The Moral Dimensions of the Student Loan Crisis
By Dr. James Thrasher
The average price of a college education is $140,000. Very few people have the resources to cover that cost, so they must turn to student loans to make attending college possible. Often with caution thrown to the wind, 70% of college students take out student loans. In fact, roughly 45,000,000 Americans owe a staggering $1.6 trillion, which has resulted in a national and personal financial crisis of significant proportions. Many students incur huge debt, hoping that it all will turn out well. The results are devastating and life-changing, and it dishes out a financial millstone that they could not have imagined.
There are numerous players and moral issues involved in the student loan predicament. First and foremost, it begins with colleges. People presume that institutions of higher learning always have prospective families’ best interest in mind. But shockingly, this is not the case. Colleges have overspent, tapped endowment funds, paid exorbitant salaries, carried over deferred maintenance, and are paying off their own loans. So prospective students have a target on their backs to be the “bank” for overextended institutions.
Questionable marketing measures and admissions policies have been adopted and scholarships created to falsely lure students to campuses. Colleges must bring in an adequate freshmen class each fall semester to keep the doors open. Because of this immense pressure to enroll students, many colleges willingly and knowingly put their students at risk. The immediate and pressing financial crisis of their own upstages the students’ futures. Without any debt education or cautions, students are told to find the money. Financial Aid staffs know their role in getting students in classroom seats by streamlining the process and reassuring new borrowers. As a matter of fact, many college administrators have overtly devised premeditated schemes to trick students financially.
Many private colleges utilize the practice of discounting. Simply put, colleges artificially and significantly inflate their yearly costs. Because prices are artificially inflated, colleges offer artificially large scholarships simply by lowering their fabricated price and calling the difference a “scholarship.” The net effect of this practice is that many students take out loans and unwittingly fund their classmates’ scholarships. Even though they too have been offered a modest “scholarship,” many students pay significantly more than their colleges’ break-even price. That surplus is given to other students who receive excessively large scholarships. Colleges fund the bulk of scholarship aid by transferring money from one family to another. Students unknowingly are being taken in, but many of these colleges know exactly what they are doing, setting many students up for disaster. This house of cards comes crashing down, delivering life-changing debt.
The federal government, and other lenders, have made committing to huge life-altering loans as easy as a click. Easy does not always mean ethical. Taking advantage of these 18-year-olds with no financial experience is simple, and lenders have done just that. These young borrowers are, almost without exception, financially illiterate. Little or no guidance is provided by lenders to educate students before signing on the dotted line. These young adults are ripe for making uninformed life-impacting decisions. Year after year, even into graduate school for some, debt is heaped upon debt. Some have called this predatory lending.
Students undiscerningly trust that a college education will be the answer to all of their current and future financial obligations and desires. This outlook is misguided at best. Students are not being taught basic financial principles and common sense in many high schools and homes. Most parents have been less than role models by spending beyond their monthly incomes and have racked up significant debt on credit cards, mortgages, and auto loans. In addition, a majority of students take longer than four years to graduate and many never finish a degree. Only 41% finish a bachelor’s degree in four years. This choice piles on more unnecessary debt. Ultimately, individual responsibility gives a bye to no one, so with few exceptions defaulting on their loans is wrong. The bottom line compels these emerging adults to grasp that decisions have implications and sometimes severe consequences.
Some have called the career services office the most important office on a college campus. Gallup (One in Six US Grads Say Career Services Was Very Helpful) has reported that only 16% of college graduates believe that their career services office was “very helpful.” After directing a nationally ranked career services department for over 20 years, having spoken at conferences and seminars, and having trained new directors from around the country, this is quite troubling to me. But I am not surprised. Many colleges have large admissions staffs and very small career services staffs, evidencing a lack of commitment to the students’ futures. This lack of staffing is compounded by the reality that these offices are inept and extremely ineffective.
Students are left to figure out things on their own, often with tragic results. Investing in every student, helping them to understand their unique design and their fit in the marketplace, is crucial. Students leave their campuses with little or no direction, no job, inadequate self-knowledge, and few networking and job search skills. This produces floundering graduates who are initially or continually unemployed. If hired, graduates often take jobs that do not require a degree, producing insufficient funds to pay their loans. With little major or career advice, some students drop out of college having nothing to show for it but oppressive debt.
Colleges need to be financially truthful with students, safeguarding them from start to finish. The responsibility of colleges is not only to accountably recruit students but to successfully launch them as well. The federal government and lenders need to make sure they are warning students of the financial risks associated with debt.
Student borrowers should be wary and not take things at face value. They must be savvy, well-informed, and vigilant, taking charge of their financial futures.
Dr. Jim Thrasher is the Senior Advisor to the Vice President for Student Recruitment and the coordinator of the Institute for Faith & Freedom's working group on calling.