p>
<p>The judge’s ruling prevents any student loans from being forgiven <a href="https://www.businessinsider.com/why-was-student-loan-forgiveness-blocked-texas-judge-debt-relief-2022-11">“until a final verdict is made”</a> in the case. Technically it could go to the Supreme Court, but it may also be settled at the appellate court level.</p>
<p>In a separate case, on Nov. 14, a three-judge panel with the United States Court of Appeals for the 8th Circuit <a href="https://apnews.com/article/biden-business-education-st-louis-student-loans-cf8136bfc75bd70839e9326cabbbf029">temporarily blocked the program</a> until the case is resolved in court. The 8th Circuit covers seven states, including Missouri, which is one of several <a href="https://apnews.com/article/biden-health-lawsuits-covid-missouri-862d783188de45b698c54b00820d3616">Republican-led states seeking to block the program</a>.</p>
<p>Both rulings effectively block Biden’s plan to forgive up to $20,000 in student loans per borrower.</p>
<h2>2. Can it be unblocked?</h2>
<p>Both court decisions could be reversed. The Biden administration has argued that the <a href="https://crsreports.congress.gov/product/pdf/LSB/LSB10818">Heroes Act of 2003</a> <a href="https://www.cnn.com/2022/11/18/politics/student-debt-relief-supreme-court">allows the Secretary of Education to forgive student loans</a> for those affected by the pandemic.</p>
<p>The Biden administration has already <a href="https://www.marketwatch.com/story/where-does-the-biden-student-loan-forgiveness-program-stand-after-texas-judge-stepped-in-to-block-it-01668206695">filed a notice to appeal</a> the Nov. 10 ruling by Pittman.</p>
<p>On Nov, 18, the Biden administration <a href="https://www.reuters.com/legal/justice-department-asks-supreme-court-lift-ruling-against-bidens-student-loan-2022-11-18/">asked the Supreme Court</a> to vacate the order by the Court of Appeals blocking student loan forgiveness. The Supreme Court has asked the plaintiffs in the case to <a href="https://www.cnn.com/2022/11/18/politics/student-debt-relief-supreme-court">provide their response by Nov. 23, 2022</a>.</p>
<p>It is unclear how the full court might rule. However, in two previous instances, Justice Amy Coney Barrett has <a href="https://www.cnn.com/2022/11/04/politics/scotus-biden-student-loans">shot down</a> attempts to block the student loan forgiveness plan.</p>
<h2>3. What kind of relief can student loan borrowers get in the meantime?</h2>
<p>Currently, student loan payments are paused but are <a href="https://www.cnn.com/2022/11/22/politics/student-loan-repayment-freeze-extended/index.html">scheduled to start again</a> – either 60 days after the legal cases against the program have been resolved, or 60 days after June 30, 2023, whichever comes first. The Biden administration could <a href="https://www.cnbc.com/2022/11/16/biden-student-debt-forgiveness-blocked-whats-next-for-borrowers.html">extend the payment pause beyond December 2022</a>. However, in August 2022 – <a href="https://www.usatoday.com/story/news/nation/2022/08/25/student-loan-repayments-refunded-forgiven/7895863001/">when the most recent payment pause extension was announced</a> – the White House stated that it was supposed to be the <a href="https://www.ed.gov/news/press-releases/biden-harris-administration-announces-final-student-loan-pause-extension-through-december-31-and-targeted-debt-cancellation-smooth-transition-repayment">final extension</a>.</p>
<p>Despite the setback for widespread student loan forgiveness, some borrowers may still qualify for one or more targeted student loan forgiveness programs. These groups include borrowers who <a href="https://www.savingforcollege.com/article/how-to-get-rid-of-student-loans">attended a school that shut down</a>. Student loans may also be forgiven for those who are <a href="https://disabilitydischarge.com/">totally and permanently disabled</a>. Students who were <a href="https://studentaid.gov/borrower-defense/">defrauded by their school</a> – such as by being misled about job placement rates for graduates or the true cost to attend the school – may also be eligible.</p>
<p>In November 2022, the Biden administration <a href="https://www.wsj.com/articles/biden-administration-to-make-it-easier-to-dismiss-student-loans-in-bankruptcy-11668706819?mod=article_inline">released new rules to make it easier for student loans to be discharged in bankruptcy</a>. If a student loan borrower can prove their expenses are equal to or greater than their income, the student loan debt may qualify to be eliminated in bankruptcy.</p><img src="https://counter.theconversation.com/content/194973/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>William Chittenden does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
A finance expert explains why President Biden’s student loan forgiveness program got blocked – and what’s next for student loan borrowers in search of relief.
William Chittenden, Associate Professor of Finance, Texas State University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/185999
2022-08-17T16:02:50Z
2022-08-17T16:02:50Z
How England plans to cut back ‘low value’ degrees so it can reap more student loan repayments
<figure><img src="https://images.theconversation.com/files/479360/original/file-20220816-25-yviwip.jpg?ixlib=rb-1.1.0&rect=8%2C0%2C5722%2C3823&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/multiracial-students-walking-university-hall-during-688627174">4 PM production/Shutterstock</a></span></figcaption></figure><p>Rishi Sunak, one of the candidates to be the UK’s next prime minister, has vowed to “<a href="https://www.independent.co.uk/news/uk/higher-education-liz-truss-winchester-college-russell-group-british-b2139918.html">crack down</a>” on university degrees with poor career outcomes. This is not a new idea. The university regulator in England, the <a href="https://www.officeforstudents.org.uk/">Office for Students</a>, has already proposed setting <a href="https://www.officeforstudents.org.uk/media/bc30a153-8c13-49b8-89f8-26ab0276d09d/setting-numerical-thresholds-for-condition-b3-corrected.pdf">minimum thresholds</a> for the proportion of graduates from each course that should be in jobs it defines as highly skilled. </p>
<p>A course that does not meet <a href="https://www.officeforstudents.org.uk/advice-and-guidance/regulation/registration-with-the-ofs-a-guide/conditions-of-registration/">the regulator’s expectations</a> could be prevented from recruiting publicly financed students. The thresholds the Office for Students has proposed are that 60% of people completing their first full-time degree should be in highly or skilled jobs or further study within 18 months of completing the course. For full-time masters students, the proposed proportion is 70%. The final levels will be confirmed in September. </p>
<p>Students, of course, do not go to university for their career prospects alone. They are motivated by interest in their subject, and by the social, cultural and sporting opportunities at university. They look for the personal growth that comes from meeting new people in a different place. </p>
<p>What’s more, after university graduates are <a href="https://www.bbc.com/worklife/article/20220720-the-case-for-job-hopping">moving between jobs</a> or even careers more than their parents did. In this context, the government’s focus on graduate employment may seem strange or shortsighted. </p>
<p>The reason for this focus lies in the financing of English higher education and how much it now costs the government. In 2012, the government tripled the level of <a href="https://commonslibrary.parliament.uk/research-briefings/sn05753/">undergraduate tuition fees</a> up to £9,000 per year. This was made possible by switching grants to universities into government loans to students. These are currently repayable by graduates as a proportion of their salary above an earnings threshold, then written off if they are not fully repaid after 30 years. </p>
<p>Alongside this, the government promoted competition, with the promise that universities would become more responsive to <a href="https://www.gov.uk/government/consultations/higher-education-white-paper-students-at-the-heart-of-the-system">students as consumers</a>. It removed controls on recruitment, brought new universities into the system, and <a href="https://www.legislation.gov.uk/ukpga/2017/29/contents/enacted">established</a> a market regulator – the Office for Students. </p>
<h2>The cost of education</h2>
<p>In this more competitive system, it was expected that students would only be willing to pay higher fees for courses leading to higher earnings. The more these students went on to earn as graduates, the more likely they would be to pay back their student loans in full. </p>
<p>Other courses would need to charge lower fees or students would decide not to go to university at all. The system would manage demand for higher education and maximise the repayment of loans, controlling the costs to government. </p>
<p>However, despite government expectations, most universities have charged the highest fees since 2012 across most subject areas, recognising that lower fees could signal poor quality and deter students. Most <a href="https://www.ucas.com/corporate/news-and-key-documents/news/record-levels-young-people-accepted-university">young people</a> have not been put off by higher fees, even for courses with lower graduate earnings. This is because they have wanted to go to university for reasons beyond their career prospects alone. </p>
<figure class="align-center ">
<img alt="Two students looking at laptop in dark library" src="https://images.theconversation.com/files/479361/original/file-20220816-3340-5eioce.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/479361/original/file-20220816-3340-5eioce.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/479361/original/file-20220816-3340-5eioce.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/479361/original/file-20220816-3340-5eioce.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/479361/original/file-20220816-3340-5eioce.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/479361/original/file-20220816-3340-5eioce.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/479361/original/file-20220816-3340-5eioce.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Students don’t necessarily go to university just to get a good job.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/university-library-two-gifted-girl-students-1752957962">Gorodenkoff/Shutterstock</a></span>
</figcaption>
</figure>
<p>In 2012, the government did not need to count any loan write-off within its accounts until it happened, so it was a problem it could defer to its successors. In 2018, though, the Office for National Statistics <a href="https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/articles/newtreatmentofstudentloansinthepublicsectorfinancesandnationalaccounts/2018-12-17">decided</a> that the proportion of loans expected to be written off should count immediately towards the balance of government spending on higher education. </p>
<p><a href="https://researchbriefings.files.parliament.uk/documents/CBP-7973/CBP-7973.pdf">By 2020</a>, the government expected to write off more than 50% of the value of student loans, compared with around 30% when fees were increased in 2012. Before the 2012 reforms, the annual cost of higher education participation to the government was £7 billion, and the change in financing was expected to save £3 billion. Instead, the annual cost increased to £10 billion in 2020. </p>
<p>Alongside other <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1057092/HE_reform_command-paper-print_version.pdf">measures proposed by the government</a> to change the terms of loans, graduate employment thresholds are intended to address these rising costs. They cut out funding for courses less likely to repay loans. </p>
<h2>Course closures</h2>
<p>This focus on graduate outcomes has <a href="https://www.telegraph.co.uk/news/2022/06/26/english-literature-course-suspended-university-poor-job-return/">led to concerns</a> that future regulation is causing course closures, particularly in the humanities. </p>
<p>It is more likely, though, that these closures are due to competition. <a href="https://www.ucas.com/data-and-analysis/undergraduate-statistics-and-reports/ucas-undergraduate-releases/applicant-releases-2022-cycle/2022-cycle-applicant-figures-26-january-deadline">The latest data</a> shows that humanities applications from students in England reduced by 5% between 2019 and 2022, compared with an increase of 15% to applications overall. </p>
<p>Due to their lower fixed costs and space requirements, there are better financial returns to humanities courses than many other subjects and it is easier for more popular universities to expand them. This means that others rapidly lose students and become unsustainable. </p>
<p><a href="https://link.springer.com/article/10.1007/s10734-016-0016-x">Experience worldwide</a> suggests that the interests and aspirations of young people and their families drives higher education expansion. Every August, as students in England receive their examination results, ministers become more concerned about ensuring sufficient places for them than controlling the system. This is because capping higher education is an unpopular constraint on ambitions. It is student demand that shapes higher education, and regulation is unlikely to change this.</p><img src="https://counter.theconversation.com/content/185999/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Millward worked for England's higher education funding and regulatory agencies during the period described in this article. He was Associate Director and Director of Policy at the Higher Education Funding Council for England from 2008-17 and then Director of Fair Access and Participation at the Office for Students from 2018-21, </span></em></p>
Course closures have more to do with student demand than government regulation of employment outcomes.
Chris Millward, Professor of Practice in Education Policy, University of Birmingham
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/183782
2022-07-26T11:57:15Z
2022-07-26T11:57:15Z
Proclaim debt amnesty throughout all the land? A biblical solution to a present-day problem
<figure><img src="https://images.theconversation.com/files/475172/original/file-20220720-11760-dzfe0b.jpg?ixlib=rb-1.1.0&rect=14%2C11%2C2481%2C1860&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Part of a restoration edict of Ammisaduqa, one of the rulers of ancient Babylon.</span> <span class="attribution"><a class="source" href="https://www.britishmuseum.org/collection/image/339237001">© The Trustees of the British Museum</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Student loan debt is one of the most burdensome forms of debt in America today. According to oft-cited statistics, <a href="https://studentaid.gov/data-center/student/portfolio">approximately 43 million Americans</a> have student loan debt, cumulatively amounting to <a href="https://www.cnbc.com/2022/05/06/this-is-how-student-loan-debt-became-a-1point7-trillion-crisis.html">around US$1.7 trillion</a>. The exorbitant costs of higher education in the United States, combined with the fact that educational credentials serve as a ticket to decent employment, require many students to take out loans that follow them long past graduation – and that are almost impossible to <a href="https://theconversation.com/can-student-loans-be-cleared-through-bankruptcy-4-questions-answered-166308">discharge in bankruptcy</a>. </p>
<p>Hence, calls for cancellation of student loan debt by legislative or executive action keep intensifying, and President Joe Biden is expected to respond by <a href="https://www.chronicle.com/article/how-would-student-loan-forgiveness-really-work?utm_source=Iterable&utm_medium=email&utm_campaign=campaign_4436193_nl_Academe-Today_date_20220609&cid=at&source=ams&sourceid=&cid2=gen_login_refresh">ordering cancellation of some amount</a>, notwithstanding arguments against any blanket debt amnesty.</p>
<p>Yet this very policy is inscribed on <a href="https://www.nps.gov/inde/learn/historyculture/stories-libertybell.htm">the U.S. Liberty Bell</a>. “Proclaim liberty throughout all the land unto all the inhabitants thereof!” it declares, quoting <a href="https://www.sefaria.org/Leviticus.25.10?lang=bi&aliyot=0">the biblical Book of Leviticus, 25:10</a>. The Hebrew word translated “liberty,” “derōr,” actually refers to debt amnesty.</p>
<figure class="align-center ">
<img alt="A large bell is displayed on a stand, with a shady courtyard in the background." src="https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=408&fit=crop&dpr=1 600w, https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=408&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=408&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=513&fit=crop&dpr=1 754w, https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=513&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=513&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Liberty Bell, with its famous crack, in Philadelphia.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/close-up-of-the-liberty-bell-news-photo/144082290?adppopup=true">Joe Sohm/Visions of America/Universal Images Group via Getty Images</a></span>
</figcaption>
</figure>
<p>In the world of the Bible, it was customary to cancel all noncommercial debts from time to time. As <a href="https://cla.umn.edu/about/directory/profile/vonda001">a scholar of the ancient Near East</a>, I’ve read many cuneiform tablets that record how people then – like Americans today – often went into debt to meet living expenses. They might mortgage their property to keep a roof over their heads, only to find that ever-accruing interest made it impossible to pay off the principal. </p>
<p>They faced the additional risk of debt bondage: People lacking sufficient property to secure their debts would have to pledge their dependents or even their own selves to their creditors. <a href="https://brill.com/view/title/7176">Their creditors thus became their masters</a>, and those pledged for debt were effectively enslaved, unless and until they were redeemed. A decree of debt amnesty would wipe the slate clean, springing people from bondage and restoring their freedom as well as their fortunes.</p>
<h2>Kings clean the slate</h2>
<p>The earliest recorded instances of this practice come from ancient Sumer, a land in the south of what is now Iraq. <a href="http://oracc.museum.upenn.edu/etcsri/corpus">Urukagina</a>, ruler of the city of Lagash around 2400 B.C., decreed a debt amnesty soon after he came to power, releasing people living in debt bondage to go home and even clearing the prisons. In the Sumerian language, this amnesty was termed “<a href="http://psd.museum.upenn.edu/nepsd-frame.html">amargi</a>” – “return to mother” – for it restored people to their families.</p>
<p>Urukagina was not the first to issue such a decree, and it may already have become traditional by his time. The practice of decreeing debt amnesty is widely documented in the Semitic-speaking kingdoms of Syria and Mesopotamia during the early second millennium B.C. Debt amnesty was routinely triggered by the death of a ruler: His successor would <a href="http://www.archibab.fr/T16766">raise a golden torch</a> and decree “andurāru,” or “restoration” – the Akkadian equivalent of Hebrew “deror.” The stated purpose of such decrees was to establish or reestablish equity. A king’s foremost duty was to maintain “justice and equity,” as Hammurabi of Babylon claimed to do when promulgating <a href="https://collections.louvre.fr/en/ark:/53355/cl010174436">his laws</a> around 1750 B.C.</p>
<p>While lending at interest was not considered unjust, debt that deprived families of their property and liberty created inequity, which had to be remedied. A decree of “andurāru” restored equity, liberty and family property by canceling debts incurred for subsistence – including tax arrears owed to the state – while leaving commercial debts untouched. When Hammurabi was on his deathbed, his son Samsu-iluna took power and <a href="http://www.archibab.fr/4dcgi/listestextes3.htm?T13">issued a decree</a> remitting noncommercial debts, canceling arrears and forbidding their collection; thus, he declared, “I have established restoration throughout the land.” </p>
<p>A decree of restoration could also be issued to address political or economic crisis. The usurper or conqueror, having subjected a people to his rule, could establish their “restoration,” both remitting debts and enabling those captured during hostilities to go free. Hammurabi himself did this <a href="https://www.bloomsbury.com/us/hammurabi-of-babylon-9781350197787/">upon conquering the kingdom of Larsa</a>, which was part of ancient Sumer.</p>
<figure class="align-center ">
<img alt="A stone relief shows two men with long beards: one standing, with a hand to his mouth, the other seated and holding a staff." src="https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=752&fit=crop&dpr=1 600w, https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=752&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=752&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=945&fit=crop&dpr=1 754w, https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=945&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=945&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Detail of a relief of King Hammurabi before the sun-god Shamash, from a stone stele inscribed with his proclamation of laws and dedicated around 1750 B.C., discovered at Susa in present-day Iran.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/diorite-stela-with-the-code-of-hammurabi-detail-showing-the-news-photo/142931321?adppopup=true">DEA / G. Dagli Orti/DeAgostini via Getty Images</a></span>
</figcaption>
</figure>
<p>Thus the conqueror could pose as a liberator setting a disordered realm to rights. The idea was to restore the inhabitants of the land to their original condition, before incurring debt, losing their property or losing their liberty.</p>
<h2>Not so forgiving</h2>
<p>The issuance of debt-canceling decrees was sporadic, not periodic, so one never knew when it would occur. But everyone knew it would happen sooner or later. Financiers would therefore prepare for this eventuality to avoid taking losses whenever debts were abruptly remitted and their collection prohibited. They used various methods to insulate transactions and investments from debt remission – because otherwise who would ever offer credit to those in need? </p>
<p>They <a href="https://doi.org/10.1086/699392">developed legal fictions</a> to disguise mortgage loans, debt bondage, and the like as contracts of other kinds, avoiding their cancellation by decree. The <a href="https://www.kriso.ee/context-scripture-volume-2-monumental-inscriptions-db-9789004106192.html?lang=eng">decree of Ammi-ṣaduqa</a>, a king of Babylon in the 17th century B.C., explicitly prohibits such subterfuge, but regulation was a step behind entrepreneurs. Clever financial instruments immunized debt from amnesty and kept credit, as well as profit, flowing.</p>
<p>Ultimately a program for periodic debt cancellation was developed in biblical law. <a href="https://www.sefaria.org/Deuteronomy.15?lang=bi&aliyot=0">The Book of Deuteronomy</a> requires remission of debts among Israelites every seventh year, using the term “šemiṭṭah” – “remission” – and stipulating that every creditor should remit the debt owed him. <a href="https://www.sefaria.org/Leviticus.25.10?lang=bi&with=all&lang2=en">The Book of Leviticus</a> adds the requirement to proclaim amnesty, Hebrew “deror,” after every seventh cycle of seven years, restoring every Israelite to his property and family in the 50th year – <a href="https://www.sefaria.org/Leviticus.25.9?lang=bi&aliyot=0">the jubilee</a> year. Recognizing that a predictable debt amnesty would only make creditors’ planning easier, <a href="https://www.sefaria.org/Deuteronomy.15?lang=bi&aliyot=0">Deuteronomy 15:9</a> warns against refusing to lend as the seventh year approaches. </p>
<p>The biblical authors must have had some experience with creditors’ efforts to evade the requirement to remit debts. According to <a href="https://www.sefaria.org/Jeremiah.34.9?lang=bi">the Book of Jeremiah</a>, when Zedekiah, the last king of Judah, decreed “deror” in the face of the Babylonian invasion of 587 B.C., creditors agreed to release their enslaved fellow Judeans, then found ways to force them back into bondage.</p>
<p>Not only was the ostensible purpose of debt-remission decrees <a href="https://doi.org/10.1086/699392">defeated by creative credit instruments</a>, the true purpose of such decrees was not to fix the problems that made them necessary. People would still need to go into debt to survive, pay their taxes and keep a roof over their heads. They would still risk impoverishment, debt bondage and eventual enslavement. Sporadic debt cancellation did not eliminate chronic indebtedness, nor was it meant to.</p>
<p>Instead, the function of such decrees was to restore socioeconomic balance – and the tax base – enough that the cycle of borrowing to survive could start over. In a sense, debt amnesty actually served to restore society to its ideal state of inequity, so that it would always need the same remedy again.</p>
<p>This dynamic is worth considering amid calls for canceling student loan debt. Certainly a student debt amnesty would benefit <a href="https://www.washingtonpost.com/education/2022/05/22/student-loan-borrowers/">millions</a> whose lives are shackled by interest on loans they took out in the hope that a degree would guarantee them gainful employment. It would do nothing to <a href="https://wdet.org/2020/12/09/forgiving-student-loans-wont-fix-the-root-cause-of-the-student-debt-crisis/">address the problems</a> that make incurring such debt necessary. </p>
<p>As long as higher education is treated simultaneously as a private good and a job requirement, people will still need to go into debt to get degrees. Then the same remedy will have to be applied again.</p><img src="https://counter.theconversation.com/content/183782/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eva von Dassow was awarded a fellowship funded by the National Endowment for the Humanities at the American Academy in Rome (2016). </span></em></p>
A scholar of the ancient Near East explains how loan forgiveness was handled thousands of years ago in the Bible and royal decrees.
