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Student Loan Debt Hides Bigger Questions

Last week, President Joe Biden announced his long-awaited plan for student loan debt relief. The loan forgiveness is available to individual borrowers who earn less than $125,000 per year and married couples who earn less than $250,000 annually. Eligible borrowers who did not receive a Pell Grant will receive up to $10,000 in student loan forgiveness. Those who received Pell Grants can seek to discharge up to $20,000 of student loan debt.

Without doubt, the move is controversial, but then again, student loans have always sparked heated debates. Regardless of what your position on student loan debt is, remember that 9 million people over the age of 50 owe student loan debt. They account for about 20% of the 45-ish million Americans who borrowed to finance their educations. (Or the educations of their children.)

It’s also important to remember that since 2010, the Department of Education has initiated all federal direct student loans. Previously, private lenders administered the program on behalf of the Department of Education. And prior to the onset of the pandemic, the Direct Student Loan program turned a profit. That’s also controversial; many people believe that the 2010 changes transformed the Department of Education into a predatory lender of sorts. )”Should the government really be making a profit on student loans?”)

Standing right behind the questions regarding student loan debt forgiveness are even bigger questions about the cost of a college education and the lifetime value a college degree generates. Student loan debt has eclipsed consumer debt in a big way. Currently, US consumers owe about $1.5T in educational debt, but just $890M in credit card debt. (Fun fact: Michigan ranks 47th among all states in terms of average consumer credit card debt. Only consumers in Indiana, Arkansas, Mississippi, and Kentucky owe less.)

Student loan debt is a symptom, not the disease

One reason student loan debt has grown so large is that, for the most part, student loan debt cannot be discharged in bankruptcy. That rule for federal student loan debt has been in place since the Nixon Administration. What is newer, however, is that same protection was extended to private student loan lenders in 2010. Previously, private student loans were classified as unsecured credit.

But the enormous cost of a college education goes beyond principal and interest. Prospective borrowers have also learned to ask what else they will need to give up in order to make their student loan payments. For some, it’s home ownership, a new car, getting married, or having children. It may be working for employers or in industries they don’t like. Or living in cities they don’t care for. It might mean working two jobs.

A growing number of prospective student loan debtors have determined that the “juice isn’t worth the squeeze.” So, despite the large number of college-age individuals in Generation Z, fewer of them are enrolling in college classes.

Low value degrees and certificates = empty classrooms

Community colleges have been blindsided by the double-digit enrollment drops since the onset of the pandemic. While the pandemic may have affected enrollment, the number of students enrolling in community colleges has been in decline for a decade. Community college enrollment isn’t strictly based on recessionary fears (or realities).

Prospective students base their enrollment decisions on how much money a degree will cost, how long it will take to earn, how long it will take to repay and how long the economic value of the degree will last. When community college graduates out-earn high school graduates, the salary differential on average is currently $2-$3 per hour. But more than 30% of high school graduates (with only a high school diploma) currently out-earn half of workers with an associate degree.


If community college administrators want to know why their classrooms are half-empty, this is it. Too many administrators have put too little effort into improving the degree programs their colleges offer. There is minimal difference in earnings between a high school diploma and an associate degree. Washtenaw Community College relies heavily on issuing non-degree certificates, which return the least value of all.

It’s not only the students who are getting little return on their investments. The entire community suffers when the community college administration and the elected Board of Trustees do not take their responsibilities to Washtenaw County seriously.

Where is the return on our investment?

Photo Credit: Gloria Garcia, via Flickr