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 financial aid while actively exploring alternative models. Based on the rich diversity of American Higher Education, one size will not fit all institutions.
- Second, colleges and universities need to offer students and their families access to comprehensive and timely advice about how to manage their student loan debt. This should be an integral part of the admissions process and should be available from the initiation of loans through repayment. The software for this analysis and advice is generally available and affordable.
- Third, as part of the reassessment of their financing models, colleges and universities need a comprehensive and inclusive approach to controlling long term costs while increasing the quality of services.
Although hope for political assistance is hard to locate in the current dysfunctional political environment, only a comprehensive approach to these vexing challenges with bold Board leadership will reduce the pressures for student borrowing and set us on a path to better serve the changing student cohorts of the future. This will require an “all hands” approach. Trustees in the past have faced similar challenges and have overcome them, we should take confidence from the history and strive to match their performance.
David Laird in post-retirement is focusing on major higher education policy and financing issues. In his forty plus years of service he has cofounded a number of programs to assist students and their families as well as the institutions they attend. He has served as financial advisor for more than one billion in financing student loans and campus facilities, while helping to sustain one of the nation’s need based grant programs. He currently serves as Trustee Emeritus of St Lawrence University and a Director of the National Student Clearinghouse Research Council. The associates of Templeton Laird have nearly two hundred years of service in higher education.