Eva von Dassow, Associate professor of Ancient History, University of Minnesota
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/179253
2022-03-30T13:54:35Z
2022-03-30T13:54:35Z
Student loans: would a graduate tax be a better option?
<figure><img src="https://images.theconversation.com/files/455227/original/file-20220330-6008-57focq.jpg?ixlib=rb-1.1.0&rect=33%2C25%2C4951%2C3707&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/people-family-budget-finances-payments-concept-582691015">WAYHOME studio/Shutterstock</a></span></figcaption></figure><p>The UK government has <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-9348/">announced plans</a> to change the system of student loans in England, which will increase the amount of repayments collected from future graduates. </p>
<p><a href="https://ifs.org.uk/publications/9964">In 2017</a>, the Institute for Fiscal Studies expected only 55% of the government’s up-front spending on fees and maintenance loans to be repaid, with the rest to be contributed by taxpayers. This expected taxpayer contribution has since <a href="https://wonkhe.com/blogs/quietly-the-rab-charge-is-reaching-worrying-levels/">got even bigger</a>.</p>
<p>The changes are intended to make it affordable for the government to maintain the current system in which students do not have to pay their fees up front and each student is eligible for a loan to cover part of their living costs. </p>
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<figure class="align-right ">
<img alt="Quarter life, a series by The Conversation" src="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em>Working to make a difference in the world but struggling to save for a home. Trying to live sustainably while dealing with mental health issues. For those of us in our twenties and thirties, these are the kinds of problems we deal with every day. <strong><a href="https://theconversation.com/uk/topics/quarter-life-117947?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">This article is part of Quarter Life</a></strong>, a series that explores those issues and comes up with solutions.</em></p>
<p><em>More articles:</em></p>
<p><em><a href="https://theconversation.com/four-ways-pensions-still-fail-to-support-staff-who-are-young-low-paid-and-part-time-176289?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">Four ways pensions still fail to support staff who are young, low paid and part time</a></em></p>
<p><em><a href="https://theconversation.com/news-of-war-can-impact-your-mental-health-heres-how-to-cope-178734?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">News of war can impact your mental health — here’s how to cope</a></em></p>
<p><em><a href="https://theconversation.com/how-your-colleagues-affect-your-home-life-and-vice-versa-175889?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">How your colleagues affect your home life (and vice versa)</a></em></p>
<hr>
<p>But a time-limited “graduate tax”-style policy could achieve this same outcome while better addressing the preferences and concerns of students, causing less harm to lower and middle-income earning graduates, and enabling the language of “debt” and “loans” to be removed from the system.</p>
<h2>The current system</h2>
<p>The student loan system is complicated and poorly understood, even among current students who have <a href="https://www.iser.essex.ac.uk/research/publications/547176">signed up to it</a>. Students leave university in debt: the <a href="https://commonslibrary.parliament.uk/research-briefings/sn01079/">average debt</a> for those who finished their degree in 2020 in England was £45,000. </p>
<p>The exact amount depends on how many years of tuition fees were paid for them, and how much money they borrowed to live on. Those from lower-income households are allowed – and often need – to borrow more. This means they graduate with more debt. </p>
<p>This debt can continue to increase as interest is added to the outstanding balance each year. But repayments are dependent on income. Currently, graduates with earnings below £27,295 are not expected to make any repayments. Those with higher earnings are required to pay a <a href="https://www.gov.uk/repaying-your-student-loan/what-you-pay">fixed proportion – 9% – of their earnings</a> above that threshold. This means that repayment amounts are linked to salary, in a similar way to how income tax is calculated. Graduates’ outstanding debts are currently <a href="https://www.gov.uk/repaying-your-student-loan/when-your-student-loan-gets-written-off-or-cancelled">written off after 30 years</a>. </p>
<p>The government intends to lower the earning threshold for repayments to £25,000, extend the period of loan repayment to 40 years, and reduce the maximum interest rate on student loans <a href="https://www.moneysavingexpert.com/news/2022/02/student-finance-loans-changes-education/">for new students starting in the 2023-24 academic year</a>. </p>
<p>Students starting in autumn 2022, current students and those who have already graduated will not be subject to these changes, but are likely to face higher payments in future, due to another change in the way the repayment threshold will be <a href="https://www.theguardian.com/education/2022/mar/02/student-loan-changes-hit-lower-earners-harder-than-first-thought-ifs">updated over time</a>.</p>
<h2>What do students want?</h2>
<p>Back in 2018, when the government first launched the review of <a href="https://www.gov.uk/government/news/prime-minister-launches-major-review-of-post-18-education">post-18 education and funding</a> that has resulted in these changes, my colleagues and I at the University of Essex surveyed more than 600 final-year students. We aimed to inform the review by collecting evidence on students’ understanding of the system, and what trade-offs they would be willing to accept if the system were to change in a way that <a href="https://www.iser.essex.ac.uk/files/misoc/reports/explainers/student-fees-preferences-explainer.pdf">did not alter taxpayer contributions</a>. </p>
<p>In our calculations, we kept the overall taxpayer contribution the same, but presented options which provided more or less support for living costs, or required higher or lower repayments for different groups of students and graduates. We can use this research to look at how well the government’s new changes match with student preferences. </p>
<p>The first proposed change is the lowering of the repayment threshold. This means that future graduates earning between £25,000 and £27,295 will in future make some student loan repayments. Currently they pay nothing.</p>
<figure class="align-center ">
<img alt="Students in lecture theatre" src="https://images.theconversation.com/files/455228/original/file-20220330-5562-1oxmbjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/455228/original/file-20220330-5562-1oxmbjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/455228/original/file-20220330-5562-1oxmbjb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/455228/original/file-20220330-5562-1oxmbjb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/455228/original/file-20220330-5562-1oxmbjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/455228/original/file-20220330-5562-1oxmbjb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/455228/original/file-20220330-5562-1oxmbjb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Under the current system, the amount of debt a graduate has can be linked to their parental income.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/college-students-listening-university-lecture-15566293">Monkey Business Images/Shutterstock</a></span>
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<p>Our research shows this change would be very unwelcome to students. They would be prepared to accept a higher total debt and higher total repayments in return for a higher repayment threshold that would protect disposable income when their earnings are low.</p>
<p>The second major change is that future graduates will wait 40 years before their outstanding debt is written off. The proposed change will have no impact on high earners who will complete repayments within 30 years, nor on very low earners who will still be on salaries below the repayment threshold in 30 years’ time. However, it will increase repayments for low and middle income-earners, who will have salaries above the repayment threshold in 30 years’ time.</p>
<p>The final major change is that the maximum interest rate on student loans will be set at the rate of Retail Price Index inflation (rather than inflation + 3%). This means that debts can no longer get bigger in real terms after graduation. Our research shows this change will be welcome for students, for whom the psychological burden of growing debt is important. </p>
<p>But it will only reduce the actual amount repaid among relatively high-earning graduates, who in any case would complete their repayments before the debt is written off. It will make no practical difference to low and middle-income earners who will pay the same amount in real terms for 40 years.</p>
<p>In sum, the changes mean the highest earners will contribute less and middle and lower earners all contribute more – in total and sooner after they graduate. </p>
<h2>A graduate tax</h2>
<p>In our <a href="https://www.iser.essex.ac.uk/research/publications/547176">2018 conclusions</a> we proposed a plan that could collect the same amount of money but align much better with students’ preferences. We called it a “time-limited and income-linked graduate contribution”. It involved all graduates paying a fixed percentage of their income above a threshold (which would be set higher, in real terms, than today’s) for a fixed period of time. This would reduce the repayment burden of lower earners, and raise it among higher earners. </p>
<p>This system would look a lot like a “graduate tax”, which the 2018 review was not allowed to recommend. </p>
<p>A formal switch to a graduate tax would have the advantage of enabling the terms “debt” and “loan” to be dropped from the system. What’s more, students’ future obligations at the time of graduation would depend only on their future earnings and not their parents’ income.</p><img src="https://counter.theconversation.com/content/179253/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Angus Holford received funding for the work cited in this article from the University of Essex and the Economic and Social Research Council (ES/M008622/1). This work has also been supported by MiSoC, the ESRC-funded Centre for Micro Social Change (ES/S012486/1). No statements expressed here are the opinion or policy of the University of Essex or the Economic and Social Research Council. Angus Holford is a member of the Labour Party but is writing in a personal capacity.</span></em></p>
A graduate tax would remove the language of debt from the system.
Angus Holford, Research Fellow in the Institute for Social and Economic Research, University of Essex
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/176218
2022-03-04T13:20:33Z
2022-03-04T13:20:33Z
Your chances of getting rid of student loan debt depend on who you are
<figure><img src="https://images.theconversation.com/files/448144/original/file-20220223-25-4urvqy.jpg?ixlib=rb-1.1.0&rect=7%2C0%2C4977%2C3325&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Single mothers are more likely than single fathers to have their debts discharged in court. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/license/522936678?adppopup=true">Heide Benser/Getty Images</a></span></figcaption></figure><p>To get rid of student loan debt through bankruptcy, you must prove to the court that paying back your student loans would cause an “<a href="https://codes.findlaw.com/us/title-11-bankruptcy/11-usc-sect-523.html">undue hardship</a>.” But in our <a href="https://doi.org/10.1037/law0000338">peer-reviewed study of nearly 700 student loan discharge cases spanning 1985 to 2020</a>, we found that judges’ decisions to dismiss student loans are often influenced by personal factors, such as your gender.</p>
<p>To determine whether repaying the student loan debt is causing the debtor to experience an undue hardship, most courts <a href="https://scholar.google.com/scholar_case?case=5270362258430051298&q=brunner+v.+new+york&hl=en&as_sdt=3,43">apply three criteria</a> outlined in a case known as “<a href="https://law.justia.com/cases/federal/appellate-courts/F2/831/395/398433/">Brunner</a>.”</p>
<p>Under Brunner, to prove they are experiencing an undue hardship, debtors must first demonstrate that repaying their student loans would not allow them to maintain a minimal standard of living. In other words, repaying the debt would prevent them from meeting their basic needs, including food, clothing and shelter. Second, debtors must show that additional circumstances exist that indicate their finances are unlikely to improve. These additional circumstances could include having a medical condition or caring for dependents. Third, debtors must show that they have made good-faith efforts to repay their loans. This includes efforts to make payments on the loans or attempts to consolidate their debt.</p>
<p>Meeting these three criteria is tough. Our data shows that about 38% of the debtors in the cases that we studied received a full or partial discharge of their student loans. But we also discovered other factors regularly come into play in the court’s decisions. Here are three factors that stood out in <a href="https://doi.org/10.1037/law0000338">our research</a>.</p>
<h2>1. Being a single mom helps, but not being a single dad</h2>
<p>In student loan discharge decisions, judges <a href="https://sgp.fas.org/crs/misc/R45113.pdf">regularly consider the expenses associated with a debtor’s children</a>. Our research team found it also sometimes matters to the court whether the debtor is a single parent. Being a single parent more than doubled the chances of obtaining a discharge, but only for mothers. Single fathers did not experience any notable benefit from being a single parent.</p>
<figure class="align-center ">
<img alt="A woman seated in a kitchen looks over paperwork while a boy lingers over her shoulder with his arm around her." src="https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&rect=47%2C0%2C7892%2C5304&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Courts are more likely to see the mother as a caregiver than they are a father.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/woman-struggling-with-home-finances-and-debt-while-royalty-free-image/1215795289?adppopup=true">Fertnig/E+ via Getty Images</a></span>
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<p>We’re not certain about why courts view single moms as more deserving of a discharge than single dads. It could have something to do with stereotypes about mothers being the <a href="https://doi.org/10.1371/journal.pone.0147315">“caregivers” in a family, whereas men are the “breadwinners</a>.” A mother’s plea to help fulfill her role as a caregiver may be seen as more persuasive than a father’s plea to be relieved of his financial obligations.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/can-you-get-rid-of-your-student-loans-by-filing-for-bankruptcy-130995">Can you get rid of your student loans by filing for bankruptcy?</a>
</strong>
</em>
</p>
<hr>
<h2>2. Disclosing a medical condition helps men, but not women</h2>
<p>When assessing a debtor’s ability to repay a debt, <a href="https://casetext.com/case/educ-credit-mgmt-corp-v-jorgensen-in-re-jorgensen">case law suggests</a>
that judges must consider any difficulties a person has in trying to find a decent-paying job. </p>
<p>Such struggles are captured by the “additional circumstances” mentioned in the second Brunner criterion. Those additional circumstances include medical conditions. However, judges appear to give medical conditions more consideration for men than they do for women.</p>
<p>Our research found that men reporting a medical condition are 93% more likely to obtain a student loan discharge than men who did not report a medical condition. We did not find this same effect for women. This gender gap is highly relevant, given that female debtors outnumbered male debtors in our analysis almost 2 to 1.</p>
<p>Women’s medical concerns seem to be dismissed or overlooked in multiple arenas – from courts to <a href="https://doi.org/10.1177/2372732220942894">hospitals</a>. Psychologists theorize this may arise from <a href="https://doi.org/10.1155/2018/6358624">stereotypes</a> that suggest women may dramatize medical conditions and exaggerate their pain. </p>
<h2>3. Not having an attorney hurts your cause</h2>
<p>Thanks to ubiquitous crime dramas, it is widely known that those who cannot afford an attorney <a href="https://www.law.cornell.edu/wex/miranda_warning">can have one appointed</a>. Lesser known is that this constitutional right applies only to criminal proceedings. In most civil trials, like bankruptcy proceedings, there is no <a href="https://www.law.cornell.edu/wex/right_to_counsel">right to an attorney</a>. When debtors cannot afford an attorney, they often must represent themselves.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/every-year-millions-try-to-navigate-us-courts-without-a-lawyer-84159">Every year, millions try to navigate US courts without a lawyer</a>
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</em>
</p>
<hr>
<p>In student loan bankruptcy proceedings, 33% of debtors represent themselves, often to their detriment. We found that debtors who retained an attorney improved their chances of getting their student loans discharged by at least 60%. This was true whether the debtor was male or female.</p>
<p>The benefit of having an attorney in court is <a href="https://psycnet.apa.org/record/2004-16118-011">well-supported by research</a>. Attorneys who specialize in bankruptcy are likely to be aware of the factors upon which judges rely and can build a strong case for discharge. Without an attorney, it can be difficult to know which details to disclose and how to present them.</p>
<h2>Potential solutions</h2>
<p>Getting student loan debt discharged can be difficult and emotionally draining. </p>
<p>If you are thinking about seeking relief from student loan debt, the following suggestions may help.</p>
<p><strong>Develop a strategy that takes your gender into account:</strong> For single fathers, it might be advantageous to emphasize your “breadwinning” role, show the court that you have made efforts toward repaying the loans or have tried very hard to get a decent-paying job. For women with medical conditions, provide as much evidence as you can in the form of hospital visits, attempts to declare disability and the like.</p>
<p><strong>Regardless of gender, remember that having an attorney matters:</strong> Familiarize yourself with <a href="https://www.americanbar.org/groups/legal_services/flh-home/flh-free-legal-help/">legal aid organizations in your area</a>, which can offer free legal services. Also, be sure to search for <a href="https://www.uscourts.gov/services-forms/bankruptcy/filing-without-attorney">other free legal information</a> that can be found on <a href="https://www.flsb.uscourts.gov/dont-have-lawyer">court websites</a> and similar venues.</p>
<p>[<em>Over 150,000 readers rely on The Conversation’s newsletters to understand the world.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-150ksignup">Sign up today</a>.]</p>
<p>None of this advice matters if you fail to file a separate case to get your student loans discharged – as is the case with most student loan debtors who file a bankruptcy case. Without the separate proceeding, students loans cannot be discharged. Around 241,000 people with student loan debt filed for bankruptcy in the U.S. in 2017, but <a href="https://ssrn.com/abstract=3715975">only 447 of those also filed a separate case to get rid of their student loans</a>. Consult the free legal resources to learn how to file this separate case.</p><img src="https://counter.theconversation.com/content/176218/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kelsey Lynne Hess receives funding from the National Conference of Bankruptcy Judges.</span></em></p><p class="fine-print"><em><span>Andrea C. F. Wolfs receives funding from the National Conference of Bankruptcy Judges. </span></em></p><p class="fine-print"><em><span>Deborah Goldfarb receives funding from the National Conference of Bankruptcy Judges, the National Institute of Justice, and the National Science Foundation. She is affiliated with the American Bar Association. </span></em></p><p class="fine-print"><em><span>Jacqueline R. Evans receives funding from the National Science Foundation, the National Institute of Justice, the Federal Bureau of Investigation, and the National Conference of Bankruptcy Judges. </span></em></p>
When researchers examined the outcomes for cases to discharge student loan debt, they found that judges are often biased against people based on their gender and other factors.
