WASHINGTON — In order to solve the growing problem of student loan debt, stakeholders in higher education must ask deeper questions about the purpose of financial aid and whether it really creates socioeconomic equity over the long haul.
That was one of the main arguments that University of Kansas professor William Elliott III put forth recently during a panel discussion that featured The Real College Debt Crisis: How Student Borrowing Threatens Financial Well-Being and Erodes the American Dream, a new book of which he is co-author.
Instead of just looking at student-loan default rates and similar measures, Elliott said stakeholders must “begin to ask different questions, not just whether students who go to college and get debt are better off, but can they achieve similar long-term outcomes as someone who didn’t take out debt.”
When the question focuses on achieving similar outcomes for similar effort, “we start seeing slightly different results,” Elliott said, citing recent reports that show student debt is hindering homeownership.
“It’s about the ability to accumulate assets over the long term,” Elliott said. If student debt is affecting that in a meaningful way, it’s a problem, he said.
Elliott made his remarks at the New America Foundation, a thinktank where he also serves as a senior research fellow for the organization’s Asset Building Program.
As he has done in other talks at New America, Elliott promoted the virtues of Children’s Savings Accounts — or CSAs — as a potentially better way to help children from families of lesser means finance their college education.
Elliott said that a primary benefit of the CSAs — which are discussed in his new book — is how they can foment a shift in the cultural mindset and expectations of families and students for whom college would be inaccessible without student loans.
“From our perspective, a CSA is a better integration of the economic market and education and how it works together,” Elliott said. “Part of it is by providing that money early on and allowing them to see that money in their account.
“It feels better to put a dollar into an account with $10 than to put a dollar in one with nothing in it,” he continued. “It’s building this identity around going to college.”
Mark Huelsman, a senior policy analyst at Demos, a public policy organization, said that the current financial aid system is “a real accident of history” because it was not conceived as something for students to accumulate so much debt. Current student debt averages hover around $30,000, he said.
“The important part of this book is looking at who is most impacted by our system of debt financing,” Huelsman said of Elliott’s book. He said the majority of those impacted are “Black and brown” students, and 4 out of 10 borrowers who are low income drop out of college with debt.
“That’s a huge number,” Huelsman said. “We brand them with the scarlet ‘D’ — default or delinquent — and go after them and try to get the money back.
“That’s not the point of education or higher education,” Huelsman said. “We should grapple with the consequences of that.”
Huelsman said that one of the benefits of CSAs is that they lead families to start thinking about college earlier instead of when students reach the final years of high school.
Melinda Lewis, co-author of The Real College Debt Crisis and also an associate professor of social welfare with Elliott at the University of Kansas, said getting families to think about college earlier has potential academic benefits as well.
“We should not wait until senior year, when prep that should have happened has or hasn’t happened,” Lewis said.
Justin King, policy director of the Asset Building Program at New America, said the paradigm shift espoused by The Real Debt Crisis is “so divorced from where we are now.”
“The dominant paradigm is ‘don’t you dare save money because that will reduce how much aid you get down the road,’” King said. “That’s a savvy decision for a lot of people, and the fact that that’s the conventional wisdom is an indicator of how far we are from where we ought to be.”
Kevin Carey, director of the education policy program at New America, cited state disinvestment, declining family incomes and increased college spending as the three main drivers of student debt. He said current student debt loads have many student loan borrowers wondering, “Why do I have to start my life behind the starting line when the generation before me didn’t?”
“There’s no reason to think people now are getting a better education than before,” Carey said. “They’re just paying more.”