The sad truth about the student debt crisis: Policy makers still don't get it

I’ve sat with many policy makers in my career. I’ve seen them strategize solutions to make education more accessible, increase levels of college completion, and reduce the burden of student loan debt. But they’re missing something when it comes to student debt: a laser focus on those who are actually having the most difficulty in repaying student loans. 

When policymakers and everyday Americans alike think of the ‘student debt crisis’, they often think of a private school graduate with $100K of debt working at a coffee shop or an out-of-work law grad struggling to pay down their loans.

In reality, those most struggling to repay student loan debt have relatively low loan balances—a signal that they may have never completed college. According to the US Department of Education, the average balance of a loan in default is actually lower than the average balance of a loan in good standing. This is likely because students who never finished have less debt than those who completed their full programs. Data from the College Board suggests that students who did not graduate are almost three times as likely to default on their loans as students who did. The debt crisis crippling students and graduates is one borne out of college completion. According to the National Student Clearinghouse, only 52.9% of students finished a bachelor’s degree within 6 years after starting. The Clearinghouse also found that low completion rates over the last 20 years have left more than 31 million adults with some college but no degree. That leaves many students with debt, but no commensurate earnings boost with which to pay back their loans. This is the real tragedy. 

To be fair, there are also greater numbers of students with very high debt loads than in the past. In the early 90s, most students did not graduate with debt from college, and those who did only had about $10,000 in college debt. However, today two out of every three college graduates have debt, and the average is around $30,000. So, college debt has become more ubiquitous in society, and lawmakers are responding to that by creating proposals designed to help people deal with large debt levels. However, responses that deal with large debt loads will not target those who are struggling with wages so low that they cannot repay even a relatively small debt balance.

Income dependent repayment options, such as those promoted by the Obama administration, can be an important tool to help these borrowers better manage their payments. Democratic presidential candidate Hillary Clinton has proposed streamlining these options, and making it much easier for student loan borrowers to enroll, which would be a tremendous step forward for those less savvy in navigating the administrative process of signing up.

Supporting students through to completion so that they receive a quality education and actually obtain a credential can also be a powerful strategy for tackling the crisis of student loan debt. Policies that promote the completion of high quality college degrees and credentials are too often overlooked as a way to help those most painfully affected by the burden of student loan debt.

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