Kelsey Lynne Hess, Ph.D. Candidate in Legal Psychology, Florida International University
Andrea C. F. Wolfs, Teaching Professor in Psychology, Plymouth State University
Deborah Goldfarb, Assistant Professor of Psychology, Florida International University
Jacqueline R. Evans, Associate Professor of Psychology, Florida International University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/177778
2022-02-25T09:58:25Z
2022-02-25T09:58:25Z
Higher education funding shake-up: what it means for students and universities
<figure><img src="https://images.theconversation.com/files/448307/original/file-20220224-33175-1k3qm74.jpg?ixlib=rb-1.1.0&rect=11%2C11%2C7337%2C4891&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/students-library-campus-education-knowledge-concept-427333528">Rawpixel.com/Shutterstock</a></span></figcaption></figure><p>The UK government has announced <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1056891/HE_reform_command-paper-web_version.pdf">changes to university funding</a> and student finance in England. It may not be welcomed either by future students or by universities. </p>
<p>While the limit for fees is set to remain frozen at a top rate of £9,250 a year, changes to the system of loan repayments are coming in. Graduates will now have to start paying back their loans as soon as they start earning £25,000, rather than the current threshold of £27,295. The full term for repayment will be lengthened to 40 years, from the current 30 – meaning it will take an extra ten years before any outstanding loan is written off.</p>
<p>The government has also launched a consultation on <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1056891/HE_reform_command-paper-web_version.pdf">thresholds for admission to university</a>, which could see students who do not achieve a grade four in English or maths, or do not get two Es at A-level, refused a student loan. This could result in students from the most educationally disadvantaged backgrounds barred from seeking loans to enable them to study.</p>
<p>The government’s proposals seem to be in contrast to higher education policy of the last 20 years, which has focused on enabling more students to go to university, especially those from disadvantaged or historically underrepresented backgrounds. Instead, these proposals may restrict university study, not expand it. </p>
<h2>Change in direction</h2>
<p>The most recent data from the Higher Education Statistics Agency shows that in 2021 there were just over <a href="https://www.hesa.ac.uk/data-and-analysis/students/whos-in-he">2 million undergraduate students in the UK</a>. This is an increase of nearly 500,000 from 20 years earlier. </p>
<p>This huge growth in student numbers means that some large universities in big cities have got larger. However, it also represents a growth of higher education in small providers – such as the University of Suffolk in Ipswich, which gained its <a href="https://www.uos.ac.uk/content/our-history-0">own degree awarding powers in 2016</a>. </p>
<p>Higher education hasn’t just got bigger, it has become more diverse. An aim of education policy in the last 20 years has not been just to provide more places for students from relatively privileged backgrounds to higher education, but also to provide more <a href="https://www.bbc.co.uk/news/education-20464013">local, tailored opportunities to earn a degree</a>.</p>
<p>This was underpinned by the mantra of <a href="https://www.officeforstudents.org.uk/advice-and-guidance/promoting-equal-opportunities/access-and-participation-plans/">“widening participation”</a>. Universities charging top fees of over £9,000 have been required to invest in outreach, with the aim of raising aspiration and attainment and helping young people from underrepresented and disadvantaged groups to be the first in their families to go to university. </p>
<p>Government policy really did seem to indicate that the more students and universities the sector had, the better. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1496787903778799620"}"></div></p>
<p>Now, the proposals under consultation – limiting loans for students who do not achieve certain grades – aim to prevent students who might not be academically capable from getting government backed student finance for a degree.</p>
<p>As currently billed, the bar is low enough that it may not <a href="https://www.timeshighereducation.com/news/augar-response-set-restrict-english-student-numbers">exclude many students</a>. But it still matters. Some of those likely not to have made the grade might be those most in need of an educational second chance – those who have suffered illness in their teens, or had a disrupted family background or educational history. </p>
<p>The most recent government data shows that the <a href="https://explore-education-statistics.service.gov.uk/find-statistics/key-stage-4-performance-revised">GCSE disadvantage gap</a> in England – a measure of the difference in performance between pupils on free school meals and other students – is widening.</p>
<p>This latest announcement is also part of a strategy to limit numbers on degrees perceived as being of lower quality – <a href="https://www.dailymail.co.uk/news/article-10541233/Pupils-fail-GCSE-maths-English-BANNED-getting-student-loans.html">often referred to as Mickey Mouse degrees</a>. </p>
<p>In reality, establishing an objective measure of the quality of a degree is difficult because so many factors are at play. Ultimately, the value of a degree for any student depends on a range of outcomes from their university time, personally and socially as well as in terms of how much they earn in a job after university.</p>
<h2>The cost of a degree</h2>
<p>The freeze on the top amount of tuition fees – which extends the current freeze to seven years – means that universities already charging this see a real life cut to their funding at a time that costs are rising very quickly. </p>
<p>For students, most of whom borrow their fees through a student loan, the proposals are also challenging. </p>
<p>There may be a view that it is fair to expect a student to bear the cost of their degree. <a href="https://explore-education-statistics.service.gov.uk/find-statistics/graduate-labour-markets/2020">Government figures</a> show that in 2020, graduates earned £9,500 more than non-graduates.</p>
<p>However, this figure hides huge disparity between subjects, universities and students – and ignores the huge benefit that degree holders in lower paid jobs, in the arts, social care, education and other fields – bring to society. </p>
<p>These new policies and proposals are likely to cause a great deal of concern within the sector. As an academic who has worked extensively in widening participation to university, I believe in the power of higher education to transform the life chances of people from all backgrounds, as well as the value of a thriving higher education sector to wider society. Preserving student opportunity is to the benefit of all.</p><img src="https://counter.theconversation.com/content/177778/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Helena Gillespie has received funding from HEFCE and Advance HE. She currently receives funding from the European Union.</span></em></p>
The government’s proposals may affect the most disadvantaged students.
Helena Gillespie, Professor of Learning and Teaching in Higher Education and Academic Director of Inclusive Education, University of East Anglia
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/172939
2021-12-17T13:27:50Z
2021-12-17T13:27:50Z
Taking out a student loan for your child can hurt your own financial well-being
<figure><img src="https://images.theconversation.com/files/436284/original/file-20211208-159504-1mc3k0p.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5751%2C3828&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Parents who borrow for their children's college education say finances control their lives.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/senior-man-and-adult-daughter-working-on-home-royalty-free-image/926397676?adppopup=true">kali9/E+ via Getty Images</a></span></figcaption></figure><p>When people take out student loans for themselves, certain risks are involved. The debt can <a href="https://theconversation.com/student-loan-debt-is-crushing-americans-4-essential-reads-166338">negatively affect</a> a person’s <a href="https://doi.org/10.1016/j.socscimed.2014.11.027">mental</a>, <a href="https://doi.org/10.1186/1471-2458-14-489">emotional</a> and even <a href="https://doi.org/10.1016/j.socscimed.2014.11.027">physical well-being</a>. It can also harm a person’s <a href="https://www.consumerfinance.gov/data-research/research-reports/financial-well-being-scale/">financial well-being</a>.</p>
<p>But when taking out a student loan for one’s child, the risk is even higher that the loan could be associated with lower financial well-being.</p>
<p>This is what economics scholar <a href="https://scholar.google.com/citations?hl=en&user=NI6MYXsAAAAJ">Charlene Kalenkoski</a> and <a href="https://scholar.google.com/citations?hl=en&user=2WdRXvAAAAAJ">I</a> found <a href="https://cdn.theconversation.com/static_files/files/1894/2021._Korankye___Kalenkoski._Student-Loan_Debt_and_Financial_WB.pdf?1639154013">in our peer-reviewed study</a> published in the <a href="https://www.iarfc.org/publications/journal-of-personal-finance">Journal of Personal Finance</a>. The study – which used a nationally representative <a href="https://www.federalreserve.gov/consumerscommunities/shed.htm">federal dataset on household economics and decision-making</a> – involved nearly 12,500 American adults ages 18 and over, with an average age of 48. It is not known whether the parents had taken out private or <a href="https://studentaid.gov/understand-aid/types/loans/plus/parent">government loans</a> for their children.</p>
<p>By lower <a href="https://www.consumerfinance.gov/data-research/research-reports/financial-well-being-scale/">financial well-being</a>, we mean that these parents were more likely to report feeling as if they will never be able to have the things they want in life or that they are “just getting by financially.” They also report feeling a lack of control over their financial situation. These statements are part of what the <a href="https://www.consumerfinance.gov/data-research/research-reports/financial-well-being-scale/">U.S. Consumer Financial Protection Bureau</a> uses to measure financial well-being. Lower financial well-being <a href="https://doi.org/10.1093/jcr/ucx109">decreases overall well-being</a>.</p>
<p>Our findings remained consistent even after we took into account several other factors, such as the education levels of the parents, whether or not they work, how much they earn per year and how they spend their money. We also considered their financial literacy and their current financial strain.</p>
<p><iframe id="2HMJF" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/2HMJF/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>The Consumer Financial Protection Bureau <a href="https://www.consumerfinance.gov/consumer-tools/financial-well-being/">offers people a financial well-being score</a> on a <a href="https://files.consumerfinance.gov/f/201512_cfpb_financial-well-being-user-guide-scale.pdf">scale of 0 to 100</a>. Taking out a student loan is associated with a lower financial well-being score for everyone, but our research found that it is associated with an even lower score when the loan is for the borrower’s child. For instance, taking out a loan for oneself is likely to lower the score by 1.44 points, and taking out a student loan for one’s spouse likely lowers the score by 1.37 points. However, taking out a student loan for one’s child was likely to lower financial well-being scores by 1.88 points. </p>
<h2>Most students rely on loans</h2>
<p>In public policy discussions about people who take out student loans, it’s not always clear whether the loan is for themselves or someone else, such as the borrower’s spouse or child. Knowing this information provides insight into how student loan debt relates to the borrower’s well-being if the loan is for their children.</p>
<p>In 2020, <a href="https://www.usnews.com/education/best-colleges/paying-for-college/articles/see-how-student-loan-borrowing-has-risen-in-10-years">64% of of college graduates</a> financed their education via student loans – accumulating an average debt of US$29,927.</p>
<p>The combined amount of federal and private student loans – as well as the number of borrowers – continues to increase. The total amount of student loan debt reached <a href="https://educationdata.org/total-student-loan-debt">$1.75 trillion</a> as of Nov. 30, 2021, and the total number of borrowers stood at 47.9 million.</p>
<h2>Negative effects on households</h2>
<p>These student loan debts have adverse effects on <a href="https://doi.org/10.1257/jep.26.1.165">individuals, households and the U.S. economy</a>. Consequently, the federal government is considering <a href="https://www.savingforcollege.com/article/whats-the-current-state-of-student-loan-forgiveness">federal student loan forgiveness</a>. In a December 2021 letter, several Democratic lawmakers <a href="https://www.warren.senate.gov/imo/media/doc/12.08.21.Letter%20to%20Biden%20re%20payment%20pause%20final%20signed%20(1)1.pdf">urged President Biden to extend the pause on student loan payments – which ends in January – and to act to cancel student debt</a>.</p>
<p>[<em>Get the best of The Conversation, every weekend.</em> <a href="https://memberservices.theconversation.com/newsletters/?nl=weekly&source=inline-weeklybest">Sign up for our weekly newsletter</a>.]</p>
<p>The lawmakers call attention to “significant disparities” that contribute to the racial wealth gap. “Twenty years after starting college, the median Black borrower still owes 95% of their loans, compared to only 6% for the median white borrower,” the lawmakers note, citing a <a href="https://heller.brandeis.edu/iere/pdfs/racial-wealth-equity/racial-wealth-gap/stallingdreams-how-student-debt-is-disrupting-lifechances.pdf">2019 Brandeis University study</a>.</p>
<p>Studies have shown that student loan debt influences household decisions and outcomes. This includes <a href="https://doi.org/10.1111/fcsr.12374">delayed homeownership</a>, <a href="https://doi.org/10.1080/13504851.2020.1757026">lower likelihood of stock ownership</a>, <a href="https://doi.org/10.1007/s10834-021-09753-9">lower probability of life satisfaction</a> and <a href="https://doi.org/10.1111/fcsr.12263">lower financial wellness</a> compared with those without student loan debt. </p>
<p>Our study used a dataset for 2017. The long-term effects on parents’ financial well-being after taking out loans for their children’s college education are not known. Having datasets for longer periods of time would enable us to examine whether the loans cause lower financial well-being at different stages in parents’ lives, such as when their children finally move out or when the parents retire.</p><img src="https://counter.theconversation.com/content/172939/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Thomas Korankye does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Student loan debt can hurt borrowers, but the pain is even greater when the borrower is taking out a student loan for their child, new research shows.
Thomas Korankye, Assistant Professor, Personal and Family Financial Planning, University of Arizona
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/163816
2021-08-10T19:48:28Z
2021-08-10T19:48:28Z
What does a degree actually cost – for students and for universities?
