What does this mean for the future?
First, people are holding this debt now. There isn’t any real conversation about debt forgiveness. So that debt bolus is just stuck in our society until it gets paid off, or until the owners die (and maybe the burden isn’t passed onto survivors; maybe not). In other words, the giant American total student loan debt is already baked into the economic pie, no matter what we do for the next student cadres. All of its results–the constraints on human lives, the macroeconomic pressure–are going to keep hitting us for quite some time, even if new tuition bills aren’t rising as quickly as they used to.
Second, this loan specter will continue to pressure college curricula. Listen carefully to the Bloomberg discussion:
“There’s a systemic problem in the student loan market that doesn’t exist in the other asset classes,” [John Hupalo, founder and chief executive officer of Invite Education, an education financial planner] said. “Students need to get a job that allows them to pay off their debt. The delinquency rate will rise as long as students aren’t graduating with degrees that pay back that cost.”
“as students aren’t graduating with degrees that pay back that cost.” Did you catch that? It’s not college per se, and not the type or reputation of (non-profit) university, but the course of study.
For students, we already know that debt dread is shaping the classes and majors they take. For institutions, what does this intelligence tell a curriculum committee considering a new major in, say, a humanities field? How does it inform development officers and presidents asking donors to fund a chair in, say, petroleum engineering? If a campus undertakes an academic program prioritization exercise, what role will perceptions of future earning versus debt play in determining which programs to fold, and which to expand?
Third, the Bloomberg analysis foretells continued challenges for the for-profit education sector.
Delinquencies escalated in the wake of the Great Recession as for-profit colleges pitched themselves as an end run around low-paying jobs, explained Judith Scott-Clayton, a Columbia University associate professor of economics and education. But many of those degrees ultimately proved useless, leaving graduates with debt they couldn’t pay back. [hyperlink in original]
I’m not sure how that sense will play against the Trump administration’s pro-business thinking.
[Editor’s Note: This blog was originally posted on Bryan Alexander’s blog on October 20, 2018.]
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