How Student Loans Create Inequality, and How to Solve the Problem
Congress must lower student loan rates to reinvigorate the economy, invest in America’s future and foster the American dream. For many students, like my brother about to head to UConn, the interest rates on student loans will determine how long he remains under the burden of debt. For other students, it may decide whether college or graduate school is even a viable option.
Broader access to college, which is made possible by low interest loans is an investment in the future. Recently, the U.S. has begun to graduate fewer students, meaning that in 2018, according to a 2010 report from Georgetown University, the U.S. will be 3 million college graduates short of labor market demands. At the very time when the U.S. needs more graduates, our politicians are making it harder for Americans to get degrees and thereby compete on the international labor market.
The high cost of college shuts many poor and middle class students out of college. A study by Martha Bailey and Susan M. Dynarski found thatthe college entry gap between wealthy students and poor students had grown from 39 percentage points to 51 between 1979 and 1997, and that gap held even among students with the same cognitive ability. The result is staggering. A recent Century Foundation study found that, “one is twenty-five times as likely to run into a rich student as a poor student at the nation’s top 146 colleges.”
Of course, some college students won’t be affected. Wealthy students rely on parental connections to gain admission to elite universities, gain internship experience and then graduate to a starting job with health care benefits, likely debt-free. For some lucky graduates, like Liz Cheney, daddy makes a new job at the State Department tailor-made for her.
Sadly, most of us don’t have these opportunities and struggle with an uninviting job market, even with a college degree. But, we still have to begin paying off our debts shortly after graduating. In Britain, where my girlfriend lives, students don’t begin paying off their loans until they find stable employment, and the cost is in proportion to their earnings. In Denmark, education is considered a rightby the people and an investment by the government, and is therefore free. Some students are even offered a stipend by the government to defray costs. In America, the university is considered a commodity, one that can easily purchased by the wealthy, but not the poor.
Middle class and working class students lucky enough to attend college must often work one or two side jobs, interfering with studies. Is it any wonder that fewer and fewer students invest time in studying or pursue degrees in science and engineering that require intense amounts of work and concentration? Plato noted that students cannot study while exhausted, and yet this is what we demand.
Is it then any wonder that the American dream is dying? Economists like Miles Corak have discovered that upward mobility is now lower in America than a host of other European countries, among them, Denmark, Sweden, Canada, France, Germany, Norway and Finland. Is it, as George Carlin claimed, “called the American dream because you have to be asleep to believe it?”
Lowering student loans below the rate paid by the big banks who destroyed the economy and the lives of millions Americans would be a good first step. But at all levels our education system is slanted towards reducing upward mobility. For my brother, for my friends who can’t pay for college, Congress needs to think big. Maybe Congress should consider expanding the Pell Grant program which has failed to keep up with the rising cost of college. Maybe Congress could consider zero-interest loans. It would be a start.
Remember that the biggest boom in American innovation came after WWII, when millions of Veterans attended college under the GI bill. Remember that the American dream, as enshrined by James Truslow Adams, was a place where, “each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”
This may well be the most short-sighted, ineffective and contemptible Congress in the past fifty years, but can they truly be foolish enough to gamble with the future of America’s children? If they do, we may find ourselves asking us what makes America so great.