<p>Many students say they feel COVID has diminished the value of their university experience. <a href="https://www.bbc.co.uk/news/education-56245074">Complaints</a> filed with the Office of the Independent Adjudicator in 2020 detail examples of how the pandemic has disrupted students’ learning. A <a href="https://www.hepi.ac.uk/2021/06/24/the-student-academic-experience-survey-2021/">recent report</a> from the Higher Education Policy Institute finds students often say they regard universities to be relatively poor value for money. </p>
<p>Such sentiments were reported <a href="https://www.independent.co.uk/student/news/higher-education-students-university-poor-value-money-dissatisfaction-survey-poll-a7779161.html">before</a> COVID shut campuses down and sent students home. The <a href="https://theconversation.com/the-augar-review-what-it-could-mean-for-students-and-universities-118080">UK government</a> acknowledged, in the 2019 <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/805127/Review_of_post_18_education_and_funding.pdf">Augar review</a>, that the university experience can, for some, lead to disappointment. But the pandemic appears to have <a href="https://www.theguardian.com/education/2020/dec/03/i-feel-out-of-my-depth-university-lecturers-in-england-on-the-impact-of-the-pandemic">made matters worse</a> for many students and staff. </p>
<p>So, with students unlikey <a href="https://www.theguardian.com/education/2021/jun/26/uk-students-want-tuition-fees-refunded-as-they-face-third-year-online">to be able to have fees</a> funded, a question of value arises. And to answer that we need to know what it costs to deliver a degree course and what students and graduates actually pay for.</p>
<h2>What a course costs</h2>
<p>Academic staff expenditure represents between 29% and 32% of university budgets in England. My colleagues Norman Gowar and Michael Naef and I, in our book <a href="https://bristoluniversitypress.co.uk/english-universities-in-crisis">English Universities in Crisis</a>, show that roughly the same percentage is spent on non-academic salaries (IT support, admissions, <a href="https://www.gov.uk/government/publications/reducing-bureaucratic-burdens-higher-education">rising</a> bureaucracy) and on facilities (libraries, lecture theatres). </p>
<p>If we view teaching as core to a student’s education, we can calculate this direct cost. A lecturer’s salary in the UK starts at about £40,000, and a professor’s at about £60,000. The number of students for each teaching position <a href="https://www.theguardian.com/education/ng-interactive/2020/sep/05/the-best-uk-universities-2021-league-table">ranges</a> between about ten at some universities to about 15 elsewhere. Taking a salary of £60,000 and adding roughly a third for National Insurance and pension costs, my calculations suggest 15 students could hire a professor to teach them for just over £5,000 a head. </p>
<p>This allows for the fact that a traditional lecturer on a research and teaching contract spends about 40% of their time on teaching, 40% on research and 20% on admin duties. Though many universities have somewhat controversially cut costs on academics by having some academics on <a href="https://theconversation.com/teaching-only-roles-could-mark-the-end-of-your-academic-career-74826">teaching-focused contracts</a>, where the lecturer teaches roughly 50% more than a traditional academic. </p>
<p>This raises the question of whether undergraduate student fees are effectively subsidising research, which is very difficult to answer. But students also benefit directly by being taught by active researchers. Simply put, would you rather be taught by the person who discovered the new theory, or someone who has only read about it?</p>
<p>The Office for Students (the independent regulator of higher education in England) <a href="https://www.officeforstudents.org.uk/media/1448/ofs2018_21.pdf">classifies</a> most subjects as low-cost, essentially involving only the lecturer and the lecture theatre. Some high-cost subjects, including clinical medical and veterinary courses, and, to a lesser extent, laboratory sciences, receive supplementary public funding. The government has <a href="https://theconversation.com/arts-education-is-facing-massive-cuts-yet-its-value-is-felt-everywhere-160844">proposed</a> to cut by 50% this supplementary funding to some arts subjects, such as drama and music, although this only works out to about <a href="https://www.fenews.co.uk/press-releases/68043-what-is-really-going-on-with-arts-funding-in-higher-education">£120 per student</a>.</p>
<h2>What a student pays</h2>
<p>In 2012, <a href="https://www.bbc.co.uk/news/education-11677862">government reforms</a> saw maximum tuition fees in England triple to £9,000. Despite the fact that this £9,000 was a cap and the government hoped that competition between universities would result in lowered fees, the cap became the standard charge. In addition, the government phased out student number controls that limited how many students each university <a href="https://researchbriefings.files.parliament.uk/documents/SN06205/SN06205.pdf">could admit</a>. </p>
<p>These reforms were designed to enable more young people to study by increasing university budgets without an immediate cost to the government. Key to this expansion is the loan-repayment scheme. Students do not need to pay anything up front. And they only start repaying once they’ve graduated and are earning above a certain amount. </p>
<p>The <a href="https://www.gov.uk/government/news/student-loans-interest-rates-and-repayment-threshold-announcement">2020-2021 threshold</a> for student loan repayments is £27,295, with an interest rate of 5.6%, which is well above current market rates. After 30 years, any remaining balance is written off.</p>
<p>Consequently, any graduate with relatively low earnings pays off only a fraction of their debt and interest. The <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/805127/Review_of_post_18_education_and_funding.pdf">Augar report</a> calculates that the 30% with the lowest lifetime earnings pay less than 10% of their original debt, while the top 30% pay more than they borrowed. </p>
<p>This means some students will pay more than the cost of their education, while others effectively receive a subsidy. In 2018, the Office of National Statistics <a href="https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/articles/newtreatmentofstudentloansinthepublicsectorfinancesandnationalaccounts/2018-12-17">determined</a> that much (estimated by the government to <a href="https://explore-education-statistics.service.gov.uk/find-statistics/student-loan-forecasts-for-england/2019-20">be about 50%</a>) of the student loan book would never be repaid and would have to be carried on the books as government expenditure.</p>
<h2>Financial returns</h2>
<p>The <a href="https://ifs.org.uk/publications/14731">Institute for Fiscal Studies</a> (IFS) has found that, after taking account of student-loan repayments, male graduates end up on average £130,000 better off over their lifetimes by going to university, and female graduates gain £100,000. </p>
<p>This differs, however, by type of university and by subject. For graduates from the large, research-intensive universities of the UK’s Russell Group and, in general, for graduates in medicine, dentistry, veterinary, economics, mathematics and engineering, earnings <a href="https://www.bbc.co.uk/news/education-41693230">have been shown</a> to be high. </p>
<p>Other students, meanwhile, gain no financial advantage. The IFS report <a href="https://ifs.org.uk/publications/14731">found that</a> around 20% of undergrads would have been better off financially without a degree.</p>
<p>If this is the case, why do differently ranked universities charge the same fees? As my colleagues and I <a href="https://bristoluniversitypress.co.uk/english-universities-in-crisis">have shown</a>, this is in part because the courses are oversubscribed – enough students are willing to pay the maximum fees to get into university regardless of their ranking. What’s more, <a href="https://www.theguardian.com/education/2019/apr/09/universities-building-frenzy-who-actually-impressed">considerable expense</a> has gone into raising student satisfaction, via marketing and non-academic facilities.</p>
<p>The pandemic, however, has changed things. For much of the lockdown period students were unable to access, or at least make the most of, new buildings fees have helped fund. The recent complaints suggest that some universities will now look for ways to improve the academic experience and make the value of a degree clearer should they seek to continue charging the same fees.</p><img src="https://counter.theconversation.com/content/163816/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jefferson Frank does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
With high fees and COVID restrictions in place, student satisfaction in England is on the downturn. How should they think about the value of their studies?
Jefferson Frank, Professor of Economics, Royal Holloway University of London
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/162076
2021-07-22T12:14:27Z
2021-07-22T12:14:27Z
Canceling student loan debt will barely boost the economy, but a targeted approach could help certain groups
<figure><img src="https://images.theconversation.com/files/411509/original/file-20210715-13-1j6glsn.jpg?ixlib=rb-1.1.0&rect=7%2C0%2C5189%2C3410&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Already the Biden administration has forgiven nearly $3 billion of student loan debt from 113,000 borrowers. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/as-college-students-around-the-country-graduate-with-a-news-photo/1323721983?adppopup=true">Paul Morigi/Getty Images for We The 45 Million</a></span></figcaption></figure><p>At the end of June 2021, 43 million borrowers – or about <a href="https://www.investopedia.com/student-loan-debt-2019-statistics-and-outlook-4772007">14% of all adults</a> in the U.S. – owed approximately <a href="https://studentaid.gov/data-center/student/portfolio">US$1.59 trillion in outstanding</a> federal student loans. Although in many cases the media has focused on borrowers with extremely large balances – such as the <a href="https://www.wsj.com/articles/mike-meru-has-1-million-in-student-loans-how-did-that-happen-1527252975">orthodontist who owes over $1 million</a> in student loans – the average balance is a more modest <a href="https://thecollegeinvestor.com/33643/average-student-loan-monthly-payment">$39,351 per borrower</a> with an average monthly payment of $393 per month. The <a href="https://studentaid.gov/manage-loans/repayment/plans/standard">standard repayment period</a> for $39,351 in student loans is 20 years.</p>
<p>The amount of student debt outstanding varies greatly based on the type of degree pursued. The average bachelor’s degree debt is <a href="https://www.credible.com/blog/statistics/average-student-loan-debt-statistics/">under $29,000</a> while the average dental school debt is more than 10 times higher at <a href="https://www.nerdwallet.com/article/loans/student-loans/whats-the-average-student-loan-debt-for-a-bachelors-degree">over $290,000</a>. In general, those who pursue careers that <a href="https://www.businessinsider.com/personal-finance/average-student-loan-debt#average-student-loan-debt-by-household-income">pay lower salaries</a> owe less in student debt. </p>
<p>Policymakers have put forth proposals to forgive anywhere from <a href="https://www.msn.com/en-us/money/personalfinance/student-loan-debt-forgiveness-update-see-where-the-latest-policies-and-proposals-currently-stand/ar-BB1g45bX">$10,000 to $50,000 or more per borrower</a>. </p>
<p>President Biden has stated that he is <a href="https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/17/remarks-by-president-biden-in-a-cnn-town-hall-with-anderson-cooper/">“prepared to write off a $10,000 debt,”</a> but not $50,000.</p>
<p><iframe id="39BmX" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/39BmX/13/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>If up to $10,000 per borrower were to be canceled for all 43 million student loan borrowers, the <a href="https://www.cnbc.com/2021/01/22/experts-weigh-in-on-10000-in-student-debt-forgiveness.html">cost would be $377 billion</a>. This would completely eliminate the student loan balances for over <a href="https://www.cbsnews.com/news/student-loan-forgiveness-wipe-out-debt/">15 million borrowers</a>. The total cost of forgiving up to $50,000 for all 43 million borrowers would be <a href="https://abcnews.go.com/Politics/congressional-democrats-propose-50000-debt-cancelation-biden-sold/story?id=75682608">just over $1 trillion</a>. It would also wipe clean the student loan balances for over <a href="https://www.warren.senate.gov/imo/media/doc/Education%20Department%20Response%20to%20Sen%20Warren%20-%204-8-21.pdf">36 million people</a>. Some limited student loan forgiveness has already begun. The Biden administration has canceled <a href="https://www.forbes.com/sites/zackfriedman/2021/07/09/biden-cancels-55-million-of-student-loans/">a combined nearly $3 billion</a> of student loans for 131,000 borrowers who either had been defrauded by their school or have a total and permanent disability.</p>
<h2>The effects of loan forgiveness</h2>
<p><a href="https://www.npr.org/2019/11/25/782070151/forgiving-student-debt-would-boost-economy">Some economists</a> view the staggering amount of outstanding student debt as a <a href="https://www.forbes.com/sites/joshfreedman/2014/02/11/student-loans-are-a-big-drag-on-the-economy-and-society">drag on the economy</a>. These economists argue that any forgiveness of student debt will stimulate the economy. However, I and <a href="https://www.crfb.org/blogs/partial-student-debt-cancellation-poor-economic-stimulus">other economists</a> argue that any boost to the economy from student loan forgiveness would be small compared to the cost to taxpayers. </p>
<p>If $10,000 per borrower is forgiven, it is not as if the borrower is receiving $10,000 that they can go out and spend today. Rather, it is estimated this would free up only about <a href="https://www.urban.org/urban-wire/student-loan-forgiveness-effective-form-economic-stimulus">$100 per month</a> for the average borrower to spend or save over 10 years. If all $1.5 trillion in federal student loans were forgiven, the average borrower would have an extra <a href="https://thecollegeinvestor.com/33643/average-student-loan-monthly-payment/">$393 per month</a>. It is estimated that the economy would <a href="https://www.businessinsider.com/economic-benefits-of-student-debt-forgiveness-2020-12">only grow by about $100 billion</a>, or <a href="https://www.bea.gov/sites/default/files/2021-05/gdp1q21_2nd.pdf">about 0.5%</a>, if all $1.5 trillion in federal student loans were canceled. For perspective, it would be like making $20,000 a year and getting a one-time raise of $100 for a new salary of $20,100, but it costs the company $1,500 today to give you that $100 raise.</p>
<p>The immediate economic impact would likely be lower, as the Department of Education is currently allowing 90% of borrowers to <a href="https://www.cnbc.com/2021/05/07/student-loan-forgiveness-would-benefit-these-groups-the-most-.html">not make their required monthly payments</a> <a href="https://studentaid.gov/articles/5-repayment-flexibilities/">through September 2021</a> due to the pandemic. </p>
<p>Since most borrowers are already not making payments on student loans, the financial benefit may already be reflected in the current level of economic activity.</p>
<p>Overall, the evidence suggests that broad-based loan forgiveness may have a modest positive impact on the economy. It is estimated that every dollar of student loan forgiveness translates to <a href="https://www.forbes.com/sites/zackfriedman/2020/11/24/student-loan-forgiveness-wont-provide-economic-stimulus/">only 8 to 23 cents</a> of economic benefit. By comparison, the stimulus checks had an estimated economic benefit of 60 cents for each dollar sent to taxpayers.</p>
<p>Eliminating some or all student debt may help with other issues beyond the economy. Borrowers may delay marriage or buying a home because of the amount of student debt they owe. The student debt burden has been shown to be the cause of mental and physical health problems and “<a href="https://theconversation.com/student-loan-debt-is-costing-recent-grads-much-more-than-just-money-158189">less overall satisfaction with life</a>.”</p>
<h2>Uneven benefits</h2>
<p>One criticism of forgiving student debt for everyone is that most of the benefits will go to those with higher incomes. In addition, relatively few of the benefits would go to those who borrowed to finance an undergraduate education. <a href="https://www.nytimes.com/2015/06/12/upshot/student-loans-the-facts.html">Sixty-eight percent</a> of those who took out student loans for a bachelor’s degree borrowed less than $10,000.</p>
<p>Only 2% <a href="https://www.nytimes.com/2015/06/12/upshot/student-loans-the-facts.html">borrowed more than $50,000</a>. Borrowers with the highest loan balances tend to have graduate degrees earning higher incomes. Households with <a href="https://www.brookings.edu/blog/up-front/2020/10/09/who-owes-the-most-in-student-loans-new-data-from-the-fed/">incomes above $74,000 owe nearly 60%</a> of the outstanding student loans.</p>
<p>If the idea behind loan forgiveness is to stimulate the economy, I believe loan relief should be targeted to those <a href="https://www.bostonfed.org/publications/research-department-working-paper/2019/estimating-the-marginal-propensity-to-consume-using-the-distributions-income-consumption-wealth.aspx">most likely to spend</a> any savings from student loan forgiveness. This suggests student loan forgiveness should be targeted to those with low incomes, who typically have <a href="https://www.cnbc.com/2021/04/06/what-the-student-debt-forgiveness-debate-is-about.html">less than $10,000</a> in student loan debt but <a href="https://www.nytimes.com/2015/09/01/upshot/why-students-with-smallest-debts-need-the-greatest-help.html">are more likely to default</a> on those loans.</p>
<p>Any student loan relief program should consider the effect it may have on borrowers, as student debt impacts some groups more than others. For example, <a href="https://www.cnbc.com/2021/05/07/student-loan-forgiveness-would-benefit-these-groups-the-most-.html">women owe approximately two-thirds</a> of the outstanding student loan debt. About <a href="https://www.cnbc.com/2021/05/07/student-loan-forgiveness-would-benefit-these-groups-the-most-.html">69% of white college graduates owe student loans</a>, compared to 85% of Black college graduates. The point is that women and people of color would benefit the most from student loan forgiveness.</p>
<p>[<em>Understand what’s going on in Washington.</em> <a href="https://theconversation.com/us/newsletters/politics-weekly-74/?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=politics-most">Sign up for The Conversation’s Politics Weekly</a>.]</p>
<h2>A matter of fairness</h2>
<p>If the government forgives current student loans and then continues to make new student loans, this may lead future students to borrow with the assumption or hope that the government will cancel their loans too. </p>
<p>Unless the underlying issue of the <a href="https://www.today.com/tmrw/why-college-so-expensive-4-reasons-ever-rising-costs-t194972">increasing cost of a college degree</a> is addressed, <a href="https://www.forbes.com/sites/prestoncooper2/2019/10/28/the-massive-moral-hazard-problem-in-mass-student-loan-forgiveness">a similar student debt “crisis” may occur again</a>.</p>
<p>Another difficulty of any student loan forgiveness program is the perceived fairness or unfairness of the program. Assume two students pursued the same undergraduate degree, took out the same amount in student loans to finance their education and secured jobs with the same salary in cities where the cost of living is the same. Both borrowers have been making their monthly payments for the last five years, but borrower number 1 made larger payments than required. Because of this, borrower number 1 just completed paying their loan off, while borrower number 2 still has a balance. Is it fair for borrower number 2’s loan to be forgiven? Should borrower number 1 be compensated for paying the loan off early? Lawmakers will need to consider the issue of fairness.</p><img src="https://counter.theconversation.com/content/162076/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>William Chittenden does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Student loan debt has long been considered a drag on the economy. But will canceling it actually do much to spur spending? An economist weighs in.
