By Tony Berry
As the price tag and value of a college education continues to increase, one astounding figure should cause us to pause. As of 2018, Americans have accumulated a mind-boggling $1.5 trillion in student loan debt. That is more than both car loans and credit card debt in America. For more perspective, consider that the current GDP of Australia is just under $1.4 trillion. While it is true that a college degree is increasingly correlated with upward economic mobility, its cost has skyrocketed. This has led to an increasing number of students needing to borrow money to finance their education, particularly students of color. While the student loan crisis has been burdensome for many Americans, minority students have felt the bulk of its weight.
The Student Loan Crisis
The nation has rebounded from the financial catastrophe of the Great Recession and is currently experiencing the best overall economy in almost half a century. Unemployment is at a historical low and it is one of the best times in American history to be in the labor market. While the economy has been doing very well recently, it has masked underlying issues like the escalating student loan crisis. Additionally, wages for the bottom 90 percent of the population have grown only modestly compared to the top 10 percent whose incomes have ballooned. This is important to understand because if the cost of goods and services – like a college education – rise rapidly while the majority of incomes only increase modestly, students will continue to be burdened by significant debt.
“40 percent of Americans would not be able to afford a $400 emergency”
According to a survey from the Federal Reserve, 40 percent of Americans would not be able to afford a $400 emergency despite the rosy economic numbers. A recent CBS report highlighted that over three million senior citizens are still paying for their student loans – and might do so until they pass away. In fact, recent data from the Consumer Protection Financial Bureau shows that Americans age 60 and over owe over $86 billion in outstanding college loans.
When individuals are trapped by an endless cycle of debt repayment, it not only hurts them, but the overall economy as well. When graduates have to pay back debts that take up a significant portion of their income, they are less likely to pursue entrepreneurship, seek out home ownership, and start a family. Millennials in particular are less likely to pursue home ownership and entrepreneurship compared to their predecessors. The crippling effect that monthly student loan payments can have on the economic activity of recent graduates cannot be understated.
Implications for Minorities
The overall student loan crisis is enough cause for concern, but the crisis has had even harsher consequences for minority students attempting to earn a college degree, and warrants special attention. There is a dramatic wealth gap between black Americans and their white counterparts. A recent article in The Economist notes that “the average wealth of white households was seven times greater than that of black households” in the early 1960s entering the height of the Civil Rights Movement. The article goes on to mention that even after decades of improved race relations and protective measures like the Civil Rights Act of 1964, that ratio remains the same: black household have a mean wealth of $138,200 while white households have a mean wealth of $933,700. Consequently, black Americans are more vulnerable as a group to periods of national financial hardship like the Great Recession. Add in the rising costs of student loans, and a dire situation emerges.
Entering college with these wealth disparities between them, the level of debt accumulation for black students and their white counterparts diverges while in school and continues after they leave. Black students are likely to “borrow more money than other students for the same degrees” and are less likely to finish those degrees, decreasing their likelihood of timely repayment, according to a report from Demos. In a 2016 report from the Brookings Institute, the authors note that student loan debt disparity triples between the two groups after graduation: it begins with a gap of $7,400 and then grows to $25,000 after only a few years following graduation. Many black students that receive significant grant funding or scholarships are still often one family or medical emergency away from being put in precarious situations. This creates an unsustainable burden for minority students that follows them for much of their lives, and contributes to widening the racial wealth gap.
A Faithful Response
How, as people of faith, should we think about the price of higher education, student loans, and debt incurred as a result?
In Scripture, the prophets and other biblical writers often rebuke the practice of lending to others with the intent of ensnaring them in a cycle of servitude that they cannot escape, often referred to as usury. Usury is defined as lending money at exorbitantly high interest rates, but it can also be thought of in broader terms as unfair lending practices.
