The College Credit Crunch

Student Loans

image by Blair Kelly / www.blairkellystudio.com

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It’s great fodder for an essay question: As college tuition rises, students seek more loans, and lenders become more predatory, does higher education become more or less exclusive?

Of course, you’re not likely to see this head-scratcher on the blackboard at your local university’s next faculty meeting. But the progressive press is producing compelling reports on the alarming state of college economics and what can be done about it.

In November, the Washington Monthly ran a story titled “The Subprime Student Loan Racket” about a scheme in which for--profit colleges steer students into private loans with highly unfavorable terms, including interest rates as high as 20 percent, “on par with most predatory credit cards.” Even if students default—which many do—these schools prosper because of the associated federal loans and financial aid dollars those students bring in. Author Stephen Burd, a senior staff member in the New America Foundation’s education policy program, proposes that Congress get tough and kick crooked, underperforming schools out of federal financial aid programs.

Simply eliminating predatory lending won’t solve the problem, however, as The American Prospect notes in “The Truth About Tuition” (Sept. 2009). “Student-loan debt is chasing ever-rising tuition like a dog chasing its tail,” Michael Dannenberg writes. “If we’re going to stop the cycle and really improve access and affordability, the progressive higher-education agenda has to include slowing tuition growth.” Dannenberg, a colleague of Burd’s at the New America Foundation, suggests two “big ideas” to make college affordable: Make community colleges tuition-free for students who work while attending school—a barometer of academic success—and cap monthly loan payments.

In the November 2009 issue of The American Prospect, author David L. Kirp takes an even broader view, calling for a new “grand bargain” in which the federal government infuses state universities with more money as long as schools commit to greater accountability. Only then, writes Kirp, author of Shakespeare, Einstein, and the Bottom Line, will we do justice to smart, money-challenged young people. The bigger question that’s yet to be asked or answered, he suggests, is whether the public is prepared to invest in higher education’s future.