William Chittenden, Presidential Fellow, Texas State University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/131363
2020-10-18T12:43:24Z
2020-10-18T12:43:24Z
Low funding for universities puts students at risk for cycles of poverty, especially in the wake of COVID-19
<figure><img src="https://images.theconversation.com/files/362706/original/file-20201009-15-wacpgy.jpg?ixlib=rb-1.1.0&rect=65%2C234%2C8583%2C5306&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Particularly during an economic crisis, graduating from university should not sentence students to a lifetime of debt. </span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Post-secondary education has consistently been linked to the promise of a better life. Graduating from post-secondary study has been identified as the <a href="https://www.aeaweb.org/articles?id=10.1257/jep.27.3.79">single most important factor affecting intergenerational mobility</a>. Yet, several factors at play today show how this function of post-secondary education <a href="https://cwp-csp.ca/2017/09/the-cycle-of-student-debt-and-poverty-and-how-we-arent-ending-it">is in crisis in Canada</a>. </p>
<p>Shrinking government funding is behind higher university tuition fees. Government funding of Canadian universities in <a href="https://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2017/03/Case_for_Renewal_in_PSE.pdf">1982 comprised 82.7 per cent of university operating revenues; by 2012, that percentage went down to 54.9 per cent</a>. By 2019, in Ontario, <a href="https://academicmatters.ca/the-university-of-toronto-explores-alternative-funding-sources/">universities’ receipt of government grants represented a paltry 24 per cent of total university revenues</a>. Many college and university students <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/141114/dq141114b-eng.htm">face significant debt</a> with no guarantee of a decent job.</p>
<p>Universities have adopted labour practices in common with the private sphere that result in a rise of precarious work in universities. In 2016, <a href="https://www.oise.utoronto.ca/hec/UserFiles/File/Sessional_Faculty_-_OHCRIF_Final_Report_-_July_2016.pdf">one-third of part-time professors, many of them women, did not make enough money to raise them above the poverty line</a>.</p>
<p>In the COVID-19 context, <a href="https://www.theglobeandmail.com/business/article-with-degree-in-hand-new-graduates-face-tough-odds-in-brutal-job">young people have reason to be concerned</a> as the entry-level job market has <a href="https://www.cbc.ca/news/business/covid-19-jobs-1.5680550">significantly “dried up,” and employers are now revoking job offers or cutting back their graduate recruitment plans</a>. </p>
<p>As our society endures a second wave of COVID-19, now is the time to take stock of what is important for our collective future. With little fanfare, <a href="https://www.postsecondarybc.ca/knowledgebase/the-history-of-post-secondary-education-in-canada-part-vii-since-2003/">our publicly funded post-secondary education system has been eroded</a> over time, diminishing the promise it once held. We should demand change.</p>
<figure class="align-center ">
<img alt="People walk in front of a Ryerson University building." src="https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Post-secondary education is essential for shaping people’s socio-economic standing. People are seen at Ryerson University in Toronto in September 2020.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Cole Burston</span></span>
</figcaption>
</figure>
<h2>Determinant of well-being</h2>
<p>Post-secondary education is not only essential for shaping people’s career development and future socio-economic standing, but it’s vital in developing their skills in <a href="http://canada2020.ca/wp-content/uploads/2014/05/2014_Canada2020_Paper-Series_Education_FINAL.pdf">critical thinking, problem-solving, social and emotional regulation, collaboration and civic engagement</a>. </p>
<p>Education is a <a href="https://www.cpha.ca/what-are-social-determinants-health">key social determinant of health</a> and well-being. But post-secondary education faces increasing <a href="https://cupe.ca/corporatization-post-secondary-education">demands for greater corporatization</a>, <a href="https://ottawacitizen.com/opinion/columnists/anne-marie-roy-fords-funding-overhaul-will-be-detrimental-to-colleges-and-universities">privatization</a> and compliance with <a href="https://pressprogress.ca/canadas-universities-and-colleges-are-being-taken-over-by-big-corporations-and-wealthy-donors/">externally imposed</a> (government or donor) priorities. This neoliberal turn has indeed created important shifts in Canadian universities that should give us pause. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-exactly-is-neoliberalism-84755">What exactly is neoliberalism?</a>
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</em>
</p>
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<p>Ontario, which <a href="https://www.statista.com/statistics/447802/enrollment-of-postsecondary-students-in-canada-by-province/">educates roughly 40 per cent of all post-secondary students in Canada</a>, has perhaps the highest stake in the future of higher education. Currently, Ontario university students have <a href="https://ocufa.on.ca/assets/2019-OCUFA-Pre-Budget-Submission.pdf">the highest student-to-faculty ratio (31:1) in Canada, compared to a national average of 22:1</a>.</p>
<p>This means that Ontario students are paying more money for their education, while also being subjected to higher-than-average class sizes relative to universities outside the province. </p>
<p>Ontario students also now have to pay as much to learn in their own virtual classrooms during the pandemic as they did for on-campus education. <a href="https://ottawa.ctvnews.ca/students-want-tuition-slashed-as-universities-and-colleges-go-online-during-pandemic-1.5013139">Many have protested</a>, but for universities to make cuts to tuition fees would also likely mean cuts to services and instructors.</p>
<h2>Reliance on international tuition</h2>
<p>Universities have endeavoured to replace absent government funding with tuition raises, so tuition rates have skyrocketed, particularly for international students, whose fees have made up the shortfall. Higher Education Strategy Associates (HESA), a research and consulting firm, notes in a 2020 report, <a href="https://higheredstrategy.com/wp-content/uploads/2020/09/HESA-SPEC-2020-revised.pdf">The State of Postsecondary Education in Canada</a>: </p>
<blockquote>
<p>“Since the start of the 2008 recession, international student numbers have more than tripled; and at the university level, the gap between domestic and international student fees has risen inexorably as well … Since 2012-13, funds from international students have covered slightly more than 100 per cent of the collective increase in [universities’] operating budgets.” </p>
</blockquote>
<p>Alex Usher, president of HESA, noted in 2018 that “<a href="https://policyoptions.irpp.org/magazines/august-2018/canadas-growing-reliance-on-international-students/">… some major institutions … are receiving more money from international students than they get in operating grants from their provincial governments.”</a> </p>
<h2>Shrinking government funding</h2>
<p>Ontario has <a href="https://www.theglobeandmail.com/canada/article-ontario-government-expected-to-cut-tuition-fees-for-canadian-students/">among the lowest funding levels per student in Canada at the post-secondary level</a>. In 2002, <a href="https://www.policyalternatives.ca/sites/default/files/uploads/publications/National_Office_Pubs/mp4.pdf">it was the lowest in North America, with the exception of Alabama</a>. In 2017-18, the province’s funding per university student was <a href="https://ocufa.on.ca/assets/2020-Pre-Budget-Submission.pdf">37 per cent lower than the average for the rest of Canada, according to the Ontario Confederation of Faculty Associations</a>. </p>
<p>As the <a href="https://www.canada.ca/en/revenue-agency/services/benefits/emergency-student-benefit.html">Student Emergency Student Benefit</a> has ended, many students, bereft of jobs they once filled to support their education pre-COVID, are now in poor financial shape to pay for their fall classes. Deprived of <a href="https://www.cbc.ca/news/canada/toronto/osap-debt-stress-students-1.5267350">government-funded grants and loans</a>, students are taking on ever-increasing loads of debt to fund their educations: almost half of <a href="https://www.casa-acae.com/students_are_still_worried_covid19">students surveyed by the Canadian Alliance of Student Associations say they will need to rely more on government loans owing to the fallout from COVID-19</a>, with <a href="https://www.theglobeandmail.com/report-on-business/graduates-face-an-unwelcoming-job-market-when-they-get-out-of-school/article31703528/">little assurance of obtaining a stable, good-quality job to pay off the debt</a>.</p>
<p>Indeed, <a href="https://www.cbc.ca/news/business/post-secondary-student-debt-1.4295476">the average student is saddled with $26,000 in loans after completing university</a>.</p>
<h2>Labour precarity</h2>
<p>The <a href="http://ofl.ca/doug-ford-fails-ontario-workers-with-the-passage-of-bill-47-say-leaders-in-the-fight-for-15-and-fairness-movement-ontario-federation-of-labour-and-workers-action-centre/">weakening of labour laws in Ontario</a> has certainly not helped in eschewing the growing trend of labour precarity for young people. In this competitive work environment (one in which <a href="https://www.amo.on.ca/AMO-PDFs/Reports/2019/Fixing-Housing-Affordability-Crisis-2019-08-14-RPT.aspx">housing</a> and <a href="https://academic.oup.com/jhrp/article-abstract/9/1/29/3074696">social resources are scarce</a>), the inability of students to find gainful employment after college or university may affect the mobility of generations into the future.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/precarious-employment-in-education-impacts-workers-families-and-students-115766">Precarious employment in education impacts workers, families and students</a>
</strong>
</em>
</p>
<hr>
<p>The future of PhD students is also not as promising as it once was. After years of study, and the debt associated with it, many graduates interested in academic life now face an <a href="https://academicmatters.ca/assets/AcademicMatters_November2013.pdf">uncertain and insecure career</a>, often as contract faculty. Sessional faculty now comprise <a href="https://behindthenumbers.ca/2019/08/15/contract-faculty-so-much-more-to-know/">53 per cent of the faculty complement in Ontario universities</a>. Half of them <a href="https://academicmatters.ca/understanding-the-role-of-universities-in-the-rise-of-contract-academic-work/">don’t make more than $50,000 a year</a>. </p>
<p>Due to COVID-19, Ontario has <a href="https://www.theglobeandmail.com/canada/article-ontario-shelves-plan-for-performance-based-postsecondary-funding/">temporarily shelved its plans to impose performance metrics</a> to hold universities responsible for the future of their graduates, and the precarious labour market they must compete in. One indicator tied government funding to universities’ graduate earnings, expecting that, irrespective of labour and economic conditions, students would land jobs immediately following graduation — but the pandemic has revealed the <a href="https://theconversation.com/covid-19-reveals-the-folly-of-performance-based-funding-for-universities-138575">capriciousness of trying to tie post-secondary education closely to the labour market</a>.</p>
<h2>Impacts of privatization</h2>
<p>The decline of publicly funded universities has led down the slippery path of privatization. </p>
<p>When universities rely on private funding from donors, whose names feature prominently on innumerable university buildings or who sit on university governance boards, places of learning are subject to <a href="https://www.theglobeandmail.com/news/national/time-to-lead/the-tricky-business-of-funding-a-university/article4619883/">corporate values and practices</a> (efficiency, secrecy of institutional budgets and operations, the erosion of collegialism), <a href="https://www.universityaffairs.ca/news/news-article/university-autonomy-is-shrinking-in-canada-study-finds/">threatening university autonomy</a>. </p>
<p>Privatization erodes human rights and leads to greater marginalization: as Philip Alston, UN Special Rapporteur on extreme poverty and human rights, has concluded, <a href="http://undocs.org/A/73/396">people living in poverty are more likely to go without privatized services or be forced to pay higher prices for them</a>.</p>
<p>It doesn’t need to be this way <a href="https://www.theglobeandmail.com/canada/article-canada-trails-most-other-wealthy-countries-in-caring-for-children">in a wealthy country</a>. People in Ontario and across Canada must demand better.</p><img src="https://counter.theconversation.com/content/131363/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tracy Smith-Carrier is an Associate Professor in the School of Social Work at King's University College at Western University and an Adjunct Research Professor in the Arthur Labatt Family School of Nursing at Western University</span></em></p>
Canadians’ publicly funded post-secondary education system has been eroded over time, diminishing the promise it once held to protect people from poverty. We should demand change.
Tracy Smith-Carrier, Associate Professor, King's School of Social Work, Western University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/145194
2020-08-28T15:53:28Z
2020-08-28T15:53:28Z
It’s time to scrap the student loans ‘motherhood penalty’
<figure><img src="https://images.theconversation.com/files/355307/original/file-20200828-23-vyfese.jpg?ixlib=rb-1.1.0&rect=153%2C64%2C4791%2C2978&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/unrecognizable-mother-son-sling-writing-on-578410708">Shutterstock/Halfpoint</a></span></figcaption></figure><p>The student loans system was supposed to be a safe and fair way for everyone who seeks further education to get the funds they need. But the system is broken and women – particularly mothers – are <a href="https://www.unison.org.uk/motions/2019/women-members/young-women-and-student-loan-repayments/">bearing the brunt</a>. </p>
<p>It may come as a shock to some, but women on maternity leave in the UK who are paying off their student loans still accrue interest when they are on leave. <a href="https://www.gov.uk/repaying-your-student-loan/what-you-pay">Loan repayments stop</a> if their income drops below £26,575 – but the interest doesn’t. It means that women graduates are effectively being <a href="https://pregnantthenscrewed.com/">financially penalised</a> for having children. </p>
<p>But the motherhood penalty is just the start of the story. Women are already subjected to workplace and <a href="https://www.fawcettsociety.org.uk/">societal inequality</a> and suffer most notably from the <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2019">gender pay gap</a>. Full-time employed women earn on average 8% less than men for the same work. This means that women are being paid <a href="https://www.portsmouth.co.uk/news/politics/still-work-do-gender-pay-gap-portsmouth-businesses-strive-equality-2878183">thousands of pounds less</a> a year. That figure is even more alarming considering that women owe around <a href="https://www.theguardian.com/commentisfree/2017/jun/21/women-two-thirds-student-loan-debt-slow-burning-crisis">two-thirds</a> of student loan debt in the UK.</p>
<h2>A gendered system</h2>
<p>Graduate women on maternity in the UK take longer to pay off their student loans in full. The UK government has estimated that for students starting university from 2006, the <a href="https://www.theguardian.com/politics/2008/jan/02/uk.studentfinance">average student loan debt</a> on graduation would take an average of 11 years to repay for men and 16 years for women. </p>
<p>For those who started studying from 2012, most graduates are expected never to pay off their loans, male or female. But <a href="https://londoneconomics.co.uk/wp-content/uploads/2017/07/LE-Impact-of-student-loan-repayments-on-graduate-taxation-FINAL.pdf">research has found</a> that the difference in the treatment of men and women by the 2012 reforms is “substantial”. </p>
<p>The typical earnings profile of a woman – even when compared to a man in a similar job – means they tend to pay more and for a longer period of time, in particular through their middle working years. In other words, women are already paying more and the extra interest only adds to that.</p>
<p>Women also end up carrying longer term <a href="https://pregnantthenscrewed.com/">financial</a> and career burdens because men are less likely to take paternity leave. The issue is then further intensified by the <a href="https://www.ifs.org.uk/comms/r64.pdf">expenses</a> associated with childcare, which often force women into part-time work. </p>
<p>A recent <a href="https://twitter.com/Hello_Sabina/status/1297229603166130179">Twitter thread</a>, which has received much attention, has made it very clear that there are different costs for men and women who study for the same degree. The difference between the couple in question is that woman took two periods of maternity leave and accrued interest at a rate which effectively cancelled out the payments she had been making – meaning it will take her significantly longer than her husband to pay off the debt.</p>
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<p>The system is opaque and confusing. Many women – just like those responding on Twitter – have no idea they will accrue interest on existing loans during maternity leave. Many more will have been paying it and wondering <a href="https://www.theguardian.com/money/2017/jul/29/graduates-anger-nightmare-student-loans-company-complaints">why it is taking them so long</a> to pay off the debt. </p>
<p>COVID-19 has disproportionately affected working mothers, <a href="https://bdaily.co.uk/articles/2020/07/07/why-cant-the-chancellor-do-the-right-thing-by-women-entrepreneurs-ask-leading-womens-groups">especially entrepreneurs </a> and the self-employed. And <a href="https://www.ifs.org.uk/comms/r64.pdf">research shows</a> that women have experienced high levels of reductions in hours, furlough and redundancies because of childcare issues. </p>
<p>Pre-pandemic, women university graduates took on a larger <a href="https://www.unison.org.uk/motions/2019/women-members/young-women-and-student-loan-repayments/">burden of student debt</a> when they became mothers. This was on top of gender pay gap issues that often begin at <a href="https://theconversation.com/how-early-career-women-help-to-open-up-the-gender-pay-gap-81591">the early career stage</a> for women. </p>
<p>Working from home can also <a href="https://wonkhe.com/blogs/co-working-co-parenting-covid-19-will-working-from-home-exacerbate-gender-inequalities/">worsen gender inequalities</a> because women still undertake most of the childcare work and experienced greater strains during this time, as schools and nurseries were forced to close and childminders were unable to work. To make matters worse, there may well have been further interest accruals on student loans for women who were forced into part-time work and earned less than the payment threshold.</p>
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<p><a href="https://pregnantthenscrewed.com/childcare-covid-and-career/">Research</a> carried out during the pandemic has also found that half of the 15% of mothers who were made redundant (or expected to be made redundant imminently) believed that a lack of childcare provision played a role. </p>
<p>These issues are not limited to the UK. Research <a href="https://link.springer.com/article/10.1007%2Fs10834-018-9591-6">from the US</a> in 2019 found that student debt repayment is delaying women <a href="https://www.sciencedaily.com/releases/2018/09/180926110917.htm">getting married</a> – but not men. </p>
<p>Women carry two-thirds of the total <a href="https://www.aauw.org/resources/research/deeper-in-debt/">US$1.54 trillion</a> (£1.16 trillion) student debt in the US – a massive burden. This affects <a href="https://www.cnbc.com/2018/06/06/why-women-hold-the-majority-of-student-loans.html">ethnic minority women</a> graduates particularly. What’s more, high levels of student debt are a major barrier for people – particularly women – <a href="https://www.cnbc.com/2018/03/29/these-are-the-ways-student-loans-stop-people-from-buying-a-house.html">buying homes</a>. </p>
<p>In Scotland, there is a forthcoming <a href="https://www.parliament.scot/parliamentarybusiness/28877.aspx?SearchType=Advance&ReferenceNumbers=S5W-31396&ResultsPerPage=10">government consultation</a> on the issue, relating to student loans taken out for living costs. It will be interesting to see whether progressive steps will be taken to bring a degree of gender equality to student loans repayments. Unfortunately, there is currently no such action in England. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-early-career-women-help-to-open-up-the-gender-pay-gap-81591">How early career women help to open up the gender pay gap</a>
</strong>
</em>
</p>
<hr>
<p>We are calling for a freeze on student loan interest accruals during maternity leave in the UK. This would be a small step to reducing systemic gender discrimination and the “<a href="https://www.theguardian.com/books/2010/feb/07/the-pinch-david-willetts">pinch</a>”, which refers to so-called Boomers (the post-war generation born between 1946 and 1964) pinching the future of their children. </p>
<p>As the country attempts to “<a href="https://www.gov.uk/government/speeches/lets-build-back-better">build back better</a>” post-lockdown and post-Brexit, this step would help to unshackle women graduates who choose to have children from extra and unfair burdens of debt at a time when people are increasingly <a href="https://yougov.co.uk/topics/education/articles-reports/2020/01/09/why-are-britons-choosing-not-have-children">choosing not to</a> have children at all. </p>
<p>With the student <a href="https://www.theguardian.com/education/2020/aug/17/uk-exams-debacle-how-did-results-end-up-chaos">exam results fiasco</a> during the summer and bleak employment prospects for young people and graduates, some people already feel like their <a href="https://www.theguardian.com/society/2020/aug/02/coronavirus-has-stolen-our-future-young-peoples-despair-as-jobs-evaporate">future has been stolen</a> from them. Removing the motherhood penalty on student loan interest repayments would at least signal some hope.</p><img src="https://counter.theconversation.com/content/145194/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
The student loans system is just another source of financial gender inequality.
