Forgiveness Won’t Fix Student Loan Problem

Forgiveness Won’t Fix Student Loan Problem

"Not one penny of taxpayer dollars should go toward funding university programs that don’t yield positive returns on investment for Montana students."

Three and a half years ago I made the last payment on my student loans. I paid back nearly $30,000 after graduating Montana State University in 2015. I remember being astounded at how fast the interest accumulated. I knew I needed to pay them off as soon as possible. I nearly zeroed out my bank account to fully pay off the debt, but I’m glad I did it before turning 30 years old.

Other young people have not been so fortunate. One third of Americans under 30 have student loan debt, with $40,000 remaining to be paid on average. Young people are delaying milestones like marriage, having children or buying a home due to this crushing debt burden.

President Biden recently announced his plan to forgive up to $10,000 in student loan debt, and up to $20,000 for Pell grant recipients. While many Americans with student debt are applauding this move, Biden’s plan does nothing to address the root cause of rising student loan debt. In fact, forgiving student loans will probably make America’s student debt problem worse.

The average annual cost of tuition and fees at a 4-year public university now stands at $9,349, having increased an astounding 130% since 1990 after adjusting for inflation. The typical student graduates from the University of Montana with $21,500 in student loan debt.

Why has higher education become so expensive that it requires so much debt? The short answer is misguided government policy. As the availability of government-guaranteed financial aid has expanded, universities have faced no incentive to lower prices. In fact, researchers have found increases in subsidized student loans resulted in tuition hikes of up to 60 cents for every new dollar subsidized.

Biden’s student loan forgiveness plan doubles down on this policy failure. With the government bailing out students in debt, universities will face even less pressure to contain prices. Experts say tuition hikes are certainly in the future.

Making matters worse, four-year college degrees are diminishing in value in the modern marketplace. Years ago, student loans for a college degree might be a wise financial tradeoff if you could expect your education to land you a higher paying job than you would receive otherwise. Today, however, graduates of many college programs won’t earn enough to repay their debt.

Montana is dead last in gainful employment rankings for public colleges with only 51% of students graduating from programs with excellent debt-to-earnings outcomes. Other programs fail gainful employment tests, meaning that typical graduates who borrowed the median amount will have great difficulty repaying their student loans, and some will simply not be able to repay them at all.

At least nine programs at the University of Montana, including the law school program, fail gainful employment tests. Student borrowers in the fine and studio arts program, for example, graduate with a median $25,000 in debt while median annual earnings for these grads is a meager $24,862. Six years after graduating, only 54% of student borrowers at UM earn more than a high school graduate.

Neither students nor the state of Montana are served by university programs that fail to help students reach successful careers which enable graduates to repay their loans. Yet Montana universities receive millions from the state and federal government, paid for by taxpayers of course.

Holding higher education accountable for their performance would be a more direct approach to address the root causes of the student loan debt crisis. Not one penny of taxpayer dollars should go toward funding university programs that don’t yield positive returns on investment for Montana students.

This column was originally published in Lee Newspapers.

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