During the Middle Ages, usury was considered one of the most egregious types of sin that a Christian could commit. In Islam, many scholars still consider lending with any interest attached as a form of usury, which is referred to as riba. Most of the major religions of the world also discourage unjust lending practices or circumstances. While student loans are generally not usurious in nature, there does need to be a resurgence of Christians and other people of faith viewing the student loan crisis with seriousness.
“Debt impacts not just an individual’s own physical, mental, spiritual, and financial wellbeing, but it also impacts their family, the institutions of which they are a part, and their community as a whole”
Christians, alongside our neighbors of various faith traditions, should always work towards public justice in our political communities. Ensuring that college is affordable keeps a pathway open for many of our neighbors - particularly those of color - to gain economic security and flourish in all areas of life. Even in the best circumstances, most students will have to support their educational endeavors with some form of financing. As people of faith, we must ensure that we support methods that are fair, just, and equitable. Though in many cases necessary, student loans do not need to be a lifelong shackle.
A Way Forward
An issue as complex as the student debt crisis requires a multifaceted response from the government as well as civil society institutions, including higher education institutions, nonprofits, and lenders.
Several presidential candidates and other elected officials have proposed solutions to the student debt crisis, but in order for those proposals to properly address the issue, they must have a particular emphasis on students of color and those from low-income backgrounds. The idea of free public college has been gaining traction as one of those solutions, however, its long-term fiscal sustainability is unclear.
AmeriCorps, a network of national service programs, allows students to defer their loans by completing a service program therein receiving an education award that can be used to pay back student loans. National service programs like this solve multiple problems at once. AmeriCorps in particular addresses the misallocation of teachers, lawyers, and doctors in low income areas as well as relieving participants of student loan debt. Awareness of these financing programs should be emphasized among struggling college students and graduates.
Purdue University is a model for what colleges can do to address the student debt crisis. Part of the critique against institutions of higher learning is that they take on none of the risk that their students do when financing their education. To address this, Purdue is experimenting with a type of student financing called Income Share Agreements (ISAs). A 2017 article in The Atlantic explains that “ISAs provide students money to cover college costs, and in exchange, students agree to pay back a percentage of their future income for a set period of time—interest-free and capped.” The money is distributed by Purdue’s endowment, thus the university has an interest in making sure that students are gaining practical skills and finding gainful employment when they graduate. Because this is a relatively new and innovative method of education financing, the necessary legal measures and protections are not yet in place. Senators Marco Rubio (R-FL) and Todd Young (R-IN) have introduced legislation to address this disparity and similar programs are also being explored on the state level.
Another method of addressing the student loan crisis is steering students toward the careers they are best suited for; namely, through a nationally administered aptitude test during high school. Many high schoolers across the country are encouraged to take a test called the ASVAB (Armed Services Vocational Aptitude Battery) even if they do not plan on serving in the military. This test identifies students’ strengths in multiple skill areas and allows them to know the types of jobs in which they may have success. A similar, broader-focused aptitude test in high school would equip students to choose college majors that they are likely to succeed in and complete; ones that will allow them to pay back their student loans.
A person’s God-given dignity is degraded when they are buried in unending debt. Far too many Americans experience the crushing weight of student loan debt, which has a disproportionate impact on people of color. Debt impacts not just an individual’s own physical, mental, spiritual, and financial wellbeing, but it also impacts their family, the institutions of which they are a part, and their community as a whole. As a society, we need to deeply consider the values that should guide our thinking on student loans especially when considering what loans should lead to: flourishing, not debt. The student debt crisis is complex and requires nuanced solutions. It is an issue of public morality which cannot be completely handled by private programs and concerned universities. People of faith, philanthropists, policymakers, higher education institutions, and students themselves all have a role in addressing this crisis. Higher education is now more accessible than ever, but the return on investment is not the same for every student. It is essential that all students are equipped to flourish during their education and after they graduate.
Tony Berry is a recent economics graduate of the University of Alabama. He lives and works in New York City. Twitter @anthonyaberry
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