Emily Yarrow, Lecturer in International Human Resource Management, University of Portsmouth
Julie Davies, Reader in Leadership & Development, Manchester Metropolitan University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/133328
2020-03-20T12:06:02Z
2020-03-20T12:06:02Z
Advanced degrees bring higher starting salaries – but also higher debt
<figure><img src="https://images.theconversation.com/files/319461/original/file-20200309-58017-164vw9j.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5014%2C2495&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Advanced degrees pay off in the job market.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/business-people-shaking-hands-in-meeting-royalty-free-image/494322995?adppopup=true">Ariel Skelly/Getty Images</a></span></figcaption></figure><p>People with a master’s degree or doctorate can bank on a much higher starting salary than those with the same major but only a bachelor’s degree. That’s according to a <a href="https://www.naceweb.org/uploadedfiles/files/2020/publication/executive-summary/2020-nace-salary-survey-winter-executive-summary.pdf">recent survey</a> of employers by the National Association of Colleges and Employers.</p>
<p>We reached the same conclusion about the payoff for advanced degrees in a study we recently published in <a href="https://doi.org/10.1177/0038040719876245">Sociology of Education</a>, an academic journal. </p>
<p>However, as sociologists who study <a href="https://scholar.google.com/citations?user=EzoNzxAAAAAJ&hl=en&oi=ao">inequality</a> and <a href="https://scholar.google.com/citations?user=WT0vZX4AAAAJ&hl=en&oi=ao">disadvantage</a> in education, we also know that the picture becomes more complicated when you see how different kinds of students pay for school.</p>
<h2>Salary and debt comparisons</h2>
<p>The <a href="https://www.naceweb.org/uploadedfiles/files/2020/publication/executive-summary/2020-nace-salary-survey-winter-executive-summary.pdf">association’s report</a> suggests that a person with a master’s degree in math, science, engineering, computer science or business can expect starting salaries between US$75,000 and $79,000 a year for a job in a related field. Those starting salaries are 10% to 30% higher than projected starting salaries for the typical person with a bachelor’s degree with similar jobs.</p>
<p>Starting salaries are even higher for those graduating with a doctoral degree. For example, the average American with a Ph.D. in engineering, math or science could expect to make slightly over $100,000 a year once they complete their degree, while those leaving college with bachelor’s degrees in the same fields could expect to start out making between $62,500 and $70,000 a year.</p>
<p>We call this gap an “<a href="https://doi.org/10.1177/0038040719876245">advanced degree wage premium</a>.” It’s the increased amount of money that college graduates who go on to earn master’s, doctoral and professional degrees in law, medicine and other fields can expect to make over those with just a bachelor’s degree.</p>
<p>We find that Americans who continue their studies after earning their college degrees tend to borrow more for their undergraduate education than those who do not.</p>
<p>We have determined that the typical college student who needs to borrow money for their undergraduate studies and ends their formal education after college takes out <a href="https://wcer.wisc.edu/docs/working-papers/Working_Paper_No_2018_10.pdf">roughly $13,500 in loans</a>. With a constant 6% interest rate, it would cost $500 a month for two and a half years to pay off that amount of debt. </p>
<p>Borrowers who get graduate degrees typically borrow <a href="https://doi.org/10.1177/0038040719876245">roughly $25,000 as undergraduates</a>. Some then accumulate even more student loan debt on top of that. A student pursuing an advanced degree typically takes out another $35,000 after completing undergraduate studies. With a $500-per-month payment plan and a constant 6% interest rate, someone taking out $25,000 would take nearly five years to pay off their debt while a graduate student taking out $70,000 would take 20 years to fully repay.</p>
<p>Amounts of debt vary by degree program. For example, the 51% of MBAs who borrowed for their education and finished business school in 2016 owed an average of <a href="https://nces.ed.gov/programs/coe/pdf/coe_tub.pdf">$66,300</a>. Grads who earned a doctorate in science or engineering, psychology, business or public administration, fine arts or theology and borrowed to pay for their education owed about twice as much – $132,000. Given a $1,000 monthly payment with a constant 6% interest rate compounded monthly, it would take roughly six years to pay off the principal and interest on the typical MBA amount versus 18 years to pay off the principal and interest of a typical doctorate degree.</p>
<p>These debt burdens are not borne equally by all.</p>
<p>In the starkest example, we have found that African Americans who go to graduate school tend to borrow about 50% more than white students with similar degrees. Under certain conditions, typical African American graduate student borrowers <a href="https://theconversation.com/african-americans-take-on-more-debt-for-grad-school-but-the-payoff-is-also-bigger-130169">could take 11 years longer</a> to pay off their loans than typical white graduate student borrowers. However, African Americans earning master’s degrees see an average 30% jump in salaries compared to African Americans with bachelor’s degrees in similar fields.</p>
<p>And African Americans see a 65% increase in their salaries above their peers who have only a bachelor’s degree if they earn a Ph.D. or similar degree. Those salary jumps are 12 and 10 percentage points higher than their white counterparts, respectively.</p>
<h2>The bigger picture</h2>
<p>Americans currently owe <a href="https://www.finaid.org/loans/studentloandebtclock.phtml">more than $1.7 trillion in student loan debt</a>. Yes, getting an MBA, a law degree or similar credentials usually increases earnings for years. But there are also economic, social and psychological costs associated with wracking up all the student loan debt it takes to get there. For example, those costs could include deferring investments in retirement, starting a family or buying a house and the anxiety that may come with making difficult decisions about finances.</p>
<p>We are in no position to tell individual borrowers whether advanced degrees are worth the cost. However, we emphasize that borrowers cannot focus just on earnings or just on cost to make informed decisions. Instead, students and policymakers should focus both how much a person borrows for an advanced degree – as well as how much they can expect to earn – to consider whether that degree will pay for itself down the line.</p>
<p>[<em><a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=expertise">Expertise in your inbox. Sign up for The Conversation’s newsletter and get a digest of academic takes on today’s news, every day.</a></em>]</p><img src="https://counter.theconversation.com/content/133328/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
A new survey shows that people with advanced degrees make more money starting out on the same jobs as those with just bachelor’s degrees. But there’s more to the story, two sociologists note.
Jaymes Pyne, Quantitative Research Associate, Stanford University
Eric Grodsky, Professor, University of Wisconsin-Madison
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/130995
2020-02-20T12:18:00Z
2020-02-20T12:18:00Z
Can you get rid of your student loans by filing for bankruptcy?
<figure><img src="https://images.theconversation.com/files/315570/original/file-20200215-10995-46n5i8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Borrowers looking to eliminate student loan debt through bankruptcy have to clear a series of high hurdles.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/grad-cap-on-cash-royalty-free-image/518338000?adppopup=true">zimmytws/Getty Images</a></span></figcaption></figure><p>Paying back student loans is not an easy thing to do. <a href="https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-student-loans-and-other-education-debt.htm">One out of every 5</a> borrowers with outstanding student loan debt has fallen behind their payments.</p>
<p>There are several ways borrowers can get help to deal with their debt burden. Bankruptcy is the most extreme. In general, the law does not allow you to get rid of student loans through bankruptcy. One exception to the rule is if a borrower can prove that paying back the loans “<a href="https://codes.findlaw.com/us/title-11-bankruptcy/11-usc-sect-523.html">would impose an undue hardship on [them] and [their] dependents</a>.” The threshold for proving that is pretty high. Plus, there’s not a lot of legal guidance on what precisely an undue hardship is.</p>
<p>Not many people try to get rid of student loans through bankruptcy. It could be because they either don’t know its an option or don’t think they will prevail. One study found that <a href="http://dx.doi.org/10.2139/ssrn.1894445">only 0.1%</a> of student loan borrowers who have filed for bankruptcy tried to discharge their student loans. Among those who do try, the success rates are high. <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1894445">Nearly 40%</a> of borrowers who challenge their student debt receive at least a partial discharge.</p>
<p>The U.S. Supreme Court has not yet weighed in on what exactly makes for an “undue hardship.” However, most federal courts follow the 1987 Second Circuit decision, <a href="https://scholar.google.com/scholar_case?case=5270362258430051298&q=brunner+v.+new+york&hl=en&as_sdt=3,43">Brunner v. New York</a>.</p>
<p>Under Brunner, borrowers can meet the “undue hardship” exception by showing three things. First, borrowers must show that they can’t – based on their current income and bills – maintain a <a href="https://scholar.google.com/scholar_case?case=5270362258430051298&q=brunner+v.+new+york&hl=en&as_sdt=3,43">“minimal”</a> standard of living if forced to repay. Second, they must show that they will not be able to repay for a “significant portion of the repayment period.” Third, they must show that they’ve made good faith efforts to repay the debt.</p>
<h2>Proving hardship</h2>
<p>Of these three prongs, the first is the most important. Typically, a borrower has to show they have both maximized their income and reduced their expenses to cover only basic needs. </p>
<p>As an example of failure to maximize income, consider the case in which a bankruptcy court ruled against a borrower who had taken on <a href="https://scholar.google.com/scholar_case?case=11052127559752056935&q=in+re+Perkins+2004&hl=en&as_sdt=3,43">debt to attend law school</a>. Although she provided evidence that her mental health made it unlikely that she would ever become a licensed attorney, the court found that, considering her education, she had not pursued other gainful employment, like paralegal work, to earn as much as she could.</p>
<p>Borrowers may find it difficult to prove that they’ve done everything to minimize expenses. Courts have found even a <a href="https://scholar.google.com/scholar_case?case=11592824822440516788&q=318+B.R.+300&hl=en&as_sdt=6,43">monthly cable TV bill as low as US$35 to be excessive</a> in light of unpaid student loans.</p>
<p>A borrower’s age and disability status are also factors a court would consider as influencing a borrower’s expected earning capacity. At the same time, borrowers who <a href="https://scholar.google.com/scholar_case?case=1106211503141415666&q=in+re+little&hl=en&as_sdt=3,43">obtain loans later in life</a> cannot rely on their age as “additional circumstances.” But, if a borrower becomes <a href="https://scholar.google.com/scholar_case?case=8539061308319439307&q=higgins+v.+spellings+2009&hl=en&as_sdt=3,43">“totally and permanently disabled,”</a> the Department of Education must discharge their federal student loans upon application without resorting to bankruptcy.</p>
<p>If borrowers meet the first undue hardship criterion, then they must show that the hardship condition is likely to last for the rest of the repayment period. As a judge explained in a case known as <a href="https://law.justia.com/cases/federal/appellate-courts/ca6/17-8041/17-8041-2019-05-30.html">In re Roberson</a>, because student-loan agreements rely on the borrower’s future income, discharge requires a <a href="https://scholar.google.com/scholar_case?case=12243411048382222886&q=in+re+roberson+%22certainty+of+hopelessness%22&hl=en&as_sdt=3,43">“certainty of hopelessness</a>, not simply a present inability to fulfill financial commitment.”</p>
<p>Finally, the court must evaluate a borrower’s “<a href="https://scholar.google.com/scholar_case?case=5270362258430051298&q=brunner+v.+new+york&hl=en&as_sdt=3,43">good faith</a>” efforts to pay their student-loan debt. Good faith efforts include showing that you’ve been in regular contact with the loan servicer or tried to get your payments suspended for a brief period. Good faith efforts could also include having tried different repayment plans and making some payments on the loan, even if those payments were below the amount owed.</p>
<p>If a court finds you have met all three Brunner criteria, it may grant a full or partial discharge of the student loan. A court could also decide to just <a href="https://scholar.google.com/scholar_case?case=3139218858537953814&q=in+re+miller+2000&hl=en&as_sdt=3,43">relieve a borrower from paying interests or fees</a>. Or, a court could <a href="https://scholar.google.com/scholar_case?case=18176318203022930024&q=in+re+kapinos&hl=en&as_sdt=3,43">let the borrower pay small payments now and bigger payments later</a> with the idea that the borrower will be making more money in the future. </p>
<h2>Other options</h2>
<p>Satisfying all three conditions may be challenging. Other, more accessible forms of relief exist. If the financial strain is temporary, a borrower may be eligible for options known as “deferment” or “forbearance.” Both deferment and forbearance suspend the required student-loan payment for a limited time period but do not get rid of the debt.</p>
<p>In order to qualify for a <a href="https://studentaid.gov/manage-loans/lower-payments/get-temporary-relief/deferment">deferment</a>, you need to meet certain criteria, such as having enrolled in college or being unemployed. <a href="https://studentaid.gov/manage-loans/lower-payments/get-temporary-relief/forbearance">Forbearance</a>, on the other hand, can be requested for a broader range of financial difficulties. Deferments last for as long as the qualifying situation, but a forbearance is limited to 12 months. Deferments must be granted, but a forbearance request can be denied by the loan servicer.</p>
<p>Another option to reduce the monthly payment amount is pursuing an <a href="https://studentaid.gov/manage-loans/repayment/plans/income-driven">income-driven repayment plan</a>. These are typically only available for federal student loans.</p>
<p>Although eligibility differs across <a href="https://studentaid.gov/manage-loans/repayment/plans/income-driven">four different plans</a>, most borrowers are eligible to enter the <a href="https://edfinancial.com/Help-Center/Lower-Payment-Options/Income-Driven-Repayment-Information-Center/Revised-Pay-As-You-Earn-(REPAYE)">REPAYE</a> plan. Each plan bases the monthly payment on income and can lower payments, even to zero dollars in some cases. Under REPAYE, the monthly payment is defined as 10% of discretionary monthly income. Forgiveness for all four plans is offered after making payments for 20-25 years, although borrowers working in the public sector, such as a teacher, or employee at a not-for-profit organization, may qualify for <a href="https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service">forgiveness after 10 years of payments</a>.</p>
<p>You may have heard that most people who apply for public service loan forgiveness <a href="https://www.cnn.com/2019/09/05/politics/rejection-rates-public-student-loan-forgiveness-fix-trnd/index.html">are rejected</a>. While this is technically true, <a href="https://studentaid.gov/data-center/student/loan-forgiveness/pslf-data">government data</a> show that the majority of applicants had not yet completed the required 10 years of repayment, and another quarter of applicants did not correctly file the application. Regardless of the loan forgiveness options, an income-driven repayment plan could lower the monthly repayment amount.</p>
<p>Finally, borrowers may also want to try to negotiate directly with the loan servicer. This may not always prove successful, but lenders can voluntarily accept reduced monthly payments, lower interest rates, or lower lump sum payments up front instead of having borrowers repay the full balance of the loan over time. So it’s worth a shot to call your loan servicer if you are having trouble making payments.</p>
<p>[<em>Insight, in your inbox each day.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=insight">You can get it with The Conversation’s email newsletter</a>.]</p><img src="https://counter.theconversation.com/content/130995/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Brent Evans has previously received funding from the Lumina Foundation to study student borrowing decisions.</span></em></p><p class="fine-print"><em><span>Matthew Patrick Shaw does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Two experts in higher education policy explain the high hurdles that must be cleared to use bankruptcy to escape crushing student loan debt.
Brent Evans, Assistant Professor of Public Policy & Higher Education, Vanderbilt University
Matthew Patrick Shaw, Assistant Professor of Public Policy, Education, and Law, Vanderbilt University, Vanderbilt University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/129859
2020-02-10T13:58:18Z
2020-02-10T13:58:18Z
A college president’s advice to college students of the future: Don’t borrow
<figure><img src="https://images.theconversation.com/files/313402/original/file-20200203-41532-em8htt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">West Texas A&M University Walter V. Wendler stands alongside the SUV he drove on a speaking tour to urge Texas high school students not to borrow too much for college.</span> <span class="attribution"><span class="license">Author provided</span></span></figcaption></figure><p>Back in 2017, I started regularly leaving my office at West Texas A&M University in Canyon, Texas, to speak to high school students in the Texas Panhandle. This past fall, I did the same thing in the South Plains. These two areas are the northern most 46 counties in the state of Texas.</p>
<p>Driving a silver SUV owned by the university, I logged a total of 14,000 miles throughout these two regions over a total of 10 months. I visited 132 high schools with student populations of all sizes.</p>
<p>For instance, in the South Plains tour this past fall, I visited 66 schools that ranged in size from <a href="https://www.lubbockisd.org/lhs">Lubbock High School</a>, where I spoke to 975 juniors and seniors, to <a href="https://www.dawsonisd.net/">Dawson High School</a>, where I spoke with all 12 high school students in ninth through 12th grades.</p>
<p>No matter where I went – and no matter if I spoke with students and families that had a concrete plan for college and others that were less certain – I heard concerns about the cost of higher education.</p>
<p>And my message and response was always the same: “Do not borrow money to attend West Texas A&M University (or any university) for the first two years. If you must borrow, attend community college, but don’t borrow a penny for community college either. Pay as you go.” And I should have added: Live with your parents rent-free as long as possible.</p>
<h2>Planning for the future</h2>
<p>You might think I was simply on a recruiting tour for the university where I serve as president. Yes, of course, I hoped that my visits helped make the university more appealing. My primary purpose, however, was not recruiting students, but helping them determine a long-range plan to enable them to become what I call “<a href="http://walterwendler.com/?s=noble&submit=Search">noble citizens</a>” ready to work, engage, think and vote.</p>
<p>Of course, you can still be a noble citizen and have a lot of debt. It’s just a lot more difficult. If you are saddled with debt, you’re less able to contribute to the community, at least financially, or purchase a home. As I spoke with students, I shared a few statistics to help illustrate the point.</p>
<p><a href="https://www.marketplace.org/2019/09/30/70-of-college-students-graduate-with-debt-how-did-we-get-here/">Seventy percent of college students</a> graduated with debt in 2019 — on <a href="https://www.marketplace.org/2019/09/30/70-of-college-students-graduate-with-debt-how-did-we-get-here/">average, US$30,000</a>.</p>
<p>Some of those graduates will still be paying off their student loans decades later, when they get Social Security checks – either voluntarily or by having those checks garnished. Of <a href="https://www.aarp.org/money/credit-loans-debt/info-2017/student-loans-debt-repayment-retirement.html">Americans</a> over 60, 2.8 million have student loans. While 73% of those are cosigners paying for children or grandchildren, the rest are students paying off their own education loans.</p>
<p>Additionally, a growing number of <a href="https://www.cbsnews.com/news/student-loan-debt-seniors-owe-billions-in-student-loan-debt-this-will-follow-me-to-the-grave/">aging Americans</a> have college debt that they will not pay back before dying. </p>
<p>Default rates for borrowers over 65 are nearly 40%, according to the <a href="https://www.cnbc.com/2018/11/14/more-older-people-are-bringing-student-debt-into-their-retirement.html">Consumer Financial Protection Bureau</a>.</p>
<p>Pell Grants, which are federal grants to help low-income students to pay for college, once <a href="https://www.marketplace.org/2019/09/30/70-of-college-students-graduate-with-debt-how-did-we-get-here/">covered 79% of tuition and fees in 1975 but only covered 29% by 2017</a> — a downhill slide caused by escalating costs and easy loans.</p>
<h2>Mixed results on borrowing</h2>
<p><a href="https://www.educationnext.org/benefits-of-borrowing-evidence-student-loan-debt-community-college-attainment/">Some studies</a> suggest borrowing yields an increase in credits earned and academic performance. Despite those benefits, other research shows that student loan debt can have a negative, long-term effect on people <a href="https://hbr.org/2019/04/student-debt-is-stopping-u-s-millennials-from-becoming-entrepreneurs">financially</a> and <a href="https://academic.oup.com/ej/article-abstract/122/563/1094/5079467?redirectedFrom=fulltext">emotionally</a>.</p>
<p>I told the students if they must borrow, to never borrow more than 60% of their anticipated starting salary of the first job. This is consistent with what I call the “<a href="http://www.thecb.state.tx.us/about-us/60x30tx/">60% Rule</a>,” which a state higher education agency developed to make sure students don’t borrow more than their degree is worth.</p>
<p>For example, if someone wanted to teach in a small Texas community with a $40,000 starting salary, they should not borrow more than $24,000 to attain a bachelor’s degree. Similar – although more lenient – advice can be found in <a href="https://www.forbes.com/sites/lawrencelight/2019/10/04/when-does-student-debt-make-sense-and-when-doesnt-it/#4e596bb71370">Forbes</a>, which urged borrowers to never borrow more than their expected first year salary. (For information about the expected salary for a particular job, check the <a href="https://www.bls.gov/ooh/">U.S. Bureau of Labor Statistics</a>.)</p>
<p>In urging students not to take on too much student debt, I also highlighted other paths – aside from college – to <a href="http://walterwendler.com/2018/05/noble-citizenship/">noble citizenship</a>: military service, certification programs or family businesses.</p>
<h2>A duty to inform</h2>
<p>I recognize the responsibility of university leadership to point out the challenges for students and families when borrowing for education. It is difficult for middle-income families to pay the increasing costs of a college education. Informed borrowing is the key issue for students. The need is highlighted for students who are first in their family to attend college and may accept the advice that any college degree is worth whatever it costs. It is not true. And, it is an unfair burden for university leadership to place on students.</p>
<p>But if students borrow for college, in my view, they should be aware that they are possibly being sucked into what I like to call a troubling triangle of treachery.</p>
<p>One side of the triangle is represented by elected officials who <a href="https://www.insidehighered.com/news/2018/09/26/growing-number-democrats-run-free-college-pushing-issue-mainstream">encourage everyone to go to college</a>.</p>
<p>The second side is represented by lenders, who – in my view – do little to assess an individual’s ability to repay a student loan. If a student borrows to enroll in a program, limits placed on amounts borrowed are <a href="https://www.nerdwallet.com/blog/loans/student-loans/much-borrow-college/">quite high</a> when federal and private loans are combined. And they tend to treat all college degrees, and by inference, employment opportunities as equal. Yet, the employment marketplace reveals that is not the case.</p>
<p>The third side is represented by university leadership, which – in my view – has not done enough to let students know the pitfalls of borrowing.</p>
<p>A student’s indebtedness is eventually their own responsibility. Debt responsibility will not disappear for the student – or for parents who are helping them. It’s their responsibility too.</p>
<p>Just ask the 44 million Americans, many of whom <a href="https://www.npr.org/2019/03/13/681621047/college-completion-rates-are-up-but-the-numbers-will-still-surprise-you">did not graduate</a>, who owe <a href="https://www.forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#30f6f067133f">$1.5 trillion in student loan debt</a>.</p>
<p>The tour was a learning experience. The value proposition of American higher education is changing. I saw it in the eyes of 20,000 students across 14,000 miles. </p>
<p>[ <em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=youresmart">You can read us daily by subscribing to our newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/129859/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Walter V. Wendler does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
West Texas A&M University President Walter Wendler set out to visit high school students throughout the Texas Panhandle and the South Plains with a simple message about student loans.
