The wrong spin on college loans
CHICAGO — Offering spin to the painfully real problem of life-altering student debt is not helpful to the young people whose favor President Obama hopes to gain.
But this didn’t stop Obama from pretending that his administration is offering substantive relief to the indebted. In the process, he has set up more students, both existing and potential, to believe that their school financing choices don’t have long-term consequences for themselves and their families.
In the name of expanding college access, the president signed an executive order Monday extending a 2-year-old plan that allows people repaying federal direct student loans to cap their payments at 10 percent of their income. The administration estimates that its action will allow nearly 5 million additional borrowers to lessen their debt burden once the extension goes into effect in December 2015.
Realistically, according to financial aid experts such as Mark Kantrowitz, the publisher of Edvisors Network, an educational website for would-be borrowers, Obama’s effort will barely move the needle.
“We’re probably not going to have many new borrowers saying: ‘I’m going to qualify for this, I should look into it,’” Kantrowitz told CNNMoney, calling the program a small-scale “safety net” to keep a select group of borrowers from defaulting.
In Obama’s extensive remarks announcing this “new” effort to make college affordable, the president noted an important underlying issue to the student loan debt crisis, perhaps without realizing it.
Referring to how some students are amazed at the difficulty they have in paying off their loans, Obama sympathized that these overextended borrowers were “just doing what they’ve been told they’re supposed to do.”
And that’s the problem.
For years, students have been coached to go to college, go to college, go to college. College, to hear it told, is the only way to attain a life not mired in poverty, and everyone must attend, at any cost, to follow their dreams, their bliss, their heart.
I’m not saying there isn’t a certain amount — albeit a very small amount — of wisdom in this message. But the cheerleading, the expectation-building and the raising of false hopes have to stop.
You rarely hear anyone but financial experts practically begging students and families to understand the difference in cost between top-tier schools and more affordable local choices. Only since the worst of the student debt crisis has the difference between government and private student loans, which offer significantly fewer consumer protections, been widely acknowledged.
And despite at least two decades’ worth of mandatory counseling concerning college loans — at the point when students sign promissory notes explicitly spelling out that their loans are due within months of graduation and are not dischargeable in bankruptcy — there’s still shock and outrage that the debt is necessary and so hard to pay off.
Though college is exceptionally more expensive today than in the past, it has always been a costly investment. If an education could be attained only by financing it like a home mortgage, it was a risk that paid off only if the student graduated from a university with a credential that was sought after in the employment marketplace.
This distasteful reality, however, hardly squares with the “do what you love and the money will follow” sloganeering that pervades almost every contemporary conversation about paying for college.
But instead of pressing Americans to get smarter about spending for education, expanding programs especially to help first-generation college applicants navigate the financial aid labyrinth — or making headlines with the part of his plan that will investigate the efficacy of existing loan counseling programs — the message the president seems to want to send is: Don’t worry, be happy.
Whether you pick a major with good job prospects, graduate or drop out, whether you planned as rigorously as would be expected for a five-figure financial investment or blindly rolled your dice, the government — in this case, Obama’s initiative — will take pity upon your inability to live the life you were promised by those who swore that going to college was your ticket to prosperity.
This sort of pandering won’t even scratch the surface of our country’s trillion-dollar-plus student debt time bomb. Worse, it does nothing to help the prospective college students who are still in a position to make better higher-ed financing choices than did their predecessors.
— Esther Cepeda’s email address is email@example.com. Follow her on Twitter, @estherjcepeda.
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