by Joel Best and Eric Best
Last month brought the collapse of Corinthian Colleges, a large–but by no means the largest—for-profit college. The Department of Education struggled to engineer a soft landing for Corinthian because the taxpayers had a lot of skin in the game. Corinthian’s current students had more than a billion dollars in student loans; if the college failed, those loans would be forgiven, which is to say the taxpayers, not the student borrowers, would pick up the tab. Other for-profits are likely to have similar problems, including several whose students owe—and will need to be forgiven–even larger sums.
For-profits are just the tip of the student-loan iceberg. The Student Loan Mess is the product of an intergenerational, interdisciplinary collaboration: Joel a sociologist who studies social problems (and Eric’s father); Eric worked at an investment bank before becoming an academic interested in applying economics to studying public policy.
Student loans have helped millions of Americans become college graduates, but they also have had troubling consequences: prospective students pay less attention to the costs of college; colleges, in turn, feel free raise the price of tuition; the federal government offers less generous grant programs for low income students; and state legislatures find it easier to reduce their support for public institutions. And of course, without student loans, there would be no giant for-profit colleges that target high-risk students. The result: ever more students are borrowing ever larger sums, and there is little incentive for any party in the system to reduce costs in the future.
These changes reinforce existing patterns of inequality. While many students from upper-middle class families that can cover the costs of higher education are able to graduate debt-free, graduates from less advantaged backgrounds may find themselves struggling to launch careers, start families, and buy homes while also repaying their student loans. And, graduates with student loan debt are often far better off than those who took out student loans but then left college prior to graduation—the fate of the great majority of for-profit students, who find themselves blocked for the higher-paying jobs reserved for college graduates while still having pay off their loans.
Recent debates about student loan policies focus on how to reduce the burden of repayment, but these reforms ignore the underlying problem. Unless we find ways to bring rising higher education costs under control, the student loan mess will only get worse.
Joel Best is Professor of Sociology and Criminal Justice at the University of Delaware and author of Damned Lies and Statistics, Stat-Spotting, and Everyone’s a Winner, all from UC Press. Eric Best is Assistant Professor of Emergency Management at Jacksonville State University. Joel and Eric co-authored The Student Loan Mess: How Good Intentions Created a Trillion-Dollar Problem.