Walter V. Wendler, President, West Texas A&M University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/130169
2020-01-23T13:52:18Z
2020-01-23T13:52:18Z
African Americans take on more debt for grad school – but the payoff is also bigger
<figure><img src="https://images.theconversation.com/files/311186/original/file-20200121-117954-1y8u5xp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">African Americans take on greater debt than whites to earn an advanced degree. Does the payoff make it worth it?</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/upset-african-american-female-sitting-kitchen-1100063888">Damir Khabirov/Shutterstock.com</a></span></figcaption></figure><p>When seeking graduate and professional degrees, African Americans take on <a href="https://doi.org/10.1177%2F0038040719876245">over 50% more debt</a> than white students. On the upside, African Americans also see a bigger payoff to earning such degrees. Whether or not that payoff is enough to make up for the additional debt burden is unclear.</p>
<p>These are some key takeaways from a <a href="https://doi.org/10.1177%2F0038040719876245">study</a> we released in January 2020 in the journal Sociology of Education that examined graduate school debt. We are researchers who study issues of <a href="https://scholar.google.com/citations?user=EzoNzxAAAAAJ&hl=en&oi=ao">inequality</a> and <a href="https://scholar.google.com/citations?user=WT0vZX4AAAAJ&hl=en&oi=ao">disadvantage</a> in education.</p>
<p>Our findings come at a time when there is an <a href="https://www.vox.com/2019/6/24/18677785/democrats-free-college-sanders-warren-biden">ongoing public debate</a> about whether higher education is worth the cost. We believe these debates represent a paradox for African Americans who are seeking education beyond a bachelor’s degree. On the one hand, graduate school enables African Americans to climb into higher income brackets. But this upward economic mobility comes at a steep upfront financial cost.</p>
<h2>Large differences found</h2>
<p>For 2016, we estimate that the average white graduate student borrowed about US$28,000 while an average African American graduate student took out $43,000 to pay for their education, even when they had comparable levels of parent income, education and other resources important for educational attainment.</p>
<p>We found that African American graduates with an advanced degree had higher pay increases than their white peers – but not necessarily higher pay.</p>
<p>While a 2016 master’s degree graduate who is white could expect an 18% bump in earnings for their degree, African American master’s degree graduates could expect around a 30% bump in earnings compared to having a bachelor’s degree alone, according to <a href="https://doi.org/10.1177%2F0038040719876245">our study</a>. </p>
<p>Among doctoral degree holders, white graduates could expect around a 55% bump compared to a 65% increase in earnings for African Americans with doctoral degrees. </p>
<p>Among those with professional degrees – needed to become, say, an eye doctor or a lawyer – white graduates earned 120% more than their bachelor’s degree counterparts who were also white. By comparison, African American graduates earned 142% more than those with a bachelor’s degree who are African American. </p>
<p>It may be tempting to conclude that African American students should aim for an advanced degree. But the reality is more complicated than that. That extra bump African American advanced degree earners get simply puts their pay close to that of their white peers with the same degree. African American advanced degree holders are not typically making more than their white peers, even though they borrow much more to earn those degrees.</p>
<p>Let’s take the case of average white and African American advance degree graduates with identical incomes and identical monthly student loan payment amounts of $300. Given a constant 6% interest rate compounded monthly, it would take the average white student just over 10 years to pay off the principal and interest of their $28,000 in student loans. By contrast, it would take the average African American student 21 years to pay off the principal and interest of their $43,000 in student loans with the same $300 rate.</p>
<p>For these reasons, taking on large amounts of student debt may perpetuate racial inequalities across generations. For instance, debt can make it more difficult for highly educated African American parents to <a href="https://doi.org/10.1177%2F2332649218790989%22">support their own children’s educational aspirations</a>. If a person who has a child right after graduate school invested $300 per month to their child’s college fund versus paying off their own student debt, with a 4% rate of return they could expect to have roughly $44,000 toward their child’s college education in 10 years.</p>
<h2>The bigger picture</h2>
<p>With student debt nearing <a href="https://www.forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#8ada29133fb5">$1.6 trillion dollars</a> nationally, people worry that student debt is <a href="https://www.vice.com/en_us/article/qvqw3x/what-a-student-loan-bubble-bursting-might-look-like">the next financial bubble</a> that could <a href="https://www.cnbc.com/2019/11/04/we-should-all-be-concerned-about-the-student-debt-crisis.html">topple the U.S. economy</a>. They also worry that student loans may be <a href="https://www.nytimes.com/2020/01/10/us/military-enlistment.html">financially crushing an entire generation</a>.</p>
<p>But our research suggests that when it comes to the nation’s $1.6 trillion student debt problem, it pays to look beyond just student loans for four-year degrees. We found that <a href="https://journals.sagepub.com/doi/10.1177/0038040719876245">nearly half the nation’s student debt</a> is held by households where at least one member has an advanced degree. These are households that typically enjoy relatively high incomes. </p>
<p>For that reason, any talk about student loan debt should take into account the debt held not just by people with four-year degrees. If disparities in student loan debt are going to be addressed, they must be addressed among people who hold graduate degrees, too.</p>
<p>[ <em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=youresmart">You can read us daily by subscribing to our newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/130169/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
African American students are taking on significantly more debt than white students to earn advanced degrees. Is it worth it?
Jaymes Pyne, Quantitative Research Associate, Stanford University
Eric Grodsky, Professor, University of Wisconsin-Madison
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/123505
2019-11-03T13:00:20Z
2019-11-03T13:00:20Z
What universities can do to keep students from dropping out
<figure><img src="https://images.theconversation.com/files/298775/original/file-20191025-173533-zbtqvh.jpg?ixlib=rb-1.1.0&rect=7%2C16%2C799%2C423&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Finances, academic performance and a sense of belonging may all be factors in whether or students finish their post-secondary studies.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>The Organization for Economic Co-operation and Development (OECD) reports that in 36 countries, <a href="https://www.oecd.org/education/education-at-a-glance/">only 39 per cent of bachelor’s degree students graduate within the expected duration of their program</a>. Another 28 per cent do so in the following three years.</p>
<p>According to the World Bank, students abandoning advanced or “tertiary” studies — everything from university to advanced-level studies — is a <a href="http://documents.worldbank.org/curated/en/613701468188661472/pdf/98454-REVISED-Box393212B-PUBLIC.pdf">serious issue negatively impacting countries’ capacities for economic growth and poverty reduction</a>. </p>
<p>Educated people are able to earn <a href="http://wbgfiles.worldbank.org/documents/hdn/ed/saber/supporting_doc/Background/TED/SABER_Tertiary_%20Framework.pdf">higher wages, can better cope with economic shocks and raise healthier families</a>. </p>
<p>Institutions should aim to understand and respond to why students don’t finish their programs. Students who don’t finish may be saddled with debt and find themselves with <a href="https://www.nasfaa.org/news-item/18214/College_Non-Completion_Focus_of_House_Subcommittee_Hearing">worse financial outcomes than if they never pursued higher education</a>. In countries where <a href="http://www.oecd.org/education/skills-beyond-school/48631028.pdf">the government finances some or all post-secondary or tertiary education</a>, all society pays for the failure indirectly. What schools call “non-completion rates” may also be seen as damaging to a program or school’s image and credibility. Universities and colleges generally don’t want to publicize these figures.</p>
<h2>Measuring rates</h2>
<p>Measuring how many students don’t finish isn’t an easy task considering there are many ways <a href="https://www.chronicle.com/blogs/data/2015/05/04/attainment-completion-and-the-trouble-in-measuring-them-both/">to define and calculate</a> this figure, in part due to differences in post-secondary systems. </p>
<p>One of the most accepted definitions of non-completion is when a student isn’t able to receive his or her degree within <a href="https://nces.ed.gov/programs/coe/indicator_ctr.asp">150 per cent of the expected time</a> — for example, three years for a two-year course or six years for a four-year one.</p>
<p>There’s some criticism about this standard because some students change programs or schools and eventually finish a post-secondary degree. Research from 2012 suggests almost <a href="http://www.heqco.ca/SiteCollectionDocuments/Persistence%20ENG.pdf">half of college and 62 per cent of university students in Canada who leave their programs will return to post-secondary education</a> within three years, at the same institution or a different one. </p>
<p>Data from Australia shows that <a href="https://www.latrobe.edu.au/__data/assets/pdf_file/0011/784028/La-Trobe-NPP-Re-recruitment-Research-Report-24-February-2017.pdf">one million people have not finished a bachelor level degree they started</a>. However, the majority had finished other courses of study: 28 per cent finished other higher education degrees, and 32 per cent, a vocational qualification. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/299323/original/file-20191029-183120-1k3pj0r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/299323/original/file-20191029-183120-1k3pj0r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/299323/original/file-20191029-183120-1k3pj0r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/299323/original/file-20191029-183120-1k3pj0r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/299323/original/file-20191029-183120-1k3pj0r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/299323/original/file-20191029-183120-1k3pj0r.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/299323/original/file-20191029-183120-1k3pj0r.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The high costs of tuition may mean some students are strapped for time due to working to pay for school.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<h2>Financial costs</h2>
<p>In more than 40 post-secondary institutions in the United States, <a href="https://qz.com/968366/college-is-as-unaffordable-for-most-americans-as-membership-at-trumps-mar-a-lago/">students need to spend US$250,000 to obtain a degree</a>. The sum of all 44 million student loans <a href="https://www.forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#39c9a2d5133f">has reached US$1.5 trillion</a>.</p>
<p>In Canada, students take between <a href="https://globalnews.ca/news/4222534/canadian-student-loans-government-interest/">nine and 15 years to pay their loans</a>. A 2017 Ipsos poll for BDO Canada Limited
found that <a href="https://www.ipsos.com/en-ca/news-polls/BDO-student-debt-2017-09-18">77 per cent of graduates come to regret their debt</a>. The poll surveyed a sample of 2,212 Canadians aged 21-39 with a completed college diploma or university degree.</p>
<p>Such costs and financial challenges mean that many students need to work part- or full-time during post-secondary studies. Spending too much time working for money can harm academic performance. <a href="http://www.reveduc.ufscar.br/index.php/reveduc/article/view/2529">A study in Brazil</a> found that 61 per cent of students who didn’t finish their programs said the necessity to work during study was the main factor. </p>
<h2>Lower averages, belonging</h2>
<p>What also may be obvious is that students with lower averages are more likely to leave their programs. </p>
<p>A study of profiles of Canadian post-secondary education dropouts found that <a href="https://eric.ed.gov/?id=EJ1028030">students whose first-year GPAs were 60 per cent or lower were more than twice as likely to drop out</a> than students whose GPAs were above that threshold. A study in Poland similarly <a href="https://link.springer.com/article/10.1007/s11233-018-09010-z">associated dropout risks with GPAs</a>. </p>
<p>But it’s not all about the factors that may seem beyond the institutions’ control. </p>
<p>The same Canadian study that examined GPAs found that dropouts have a low sense of belonging, and that first-year students who don’t have someone on campus to talk to about personal issues were more likely to leave. </p>
<p>Sociologist Wolfgang Lehmann of Western University argues students who are either the first generation in their families to attend post-secondary education, or who are low-income students, often “encounter a sense of discontinuity.” In his interviews with 25 students who dropped out, he explores the theme that many had the <a href="https://eric.ed.gov/?id=EJ775438">feeling of not fitting with the university because of a lack of social bonds</a>.</p>
<h2>Dropping the dropout rate</h2>
<p>Researchers have proposed ways to retain students. Vicent Tinto, a professor emeritus in education from Syracuse University, argued twenty years ago that schools must <a href="https://doi.org/10.12930/0271-9517-19.2.5">address five main areas</a>: having clear expectations, providing adequate academic and social support, offering students clear feedback and allowing opportunties for academic and social involvement, including in learning.</p>
<p>But what should that support and those opportunities look like? Considering the many differences among post-secondary systems, there is no ready formula, but understanding both national conditions and the particular student body helps. </p>
<p>For example, <a href="https://www2.deloitte.com/us/en/insights/industry/public-sector/improving-student-success-in-higher-education.html">in the U.S. today</a>, almost <a href="https://www.wiley.com/en-us/Becoming+a+Student+Ready+College%3A+A+New+Culture+of+Leadership+for+Student+Success-p-9781119119517">half of current U.S. college students (44 percent) are 24 years of age or older</a>; 26 percent work full-time and 28 percent need to take care of family during their studies. </p>
<h2>Targeted investments</h2>
<p>Georgia State University (GSU), in Atlanta, brings one example of a success in increasing completion rates: it <a href="https://www.theatlantic.com/education/archive/2013/09/georgia-state-improved-its-graduation-rate-by-22-points-in-10-years/279909/">did so by 22 percent in ten years</a> by investing in key areas. </p>
<p>The university learned that financial issues and students getting overwhelmed, or making poor academic choices, were all impacting students decisions to leave.</p>
<p>Among other initiatives, GSU has made <a href="https://www.nytimes.com/2017/03/14/opinion/when-a-few-bucks-can-get-students-to-the-finish-line.html?module=inline%20%22%22">small grants</a> available to students, sometimes as little as $300. GSU found this especially helps older students with immediate necessities. In 2012, the school introduced a proactive <a href="https://www.nytimes.com/2017/03/28/opinion/at-college-a-guided-path-on-which-to-find-oneself.html">advising program</a> where advisers reach out to students and follow them through their studies. It also created freshman cohorts of 25 students that take their courses together, leading to the students building community.</p>
<p>GSU’s recipe won’t work everywhere, but the important lesson is to examine the issue with seriousness, and look for solutions that face the reasons why students don’t finish. Sounds much better than trying to hide it!</p>
<p>[ <em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/ca/newsletters?utm_source=TCCA&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/123505/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ken S. Coates is affiliated with the Macdonald-Laurier Institute.</span></em></p><p class="fine-print"><em><span>Lenin Cavalcanti Guerra does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Tailored strategies to address students’ finances, academic success and socio-emotional connections with an institution or program can help keep students in school.
