President, Templeton Laird
What part should borrowing have in helping students attend and succeed in college?
The coming year looks like another banner year for student loans. In spite of low inflation and interest rates and continuing low growth in family incomes, tuition increases are expected to be in the 3 to 5 percent range, well above growth in family incomes. Two years ago student loan borrowing became the largest component of national consumer debt and in the last six years defaults on student loans have doubled. As a result of changes in federal student loan programs, they have become one of the largest profit centers in the Federal budget. There is legitimate concern that student loans have made the entire college finance system less sustainable. While some students graduate with reasonable levels of debt, many others leave college with an unworkable yoke around their necks which has a negative impact on personal and regional economies.
The annual ritual of fixing tuition and aid policies by boards needs to be a more strategic exercise. Trustees can work on policies that balance institutional and student needs or they will find themselves without a market. Part of the exercise must be a careful consideration of the ideas that will reduce the reliance on student debt and encourage student borrowers to repay their loans. At the same time it is reasonable to look to state and federal governments to generate moderating repayment programs and to target subsidies to professional and graduate programs so vital to our economic stability and competitiveness.
How should colleges and universities, led by their boards, make a difference in this complex situation?
- First, they need to rethink their assumptions about the financing model they use for setting tuition and