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February 8, 2023

The Chains Of Student Loan Debt

Over the course of the 20th century, the Federal government has taken on the role of being the primary patron of our higher education institutions. This position came about because of Title IV funding and the easy way students can qualify for Pell Grants. This financial support from the Federal government has led many students to acquire large amounts of student loan debt. And though student loan debt is very easy to acquire, it is extremely difficult to get rid of.

Many people with larger student loan debts have given up on the idea that they could ever pay their debt off because it is almost impossible to cancel student loan debt through bankruptcy. Instead, many people minimize their monthly payments by opting to have their payments based on their annual income. Oftentimes this payment is small enough that it doesn’t even cover the interest of the loan, so the loan total is growing each month rather than shrinking. This is how people can find themselves in the category of owing over a million dollars in student loans.

Many people with these debts hope the Federal government will create a loan forgiveness program. The Biden administration has been working to start a program like this but has been delayed by lawsuits that the Supreme Court is reviewing. At this point, there is no word about how that will go, but this method is not a silver bullet because it just moves the debt from the students who applied for the loan to those who did not apply for it: hard-working families and those who didn’t go to college. 

At this point, approximately 43 million Americans are carrying student loan debt, with that total debt exceeding 1.5 trillion dollars. The debt owed on America’s student loans is now seen by many to be the next big financial crisis, a debt bubble that, because it has no collateral except the federal government, will hit America worse than the housing crisis of 2008. Student loan debt is actually the federal government’s largest asset by a long shot. And yet, of all the various forms of debt Americans take out, student loan debt has the highest default rate, with over 10% of the 2015 graduates defaulting within the first three years after graduation.

We castigate the next generation for their apparent “failure to launch” mentality, but we fail to notice the impact that carrying this kind of debt has on moving on from college.

Aside from the possibility of a national student loan crisis, we can see the negative impact of this debt on the individual students that carry it. We castigate the next generation for their apparent “failure to launch” mentality, but we fail to notice the impact that carrying this kind of debt has on moving on from college. You cannot underestimate the power that student loans have in delaying decisions to get married, have children, and buy a house. Many graduates simply must put off these life decisions until they have knocked out their student loan debt.

In a bit of poetic justice, colleges are currently alarmed because data shows that across the US, we will soon be facing what is known as the “birth dearth." Since 2007, the nation’s birth rate has dropped more than 12%. This means that looking forward to 2026, there is a corresponding projected drop in college enrollment because we will have fewer high school graduates (Nathan Grawe, Demographics and the Demand for Higher Education (Baltimore: Johns Hopkins University Press, 2018), p. 6.) Therefore, in a few short years, we will face a shortage of incoming college freshmen. And while colleges are busy figuring out how to respond to this coming drought of prospective students, I don’t think they realize the possibility that they have contributed to the creation of this drought. But since the burden of student loan debt has significantly discouraged college graduates from taking the plunge to get married or to start having kids, it is reasonable to suspect that colleges themselves carry some of the blame for the coming birth dearth. 

Consider the impact of those two June dates – June 22, 1944, and June 23, 1972. First, FDR brought us the GI Bill, which opened the door for the federal funding of college education. And with the second, Nixon set up the one-two punch of the Pell Grant and the federally subsidized student loan. You can’t deny that these programs have brought a lot of good in that they made a college education possible for millions of Americans who lacked the means to get there on their own. I’m one of them. Straight out of high school, I joined the Marine Corps Reserves to take advantage of the GI Bill. I then used both Pell Grants and student loans to complete my degree. So I can appreciate how, for many individuals, these programs made college a possibility.

Graduates are now walking across the graduation stage, pulling a $30k ball and chain of debt.

But this good thing has come at a high cost as well. Graduates are now walking across the graduation stage, pulling a $30k ball and chain of debt. And on top of that, our colleges have been radically transformed, for the worse and not for the better. This torrent of federal money has come with a significant number of strings attached and has reshaped the face of higher education in ways that we, distracted by the “free” cash, have failed to understand. 

At New Saint Andrews College, we understand the cost of these federal loans. We recognize that some students have to take out loans to go to college, but we also recognize we are responsible for setting an example for our students, so we refuse to accept Title IV money. This costs us as an institution because we don’t get this easy money. Instead, our vision is to offer a truly free education, free of government entanglement. This helps our students be free of debt. We are also committed to making our tuition competitive and financially feasible for students. We believe this is the proper way to solve the student debt crisis.