Lenin Cavalcanti Guerra, Post-Doctoral Fellow, Johnson Shoyama Graduate School of Public Policy, University of Saskatchewan
Ken S. Coates, Canada Research Chair in Regional Innovation, University of Saskatchewan
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/123571
2019-10-11T13:04:15Z
2019-10-11T13:04:15Z
Income-based repayment becoming a costly solution to student loan debt
<figure><img src="https://images.theconversation.com/files/296569/original/file-20191010-188792-1exzvfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Student loan debt is approaching the $1.5 trillion mark.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/mini-graduation-cap-on-us-money-101980843?src=rkIOXz08QvTfQTaA-CwD4Q-1-1">zimmytws/Shutterstock.com</a></span></figcaption></figure><p>When Congress established the income-driven repayment for federal student loans back in 2007, it was touted as a way to <a href="https://www.congress.gov/congressional-record/2007/09/07/senate-section/article/S11241-7">help student loan borrowers save money</a> by capping monthly payments at a certain percentage of a borrower’s income.</p>
<p>Since then, student loan debt has risen from US$500 billion to where it is now <a href="https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2019Q2.pdf">approaching the $1.5 trillion threshold</a>. The federal government expects to <a href="https://www.budget.senate.gov/download/fact-sheet-gao-student-loan-investigation">forgive over $100 billion</a> of the $350 billion in loans under income-driven repayment as of 2015. That means taxpayers are picking up the bill.</p>
<p>This has put the entire income-driven repayment system in jeopardy as there have been proposals by congressional Republicans and the Trump administration to <a href="https://www.urban.org/urban-wire/prosper-act-changes-math-student-loan-borrowers">reduce the amount of loans forgiven</a> and <a href="https://www.cnbc.com/2019/03/11/trumps-budget-proposal-would-cancel-public-service-loan-forgiveness.html">end the Public Service Loan Forgiveness program</a>, which is <a href="https://theconversation.com/what-is-public-service-loan-forgiveness-and-how-do-i-qualify-to-get-it-106138">a special repayment option</a> for people in public service fields. So far, these proposals have failed to become law, but expect to see them put forth again in the future as concerns about program costs continue to grow.</p>
<p>As a <a href="https://scholar.google.com/citations?user=qrYZ8cwAAAAJ&hl=en&oi=ao">researcher</a> who specializes in higher education policy and financial aid, here are some of my insights on how income-driven repayment works, why its future is now in jeopardy and some potential options that can protect the most vulnerable borrowers while also helping taxpayers.</p>
<h2>How it works</h2>
<p>Six months after they leave college, students who took out a federal student loan are automatically <a href="https://studentaid.ed.gov/sa/repay-loans/understand/plans/standard">put into a repayment plan</a> with fixed monthly payments over 10 years. This is similar to how mortgages and car loans work. However, repayment can often be a major burden for student loan borrowers who take low-paying jobs or struggle to find employment after college.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The pressure is on for federal student loan borrowers to pay back their loans shortly after they leave college.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/concentrated-young-african-american-female-student-1100063891?src=0RfHdGHAyV0QJbMrf_D_pg-1-95">Damir Khabirov/Shutterstock.com</a></span>
</figcaption>
</figure>
<p>To address this issue, Congress and the Department of Education created <a href="https://studentaid.ed.gov/sa/repay-loans/understand/plans/standard">a number of options</a> during the George W. Bush and Barack Obama presidencies that tied student loan borrowers’ payments to their <a href="https://www.nerdwallet.com/blog/loans/student-loans/discretionary-income-calculator/">discretionary income</a>, that is, how much money they have left after meeting their basic needs. </p>
<p>Most students who take out federal loans today qualify for a plan called <a href="https://www.consumerfinance.gov/ask-cfpb/what-is-pay-as-you-earn-paye-how-do-i-know-if-i-qualify-en-1555/">Pay As You Earn</a>. This plan – known as PAYE – limits monthly payments to 10% of a student loan borrower’s discretionary income for up to 20 years. </p>
<p>There are two requirements. First, student loan borrowers must <a href="https://studentloans.gov/myDirectLoan/ibrInstructions.action">fill out paperwork each year</a> with their income to be eligible for income-driven repayment. In recent years, <a href="https://www.chronicle.com/article/Thousands-Fall-Out-of/229031/">more than half of federal student loan borrowers</a> have failed to complete the paperwork on time, putting them back into the standard plan. Second, if any part of the loan is not repaid within 20 years, the remaining balance is forgiven. But this forgiveness counts as income and taxes must be paid on it in that year. </p>
<p>Borrowers who work for government agencies and certain nonprofit organizations can qualify for <a href="https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service">Public Service Loan Forgiveness</a>, which limits payments to 10% of discretionary income for as little as ten years with no income tax penalty. So far, just <a href="https://www.nasfaa.org/news-item/19700/Education_Department_Releases_New_Data_on_Public_Service_Loan_Forgiveness_Program">1% of borrowers who applied for forgiveness</a> have had their loans forgiven, but this rate will likely increase over time as the Department of Education gets better at managing the forgiveness process.</p>
<h2>Problems abound</h2>
<p>In some respects, the biggest problem with income-driven repayment is that too many people are taking advantage of it.</p>
<p>The share of students who reduced their loan balances by even one dollar within five years of leaving college <a href="https://robertkelchen.com/2018/11/01/some-good-news-on-student-loan-repayment-rates/">has fallen from 67% to 51% over the last five years</a> as low monthly payments under income-driven repayment mean that many borrowers’ balances are growing instead of shrinking. This has <a href="http://www.gao.gov/assets/690/681064.pdf">increased the projected price tag of these programs</a> to the federal government well beyond expectations.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Students with $100,000 or more in student debt are the biggest users of income-based repayment.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/college-graduate-large-tuition-bill-vertical-151974746?src=FFCNkXMJlfRZfNasg_Mfwg-1-45">Burlingham/Shutterstock.com</a></span>
</figcaption>
</figure>
<p>These programs tend to be used more frequently by borrowers with large debt burdens – especially those who have more than $100,000 in debt. <a href="https://studentaid.ed.gov/sa/about/data-center/student/portfolio">Data from the Department of Education</a> show that students who owe $100,000 or more make up just over one-third of all outstanding student debt but nearly half of all borrowers in income-driven repayment.</p>
<p>Trying to pay back $100,000 in student loans is certainly not easy, and I can speak from experience thanks to my wife’s law school debt. But most of the borrowers with large student debt burdens tend to be <a href="https://www.urban.org/urban-wire/which-households-hold-most-student-debt">professionals with graduate degrees and reasonably high incomes</a>. Many of the borrowers who have the greatest difficulty repaying their loans <a href="https://www.usnews.com/news/data-mine/articles/2017-11-07/federal-data-show-39-million-students-dropped-out-of-college-with-debt-in-2015-and-2016">never earned a college degree</a> and thus did not see substantial financial benefits from their investment.</p>
<h2>What can be done?</h2>
<p>As a researcher of student financial aid, my concern is that policymakers might throw the proverbial baby out with the bathwater and get rid of the entire income-driven repayment system.</p>
<p>In my view, a better way to stop borrowers with $100,000 in debt from getting most of the benefits is to limit the amount forgiven. This can be done by capping the amount of loans that can be repaid through income-based repayment or extending the repayment term.</p>
<p>President Obama proposed limiting Public Service Loan Forgiveness <a href="https://www.brookings.edu/research/the-coming-public-service-loan-forgiveness-bonanza/">to the first $57,500 in loans</a>, although this did not pass Congress. His administration also implemented a program that required graduate students to <a href="https://www.insidehighered.com/news/2015/05/01/federal-rule-making-panel-oks-plan-expand-income-based-repayment-program">pay for five more years than undergraduate students</a>.</p>
<p>The savings from requiring higher-income borrowers with large loans to repay more of their loans can then be used to help the most vulnerable borrowers. Students who dropped out of college after a semester or two could see their debt forgiven more quickly and without having to pay additional income taxes. This may be a tough political sell, but this could also encourage students – especially those who are the first in their families to attend college – to give college a shot.</p>
<p>Some of the money could also be used to support larger Pell Grants to reduce the need for borrowing in the first place. Cutting the total amount of loans forgiven in half would allow for an increase of about 20%, or $1,200 per year, in the maximum Pell Grant, which is <a href="https://studentaid.ed.gov/sa/about/announcements/pell-2019-20">$6,195</a> for the 2019-2020 academic year. This would help cover much of the tuition increases over the last decade and reduce student loan debt.</p>
<p>[ <em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/123571/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert Kelchen does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
The income-based repayment plan that lets borrowers pay back student loans based on their salaries is in jeopardy. The problem? The program proved too popular.
Robert Kelchen, Associate Professor of Higher Education, Seton Hall University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/117734
2019-07-12T12:05:10Z
2019-07-12T12:05:10Z
Could black philanthropy help solve the black student debt crisis?
<figure><img src="https://images.theconversation.com/files/278543/original/file-20190607-52767-aki5jk.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Left: Robert Smith. Right (clockwise from left): Beyonce Knowles-Carter, Jay-Z, LeBron James and Nicki Minaj.
</span> <span class="attribution"><span class="source">Reuters, USA Today</span></span></figcaption></figure><p>When billionaire Robert E. Smith decided to <a href="https://www.cnn.com/2019/05/19/us/morehouse-robert-smith-student-loans-trnd/index.html">pay off the student loans</a> of the graduating class of 2019 at Morehouse College, he suggested that others follow his lead.</p>
<p>“Let’s make sure every class has the same opportunity going forward, because we are enough to take care of our own community,” Smith declared in his <a href="https://www.youtube.com/watch?v=-P1CcRphVnM">commencement speech</a>.</p>
<p>But is there even enough black private wealth in the United States to pay off all black student loan debt? </p>
<p>As a scholar in <a href="https://www.researchgate.net/profile/Mako_Fitts_Ward">social transformation and African American studies</a>, I’m intrigued by this question. It provides an opportunity to examine black wealth, higher education and the possibilities for alleviating debt, which in turn opens the door to new economic opportunities.</p>
<h2>Black celebrities give to higher education</h2>
<p>Smith’s gift is estimated to be <a href="https://www.forbes.com/sites/colinseale/2019/05/28/40-million-for-400-students-morehouse-donation-highlights-an-inequitable-new-normal/#31f4447b1bc3">worth US$40 million and will benefit 396 students</a>. </p>
<p>That’s a lot of money, and he’s done it before. Before his gift to Morehouse, Smith donated <a href="http://news.cornell.edu/stories/2016/01/robert-f-smith-gives-50m-engineering-cornell-tech">$50 million to Cornell University</a>, his alma mater, in part to support African American and female students at Cornell University’s College of Engineering.</p>
<p>Other black celebrities have also stepped up to fund education. Powerhouse couple <a href="https://www.prnewswire.com/news-releases/beyonce-and-jay-z-through-the-beygood-initiative-and-the-shawn-carter-foundation-announce-a-new-scholarship-program-to-award-one-exceptional-senior-high-school-student-with-financial-needs-in-us-markets-on-their-otrii-tour-300702407.html">Beyonce and Jay Z</a> gave more than $1 million in scholarships to students who lived in cities they were touring in 2018.</p>
<p>Rapper <a href="https://www.billboard.com/articles/columns/hip-hop/8463821/nicki-minaj-awards-37-college-students-scholarship">Nicki Minaj</a> gave 37 “Student of the Game” scholarships. <a href="https://www.businessinsider.com/lebron-james-college-scholarship-school-cost-100-million-2018-7">LeBron James</a>, through his foundation, promised to pay for 2,300 students to attend the University of Akron – at an estimated price tag of $100 million. <a href="https://www.insidephilanthropy.com/glitzy-giving/oprah-winfrey.html">Oprah Winfrey</a> has donated more than $400 million to educational causes.</p>
<p>But with just five <a href="https://www.blackenterprise.com/jay-z-net-worth-black-billionaire-list/">black billionaires in the United States</a> – Smith, Winfrey, <a href="https://www.forbes.com/profile/david-steward/#3804af1a5626">David Steward</a>, <a href="https://www.forbes.com/sites/kurtbadenhausen/2018/03/28/michael-jordan-adds-350-million-to-fortune-net-worth-now-1-65-billion/#2e9528a62848">Michael Jordan</a> and <a href="https://www.forbes.com/sites/zackomalleygreenburg/2019/06/03/jay-z-billionaire-worth/#7c95c8533a5f">Jay-Z</a> – monumental gifts like the one that Smith made will likely be few and far between. </p>
<p>Is Smith’s claim that “we are enough to take care of our own community” true of all the black wealth in the U.S.?</p>
<h2>Philanthropy among African Americans</h2>
<p>A strong <a href="https://onlinelibrary.wiley.com/doi/abs/10.1002/pf.41219950803">heritage of black philanthropy</a> dates back to <a href="http://nationalhumanitiescenter.org/pds/maai/community/text5/text5read.htm">mutual aid societies</a> of the 1700s and 1800s in which free blacks sought to help fellow blacks facing hardships or distress and, in later years, in need of education and job training. </p>
<p>Black charitable giving also arose from <a href="https://link.springer.com/article/10.1057/ijea.2010.20">the black church</a> and <a href="https://onlinelibrary.wiley.com/doi/abs/10.1002/pf.41219950803">fraternal organizations</a> throughout the 1800s and 1900s with movements such as abolitionism, the <a href="https://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/black-womens-club-movement">Black Women’s Club Movement</a> and the civil rights movement.</p>
<p>Mary Church Terrell, the first president of the National Association of Colored Women, described how charitable organizations had “a keen sense of the responsibility” to secure economic and educational resources, “lifting as we climb” up the ladder of social mobility. This ethic of giving was also present among the early black economic elite such as <a href="https://blackthen.com/thomy-lafon-shrewd-businessman-philanthropist/">Thomy Lafon</a>, <a href="https://www.womenshistory.org/education-resources/biographies/madam-cj-walker">Madame C.J. Walker</a> and <a href="https://www.encyclopedia.com/history/historians-and-chronicles/historians-miscellaneous-biographies/james-forten">James Forten</a>.</p>
<p>Black giving remains <a href="https://www.urban.org/urban-wire/despite-racial-wealth-gap-black-philanthropy-strong">strong</a> to this day. Despite <a href="https://socialequity.duke.edu/sites/socialequity.duke.edu/files/site-images/FINAL%20COMPLETE%20REPORT_.pdf">racial wealth gaps</a>, black families <a href="https://www.urban.org/urban-wire/despite-racial-wealth-gap-black-philanthropy-strong">contribute larger portions of their wealth</a> than any other racial and ethnic group. The W.K. Kellogg Foundation reports that <a href="http://www.d5coalition.org/wp-content/uploads/2013/07/CultureofGiving.pdf">two-thirds of all black households</a> donate to charitable causes. This giving amounts to about $11 billion annually, most of which goes to religious organizations. </p>
<p>But how much of it goes to higher education? African Americans across the socioeconomic spectrum <a href="http://www.thenonprofittimes.com/wp-content/uploads/2015/03/Diversity-in-Giving-Study-FINAL.pdf">report</a> donating 17% to education – both K-12 and post-secondary institutions and scholarship funds. That adds up to about $1.8 billion donated annually. </p>
<h2>Counting black millionaires</h2>
<p>The percentage of <a href="https://www.washingtonpost.com/news/wonk/wp/2017/10/03/white-families-are-twice-as-likely-to-be-millionaires-as-a-generation-ago/?utm_term=.ada3d92ac0e5">black households worth over $1 million</a> has remained at or below 2% since 1992, or about 877,000 based on <a href="https://www.census.gov/quickfacts/fact/table/US/IPE120217">2018 population estimates</a>. </p>
<p>Among black high net worth households – those with a net worth of more than $1 million (not counting the value of their primary home) or with an annual household income of $200,000 – <a href="https://www.privatebank.bankofamerica.com/publish/content/application/pdf/GWMOL/USTp_ARMCGDN7_oct_2017.pdf">49%</a> report giving to higher education. This is significant since across all racial groups, the <a href="https://mlaem.fs.ml.com/content/dam/ML/Articles/pdf/2018-US-Trust-Study-of-High-Net-Worth-Philanthropy-Final-Report-ARLMGDN5-102418.pdf">share of dollars</a> donated by high net worth individuals to higher education was only 4%. </p>
<h2>Black student loan debt</h2>
<p>Student loan debt in the U.S. reached an all-time high in 2019, making it the <a href="https://www.forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#60513566133f">second-highest consumer debt</a> category behind mortgage debt. Over 44 million borrowers owe roughly $1.5 trillion in student loan debt. </p>
<p>Looking at 2016 data, <a href="https://1xfsu31b52d33idlp13twtos-wpengine.netdna-ssl.com/wp-content/uploads/2019/02/Race-and-Ethnicity-in-Higher-Education.pdf">86.4% of blacks</a> completing a <a href="https://nces.ed.gov/programs/digest/d18/tables/dt18_322.20.asp">bachelor’s degree</a> had some form of student loan debt, and the <a href="https://1xfsu31b52d33idlp13twtos-wpengine.netdna-ssl.com/wp-content/uploads/2019/02/Race-and-Ethnicity-in-Higher-Education.pdf">average amount borrowed</a> was $34,010. If we multiply the total number of blacks that graduated with some form of debt – roughly 168,000 – by the average amount borrowed per individual, the average cumulative debt for this one graduating class was roughly $5.7 billion. This includes graduates from all colleges – public as well as private – but not community colleges.</p>
<p>Of course, looking at it at the most basic level, the <a href="https://www.forbes.com/sites/mfonobongnsehe/2019/03/05/the-black-billionaires-2019/#5414cec56795">collective wealth</a> among America’s black billionaires – which totals $13.4 billion with the recent addition of <a href="https://www.forbes.com/sites/zackomalleygreenburg/2019/06/03/jay-z-billionaire-worth/#281687fa3a5f">Jay-Z</a> – can easily subsidize the debt of a single graduating class. </p>
<p>And while a more sophisticated calculation is undoubtedly warranted, a rough estimate shows that the $5.7 billion in black student debt could be covered by America’s black millionaire households if each one chose to devote $6,500 toward eliminating the overall debt.</p>
<p>Of course, the debt load for black students goes far beyond one graduating class. The majority of <a href="https://www.bls.gov/opub/ted/2019/rising-educational-attainment-among-blacks-or-african-americans-in-the-labor-force-1992-to-2018.htm">blacks in the labor force that hold a bachelor’s degree or higher</a> have some form of student loan debt. This means that the figures for the entire black population with outstanding student loan debt across generations are significantly higher than $5.7 billion.</p>
<p>Robert Smith’s gift to the class of 2019 at Morehouse provoked an interesting discussion about whether black philanthropy can alleviate black student loan debt. However, one-off philanthropic efforts that help a small group of beneficiaries can’t compete with the kind of large-scale change needed to alter the course of an entire community.</p><img src="https://counter.theconversation.com/content/117734/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mako Fitts Ward does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
A recent gift by billionaire Robert Smith to pay off the student loans of 2019 graduates of Morehouse points to the potential of America’s black elite to pay off all black students’ college loans.
Mako Fitts Ward, Clinical Assistant Professor, African and African American Studies & Women and Gender Studies, School of Social Transformation, Arizona State University
Licensed as Creative Commons – attribution, no derivatives.