Student loans aren't the reason there's a student debt crisis in this country.
The real problem is that there's not adequate education, information or support systems in place to help students (and their families) make smarter college choices while they are still in high school.
Nationwide, college student loan debt was $517 billion in 2006. There are more than 44 million borrowers who now collectively owe $1.5 trillion in student loans, according to the latest statistics for 2019.
The government spends a great deal of money on regulation and education on teen alcohol abuse, tobacco, and drug use and prevention. We, as a society, have decided that teens shouldn't be able to legally use these substances, and we provide education and extremely clear warnings about the danger of their use.
Yet we are all somehow enablers of teen student loan use.
Sadly, 90% of private student loans now have an adult co-signer. I don't blame parents, because as a parent of two myself, I know we just want what is best for our children. A college education is part of the American dream and parents want their children to have access to higher education, which, in most cases, leads to considerably higher lifetime earnings.
So, whose responsibility is it, then, to provide the financial literacy and other support to help educate students and their families about student loans and which colleges and majors are worth it?
The government, of course. Since a wide variety of failed policies and programs has made the federal government the main cause of this crisis, it's up to the government to fix the problem.
It's up to state and local governments to find ways to fund education programs for students and their families.
To that point, new research from Harvard University suggests that the use of certain technology can significantly alter college choices. The Harvard study found that Naviance, a college counseling software used by more than 40% of high schoolers, shifted students' choices about which colleges to apply to and attend based on information on classmates submitted about their admissions experiences.
Districts using Naviance would likely spend less time and money educating students about where they can get in, and more on what they can get out of college. The government isn't likely to adopt this approach tomorrow so, in the meantime, financial institutions and employers committed to financial literacy and wellness could invest more in helping families make smarter college choices.
As a taxpayer and former university vice president, I'm glad we make college more accessible in this country through loans. Incurring a reasonable amount of debt to get higher education and, potentially, $1 million in additional lifetime career earnings over workers with just a high school diploma seems like a worthy investment to me. I think it is also an awesome opportunity to teach young people about personal financial responsibility.
According to a study by the U.S. Department of Health and Human Services, programming to achieve substance abuse reduction for 1.5 million youth would cost an estimated $220 per pupil nationwide.
That investment in addiction education would preserve a "quality of life over a lifetime" valued at $65 billion collectively, according to this study. By way of comparison, outstanding student loans now total $1.5 trillion. Education for student loans and substance abuse, of course, aren't mutually exclusive, but I believe we should spend more money, time and attention on addressing the student loan crisis by educating students before they take on the debt.
Sen. Elizabeth Warren (D.-Mass.) has a misguided proposal to forgive student debt that creates a dangerous moral hazard. Warren has proposed abdicating responsibility and teaching people that when they sign a promissory note they just have to wait until a political candidate wants to win so bad that they'll use taxpayer dollars to buy votes.
Instead, the plan should be to allocate billions of dollars to educate young people about risk and reward, and provide them with education and tools to make informed decisions about their education and future employment.
We could have, and should have, done more to educate these borrowers who are now burdened by student debt. Fortunately, there are a lot of efforts underway to help people with student loans, including a growing number of employers that are committing themselves to financial wellness with college coaching and student debt repayment benefits. The IRS has issued guidance that these benefits can be tax-advantaged like a 401(k) plan match.
I'm for remediative, private-sector support such as this but would also like to see more investment in preventative measures to help students make smarter college financial choices around choosing the right college and major.
Government officials need to find the resources to help families make smarter financial decisions about college during children's high school years. That way, young people will have the opportunity for a great education with less debt and better financial outcomes. Like many other issues facing our society — substance abuse and obesity — education and prevention is the most effective path to ending the crisis for future generations.
— By Nick Ducoff, CEO and co-founder of Edmit. Ducoff was previously vice president at Northeastern University.