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Student debt handbook details history of loans, new ways to fund education

Monday, February 06, 2017

LAWRENCE —Many students who have undertaken higher education in the last few decades and many more who will do so in coming years deal with student loans. For some students, borrowing for college may seem like the only option. Parents and other observers may assume that this debt-dependent financial aid system is in place because it is proven to be the most effective. Against a backdrop of rising indebtedness and the financial strain that often accompanies student borrowing, it can be hard for Americans to imagine alternatives. However, as two University of Kansas professors point out in a new book, the nation has policy options.

Today’s student loan system is in place because of a political compromise, and growing discontent with student debt may signal that this arrangement has run its course. While there are resources and organizations in place to help those struggling with debt, the time has come to consider a new direction for financial aid, William Elliott III and Melinda Lewis argue in “Student Debt: A Reference Handbook.”

Elliott and Lewis edited the book, part of the Contemporary World Issues series published by ABC-CLIO. Elliott is associate professor and director of the Center on Assets, Education and Inclusion (AEDI) in KU’s School of Social Welfare; Lewis is associate professor of the practice and AEDI’s assistant director.

“The student loan program in America was essentially a compromise between Republicans and Democrats. It wasn’t based on some deep, empirical analysis,” Elliott said. “It contained things both sides liked. Republicans appreciated that it wasn’t grants but required sweat equity. It spoke to values they admire. For Democrats, student loan programs got the federal government involved in funding higher education and making it available to more people. Few of the actors involved with establishing student loan systems had any idea what they would become, or how they would reshape the fortunes of generations of American students.”

The book’s first chapters outline the history of how student loans became the dominant form of higher education funding in America, beginning with the National Defense Student Loan Program in 1958 and the Higher Education Act of 1965 and through the 1980s, when student loans became the primary paradigm in financial aid. The book also tracks the evolution of loans, charting their ascendance in the financial aid system, educational amendments of the early 1970s and changing perceptions of student loans today.

The authors also examine the question of why, given student loans’ origins as a compromise, the prevailing attitude seems to accept that the system can’t be changed. They lay out evidence for a pivot to a new policy direction, outlining how high amounts of debt have led countless students to default and how student loans deter some students from college altogether. They also speak to racial divides in student borrowing and their implication for broader wealth divides in the U.S. today. While the book is intended for a public audience, Elliott and Lewis also call on academics to explore the problem further, a topic Elliott says many in academia avoid.

In following chapters, Elliott and Lewis examine problems, controversies and solutions surrounding student debt. For example, they explore how the tendency to define debt as one of repayment has led to narrowly focused “solutions” on the margins of the debt problem, rather than fundamental reconsiderations of how to finance higher education. They then consider possibilities for funding higher education in new ways, including child savings accounts for all children, putting a lid on student borrowing, making college “free” and providing a bailout for student debtors. With each possibility, they examine the pros and cons and how they could be implemented without “moral hazards” that many have argued could accompany some reforms.

A perspectives chapter includes essays from experts in the field as well as the experiences of a student borrower. For example, a brief essay from scholar Mark Huelsman discusses how student debt got to this point and why the public should be concerned, while another reviews student loan bankruptcy law. One essay provides advice from student loan counselors and one asks a financial education counselor to examine whether student debt cancels out the value of higher education. An essay from Lewis details the valuable yet inequitable nature of education.

The book is useful for students and families considering their future financial aid options as well as those currently paying off student loans. It features information about researchers who are studying the problem, journalists who cover the issue, research and policy organizations, groups providing resources and relief for borrowers, and student groups and movements and advocacy organizations.

A data and documents chapter provides information on the early debates about the student loan program, including the original belief that few students would rely on loans. Tables and figures provide data on scope and patterns of student debt. The chapter illustrates the racial divide in borrowing and how low-income and students of color are more likely to borrow and carry more debt than others, as well as total student loan debt in the United States.

Lastly, “Student Debt: A Reference Handbook” provides a glossary of terms for understanding the financial aid and student debt debate. Elliott and Lewis, who also authored “The Real College Debt Crisis: How Student Borrowing Threatens Financial Well-Being and Erodes the American Dream,” said the new book can be of value to students, families, scholars, financial aid practitioners, youth advocates, legislators and anyone interested in the student debt crisis. By tracing the history of loans, concerns that were present from the start and possible solutions, they hope to convince people to consider alternatives to the current system that has put millions into debt.

“By giving an overview of the history of student loans, we can help give a better understanding of where we are now, how we got here and the scope of student debt,” Lewis said. “Our hope is to expand the conversation. We think the book is substantial and something people will want to pull out and use regularly.”

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