The Borrowed Burden

The rewards of a college degree today are unlike those of generations before. If you want to propel yourself professionally in just about any field, a college degree is your foundation. In some fields, a college degree isn’t even enough; pursuing a graduate or law degree becomes a necessity for professional elevation. I don’t have anything against that if the playing field to pursue said opportunities is fair – but it’s not. There is a gap between the fantastically educated and degree-happy society we aspire towards and the reality of how we can achieve it, and it’s about $1.2 trillion wide.


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Instagram post (@Fee_Teng) on my remarks at U.S. Senate Press Conference with Senators Elizabeth Warren and Al Franken. Click photo to watch the full press conference.

On May 14, 2014, the US Senate held a press conference to introduce a piece of legislation that would level the playing field for student loan borrowers – it would allow refinancing of student loan interest rates much like for mortgages or small businesses. US Senators Elizabeth Warren, Chuck Schumer, Richard Blumenthal, Al Franken, and Jack Reed proposed legislation that would allow student debt holders to refinance their loans to match lower market rates. This law, if passed, would apply to public and private loans, where I’ve heard interest rates as high as 9.2%.

Daring as it may be, this legislation is just the tip of the iceberg. The more I explore the system and talk to student loan holders, the more puzzled I become by the complexities of the questions that arise.

Why do we keep paying for college if it’s so expensive?

Four-year colleges and universities are expensive in the US. To be exact, they have experienced a tuition increase of 1120% since 1978 while managing to hand out more degrees than ever. Based on simple economics, the increase in the price of a good generally reduces the quantity or rate at which it will be consumed. Paying for our college education, however, is more complex than that because both the assigned value and presumed return on investment (ROI) fluctuate over time.

Maybe that’s the problem. How often are we considering a college education as an investment by which we receive some return that justifies the high price tag, and keeps us financially afloat while paying back our loans? 

It’s a question of supply and demand, and one I believe every student needs to be able to reasonably answer before making student loan decisions. Borrowers could review information on occupation-specific salaries, university job placement statistics, regional earnings, and occupational growth potential before making a decision. By integrating relevant data into our decision-making process, thus treating it like a financial investment, we could more closely align the costs we pay and the market demands for our degrees.

Will we ever have free higher education? 

All things considered, this is a distant goal, but one important to consider. No doubt the math is more complex than simply moving the $69 billion spent on student aid each year to the estimated $62.6 billion necessary to offer free education at public universities and colleges. It would be prudent to understand how countries like Germany, Mexico, and Greece are currently offering no-cost higher education. Similarly, we can learn a thing or two from Sweden’s model as their free education comes with a high price. Forbes contributor, Josh Freeman, writes a comprehensive review of the pros and cons of free higher education in the US.

Is college the only way? 

At the end of the day, college provides an education by which students benefit from social mobility, meaningful job placement, and increase in earnings. College undoubtedly also provides a novel and exciting environment for personal development in equally important areas such as emotional intelligence, sociability, networking, and leadership. Innovative education solutions have sprung up that provide the benefits of college without the high price tag.

Small yet powerful initiatives like the Experience Institute , The Leap Year Project, and The Open Master’s introduce new ways of educating by combining the importance of cohort learning and shared networks with immersive real world experience, at little to no cost. The idea is that we don’t have to pay for expensive degrees if we could simply re-create the environments in which students learn and thrive.

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U.S. Senate Press Conference proposing legislation to allow student loan refinancing. The legislation was rejected.

If we did borrow, why are we often so blinded by our student loans? 

There is a certain responsibility for a borrowing student to understand what she is signing the dotted line for, but there is absolutely no doubt that the system’s predatory practices on this often financially vulnerable population are founded on lack of transparency. Many students often have no idea how much they owe, when payments are supposed to begin, whom / how to pay, or what options they have for affordable payments. It could neither be the University’s nor the bank’s priority to ensure the borrowing student understands all the fine print of her loans because her resultant smarter decisions could conflict with their interests.

Therein lies the problem – the  current student loan process is administered entirely by stakeholders that gain from the borrowers’ ignorance and lack of insight.

Fast forward four years, our borrowing student nears graduation and only now begins to communicate with her loan servicer to discuss repayment. She is not offered repayment plan options unless she knows to ask about it, and her loan servicer has a track record of poor customer service, causing added anxiety to the already complex process.

If you received bad service at a restaurant, you might leave a smaller tip. If you don’t like your doctor, you go elsewhere for a second opinion. With student loan servicers, there are no such consumer-driven consequences because loan servicers are assigned, not chosen. Student loans also cannot be refinanced nor will they be discharged in the case of bankruptcy, so while you’re stuck with your servicer, they have little incentive to improve. Borrower choice could drive a competitive market for better customer service and experience (think Yelp reviews for loan servicers).

What can be done to improve the borrower experience?

The solution for greater transparency is easy to imagine – require every borrowing student to undergo an in-depth review with a counselor to understand the loan terms, review salary trends in select fields and regions, and calculate the impact and affordability of loan payments after graduation. Regular reviews of loan progress should be expected if the end goal is to properly inform our borrowers from start to finish. The point is to help students envision the very real, daily financial decisions of balancing – dollar for dollar – expenses like rent, groceries, bills, transportation, and understanding how their loan payments would fit into them.

The short-term temptations of  student loan checks must be met with realistic juxtaposition of long-term loan commitment for a complete lifecycle assessment.

Have a student loan story to share?

Learn more about how you can get involved. Everyone’s story is so unique and offers a new perspective to learn from. Let’s speak up and make some moves.

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2 thoughts on “The Borrowed Burden

  1. Hey Fiona –

    I don’t remember how much I told you about my loan situation but, at my current payment plan, I’ll have paid 90K by the time I pay off my loans. My employment situation with an architecture career path left me unemployed and in deferment for several years and my loans just accruing interest. I’ve learned a hard lesson after now buying a home and now going into repayment that I’ll not be able to effectively save for retirement or go on vacation for ten more years. I really wish that I’d had a hand to guide and help me think about what these loans would mean. Thanks for doing what you’re doing and let me know if I can help.

    Nick

    1. Hey Nick,

      Thanks for writing and sharing your story. I think you may have told me about this before. I definitely understand your perspective of wishing you had a guiding hand. Could I add your name and contact info on my listserv as I prepare for the website to be launched? I’d love for you to share your story on the site if you’re open to it.

      Fiona

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