The White House released a report on student loan debt that shook up conventional wisdom by claiming student loan debt isn’t a crisis, nor is it doing long-term harm to the economy.
It’s a surprisingly level-headed report that’s opened discussion that was previously ignored. Even Vox admitted that “the real problem is college completion rates.”
Despite alarmist headlines, the report noted that “college remains an excellent investment overall, and the majority of dollars in the student loan market continue to fund investments with large returns to student borrowers and the economy.”
Though debt is unfortunate for anyone who holds any, and political promises to reduce that debt are unsurprisingly popular among debtors, that political argument obscures reality.
Frankly, graduates with high debt loads are already better off than most Americans. Only a minority of Americans hold a degree, and high debt loads tend to fall among graduates who pursued professional degrees who have a high-income career ahead of them. Why that sector of the population should be a public policy priority is a question that remains unanswered. College graduates are at the top, not the bottom, of the labor market.
The White House, by noting the benefits of a degree for graduates, can shift the discussion to dropouts who accumulated debt without gaining an economic payoff, and the deeper problem in higher education of why so many students drop out in the first place.
As Andrew Kelly of the American Enterprise Institute noted, “this report (and others) makes clear that the real repayment problems seem to be among students who drop out and have small balances (often $5,000 or less).”
Much of the political capital spent over higher education in recent years has been about “free” college, student loan interest rates, expanding student aid, and pay rates for adjunct professors.
The elephant in the room has been that 41 percent of first-time full-time college students can’t finish a four-year degree in six years. For two-year community colleges, 80.5 percent of first-time full-time students at public institutions and 46.4 percent of students at nonprofit institutions don’t finish a two-year degree in three years. That’s worse than at for-profit two-year institutions.
Those figures don’t account for older students attempting a degree for the second time, or part-time students, though those students tend to have worse graduation rates due to economic and familial pressures. Regardless, the completion problem in higher education is stark. Were Democrats, and some Republican governors, to succeed in pushing for free college at the community college or public four-year college level, that could cost billions.
That investment would then be squandered because politicians have targeted student loans as the bogeyman of higher education and ignored a problem that’s glaring to anyone who looks through basic education statistics.
College is an investment as well as a consumption good. Making college free and accessible satisfies student demand for the consumption aspect of it, but failing to improve degree completion squanders the opportunity to make it a positive return on investment. With any luck, the White House report will expand the higher education debate. If its conclusions are ignored, however, policymakers will have squandered an opportunity for substantive reform.