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The Debt Threat on Our College Campuses

The Debt Threat on Our College Campuses

College financing options have not kept pace with college complexity and cost increases — except in the case of student loans. The risk of a daunting debt overhang upon graduation is an educational deterrent for almost all college students, but becomes especially so in the case of students from low-income families. Since low-income students make up much of the core constituency at historically Black institutions, their educational options, or lack thereof, have direct implications for entire regions.

For example, upon graduation, many of these students become members of the managerial and leadership pipeline for local, regional and national companies. Among other things, their employment choices may be influenced by residual pressures from the way they managed their education costs.

More financially well-endowed institutions are approaching the problem by easing the cost burden on low-income students. For example, UNC-Chapel Hill was among the earliest institutions to promise that their low-income students would graduate without any college debt. Stanford University has determined that “… parents of financial aid applicants whose total annual income is less than $45,000 will not be expected to pay for their children’s educational costs.”

It is telling that the model both of these institutions subscribe to implies that low-income students and their parents cannot handle the college debt problem on their own. With proportionately few of these students, the elite, well-endowed institutions can easily accommodate the no-debt model.  However, alternatives are needed at “endowment challenged” institutions, which generally have large proportions or numbers of low-income students.

At present, low-income students and their parents cope as best they can at lesser endowed colleges and universities. Too often, these students are qualified primarily to work at minimum wage jobs, which they do before and during college. But the federal minimum wage has been long stagnant. In order to make ends meet, these students often work hours that we know are incompatible with academic success.

The elite institutions have sounded the alarm. They have acted on the conviction that appropriate college financing solutions are beyond the capacity of their low-income students. The struggle to overcome this obstacle may play a role in other unfortunate trends for low-income students in higher education.

For example, it is possible that this debt threat and the inappropriate work strategies it often creates adversely affects the retention and graduation rates of low-income students. This could lead to a homogenous employee pool for the nation’s corporations, which is a major problem in the face of increasing global competition.

In a “flat” world, global competition is now dominated by high-population, high-attaining and high-achieving nations such as India and China, who seek to retain their comparative advantage. Recently, The New York Times reported that China was producing 442,000 undergraduate engineers per year, and 48,000 graduates with master’s degrees. Businesses are paying attention. Intel CEO Craig R. Barrett and IBM’s Nicholas M. Donofrio have both expressed concern that America produces only about one-fifth as many engineers as Asia. If the debt threat distorts students’ educational choices and impacts retention and graduation rates, then this country’s long-term competitive prognosis may be unnecessarily dismal.

So the question is what do we do. Anecdotally, we know that low-income students are using minimum wage employment partially to finance college education. So in the short run, one option is to support an increase in the federal minimum wage. Longer term, however, there might be avenues to build in educational incentives by devising an “educational earned income credit” for low-income college-bound students. Such incentives may even boost high school performance and the percentage of such high school students going on to college.

This issue and the plausible solutions must encompass all of the nation’s colleges and universities. Global competition requires a public policy response to this situation. One model was adopted by the elite institutions, but there must be others. And the possible solutions are unlikely to be cheap! However, as the elite colleges have shown, there is one outcome that is not tenable. And that outcome is the status quo.

— Dr. Cole is the interim chair of the Department of Economics and Transportation/Logistics at North Carolina A&T State University.

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