Student Debt - Address It Now or Pay Later

If April is the cruelest month, as T.S. Eliot wrote, August must be a close second. That's when many college students will be paying tuition bills for the upcoming academic year.

With August comes the realization that, today, a college degree can seem less an investment than a high-stakes gamble.

Consider the high price of admission. At public institutions of higher learning, the cost of attending classes averages $6,823 a year. At private schools the figure is $17,631 a year. Since 1980, the expense of attending a public college has risen 211 percent. At private schools, tuition has increased 242 percent over the same period - a development that might explain why I am neck deep in student-loan debt, and why others like me are borrowing heavily to cover their bets.

"You'll be happy, or maybe not so happy, to know that your $10,000 in debt puts you equal with the national average for student loan borrowing," said Diane Saunders, vice president of Communications and Public Affairs at Nellie Mae, the nonprofit student loan agency.

Although it is reassuring to know others are in the same boat, it is worrisome to know that the boat might be sinking.

Ms. Saunders recently completed her masters thesis on growing student indebtedness, documenting a trend that should be no surprise to anyone. Rising tuition costs in recent years has led to rising levels of student debt. While the average debt for the undergraduate is $10,000, today's professional-school graduate leaves with about $65,000 in debt. Depending on the field of study, the figure can mount even higher. Students are capable of mortgaging their futures to the tune of $138,500 - the federally backed cap for combined undergraduate and professional degree borrowing.

For today's graduates, the stakes of borrowing are growing riskier. The twin problems of high borrowing and high tuition are coupled with a decline in earnings, creating an emerging debt crisis. If students are borrowing at unprecedented levels, yet earning less after graduation, how will these loans ever get repaid? Furthermore, how will the inability to pay for tuition determine who can and cannot attend class?

"The higher-education community has not focused on this issue nor created forums for new ideas in helping students manage increasing levels of indebtedness," said Saunders. "If we begin to address this issue now, we may not have a debt crisis in a few years. If we ignore it until it is such a widespread problem, it may be too late."

A massive student loan crisis would have several negative impacts. Growing defaults could lead to a sharp drop in public support for student-loan programs. Also, higher levels of borrowing could discourage low-income students, pushing the country back toward the days when college was only for the relatively well-off.

Clinton, to a degree, has addressed the problem, calling for $1,500 tax credits each year for the first two years a family sends a daughter or son to college. While well-intentioned, the proposal benefits parents, not the students who today bare the primary burden of paying for college. And $3,000 in tax credits scarcely dents the cost of a four-year degree.

A little-discussed approach, proposed by Nellie Mae, more directly addresses the student-debt problem. The proposal allows for the repayment of loans using pre-tax contributions from both students and their future employers, making borrowing less expensive. And since payments would be made directly from a student's paycheck, the risk of defaults also decreases.

But would business be willing to adopt this idea? As primary beneficiaries of their workers' high level of education, businesses should be open to student-loan benefits. And young people enjoying these benefits would have an incentive to stay with a company.

Congress should consider the Nellie Mae proposal, not only because it is a good idea, but because the legislators themselves recommended the concept in the 1992 amended Higher Education Act. A section from the act calls for "a program to encourage corporations and other private and public employers, including the Federal Government, to assist borrowers in repaying loans ... including providing employers with options for payroll deductions of loan payments and offering loan repayment matching provisions as part of employee benefit packages."

Moreover, the 1992 legislation called for progress toward implementing a program like Nellie Mae's within the following year. To date, that has not happened. Students continue to borrow into the stratosphere with little ability to handle the debt.

Is there a chance that Congress will address this issue and follow its own recommendations?

"Right now everyone is focused on the budget bills and election campaigns," Saunders said. That means student borrowing will not be brought to the legislative table for quite some time, if at all.

Meanwhile, a nation belatedly focused on its national fiscal problems is allowing yet another debt crisis to ferment.

*Michael Logan is a student at Emerson College in Boston.