With attention on the higher education scandal in which a number of wealthy and prominent figures are accused of buying their way into their children’s college admission, the vast majority of students in higher education continue to grapple with tuition sticker shock and limited resources on the path to obtain that coveted degree.
The House Committee on Education and Labor recently held a hearing, “The Cost of College: Student Centered Reforms to Bring Higher Education Within Reach,” to discuss what many in the educational field say is the ever-growing epidemic of rising education costs plaguing the nation.
“For college to be affordable, students must be able to both make ends meet while enrolled and successfully repay their loans after leaving school,” testified James Kavaal, president of the Institute for College Access and Success, a research and advocacy non-profit that works to make higher education more affordable. “Unfortunately, for many students, one or both of those goals are not possible today.”
The committee chairman, U.S. Rep. Bobby Scott (D-VA), offered some staggering statistics, saying that, “The cost of attending public colleges has risen dramatically in recent years. From 1990 to 2015, the median household income increased by 12 percent, but the net cost of attending college increased by 81 percent.
“If we do not address the rising costs, not only will we lose our economic competitiveness, but a growing number of students and families will lose out on the benefits of college degree. This is particularly true for low-income students and students of color, who already face significant barriers to earning a college degree.”
There are many options to funding a higher education, such as scholarships, grants and loans. But what does future debt look like for those graduates who did not receive full or partial scholarships, but only qualified for loans, or could not obtain more than minimum wage upon graduation, or while in school have costs not covered by financial aid?
“Schools often offer generous financial aid packages to students, in some cases only a very small percentage of those enrolled actually pay the full sticker price,” said Temple University Professor Dr. Douglas Webber at a congressional subcommittee hearing. “However, since institutional financial aid typically does not include things like housing and food, low-income students have been fully exposed to price increases in these markets.”
Miami, for instance, ranked second-worst in the country for income and poverty levels in 2017 and that gap continues to rise, squeezing many students in the pocketbook when they can ill afford it and putting them at risk for defaults.
Colleen Campbell, director of Postsecondary Education at the Washington think tank Center for American Progress, testified at that same subcommittee hearing that “to create a more borrower-centered, accountable and transparent repayment system, Congress must: end student loan default, open up funding and flexibility to improve loan repayment, compel the Department of Education and its contractors to put borrowers first, authorize the CFPB (federal Consumer Financial Protection Bureau) to provide oversight and support for the student loan program, and give the public the opportunity to weigh in on changes that would impact borrowers,” among other recommendations.
“The consequences of default are steep, including damaged credit, assessment of collection fees of up to 25 percent of the loan balance, and wage, social security, and tax garnishment,” added Campbell. “Just as bad, borrowers are not able to receive any federal financial aid until they resolve the default, all but prohibiting them from re-enrolling in school and bettering their career prospects.”
Depending on loan provider and personal circumstances, a grace period of up to six months after graduation is offered, giving a student some time to secure funds and plan their repayment schedule. Students who plan to re-enroll in school, usually for a post-graduate degree, are given the option to defer loans for an even longer period of time.
However, for those not doing that, and with current job insecurity for recent graduates with only a Bachelor’s degree, that means debt is to come.
“The federal student loan program currently has an outstanding portfolio of $1.4 trillion in student loans distributed among 43 million borrowers,” says Preston Cooper, research analyst in Higher Education Policy for the American Enterprise Institute, a Washington-based public policy group.
According to estimated rates from a report produced by credit rating agency Experian, student loan debt in Florida increased from 35 percent to $89.4 billion between the third quarter of 2015 and the same period in 2018, more than any other state in the nation.
A lack of grants and private and public scholarships is part of the reason for the increase in student debt and loans, even while a college degree continues to be a gateway to economic mobility and opportunity for many, particularly in communities of color.
“College has tremendous potential as a force for upward mobility,” says Kavaal. “At most colleges, students from low-and high-income families earn similar incomes in adulthood. While 34 percent of American adults have a Bachelor’s degree or higher, only 24 percent of black adults and 17 percent of Latino adults do.”
All this occurs with the backdrop of a proposed Trump administration 2020 budget proposal that include several changes to the student loan programs, such as eliminating subsidized loans. Students currently do not accrue interest on loans while in school; the White House proposal would change that. Another proposed change would increase monthly loan payments and would eliminate the loan debt forgiveness program for graduates who enter public sector or non-profit jobs after several years of timely payments. This is the first budget proposal since Donald Trump took office with Democrats in control of the U.S. House, and a few Democratic legislators have said they intend to fight these proposed cuts.