James Spencer: Why Student Loans Aren’t the Problem

The so-called student debt crisis can be fairly easily solved through loan forgiveness as long as the government is prepared to continue forgiving student debt long-term. To put it differently, Biden’s reforms alleviate a pain point rather than addressing the core problem of rising higher education costs. Rather than politicizing a measure intended to assist those hindered by student loan debt, Americans should view the Biden administration’s forgiveness of student loans as the climax of America’s higher education story. Whether or not you agree with the forgiveness of student loans is less crucial than recognizing that forgiving student loans highlights the deep brokenness of the higher education industry and demands broader reform. My concern is that student loan forgiveness will only exacerbate the higher education cost problem due, in part, to three contributing factors: (1) schools are sentimental, (2) schools tend to operate without external competitors, and (3) schools have little accountability, particularly fiscal accountability, to the public, despite federal funding.

Sentimentality

Over the years, I have had the pleasure of working as a consultant with higher education institutions who worked hard to keep their costs low and to minimize student debt through disciplined financial management. Other establishments have viewed federal aid as a ready source of cash and oriented their recruitment systems to leverage dollars intended to assist students, particularly low-income students, to build the institution’s revenues. 

While this latter sort of institution may sound like the stereotypical mustache twisting, cat-petting villain, I am less inclined to point toward the sinister than the sentimental as the driving motivation for bloated institutional costs. Most of the colleges with which I’ve interacted over the years have trouble letting go. Viewed from a different angle, we might say that higher education institutions are reluctant to accept that their way of educating and credentialing students in certain academic disciplines is no longer desirable or necessary. There is certainly a need to retain certain disciplines, particularly within the liberal arts; however, when schools retain such programs for reasons driven by, for instance, faculty preference or nostalgia, public funds become less aimed at education than at sustaining the higher education system favored by those internal to the institution.

Sentimentality inflates costs without the necessity of advancing an educational purpose. Nostalgia factors in decisions to keep heavily subsidized academic or student support programs running because they enhance the reputation of the institution or offer talking points for fundraisers. Sentimentality, however, isn’t the entire problem, but a contributor reinforced by the second factor: lack of external competition.

External Competition

Federal aid combined with a general sense that an undergraduate or graduate degree is the “coin of the realm” for upward social mobility creates a situation in which higher education as an industry has an undeserved monopoly on educational credentialing. While Coursera, EdX, Degreed, and various other platforms represent external competition to traditional higher education credentials, the fact that Coursera and EdX still draw credibility from major institutions like Harvard, MIT, and Yale demonstrate the ubiquity of higher education. Even “innovative” low-cost credentialing systems needs to be tied to higher education to demonstrate value sufficient to justify spending the time and money to earn a micro-masters or pursue executive education online. 

Without a true “second option,” the higher education industry has little impetus to adjust to further benefit the public good. There may be a few corporate programs nibbling around the edges of higher education, but there are no true rivals outside of the higher education industry. In many ways, it is the perfect recipe for the status quo. Colleges and universities become societal “givens” that are not only too big to fail, but too essential to disrupt in any real sense of the word.

Accountability

As student debt has been on the rise, we have also seen rising tuition and fees. While wrongheaded regulation is almost certainly part of the problem, it is difficult to deny that some significant number of college and university leaders are less interested in minimizing student debt than in “making a mark” through projects with more sizzle than steak. The tendency of some college presidents to start new programs, initiate building projects, fund research initiatives, or enhance their institution’s public profile instead of addressing ways that they could reduce student costs that are partially subsidized through state and federal aid. The institution serves itself or the whims of its leaders rather than the public trust.

When building a new recreation center becomes more important than lowering student costs, should not the public supporting higher education question whether allowing students to purchase a gym membership might be more cost effective? Schools offer high-priced amenities not because they are necessary for student learning, but because there is a lack of accountability with regard to the ways institutions spend funds. They are under no obligation to spend monies, many of which come directly from federal and state aid, to improve student learning or lower student costs. Providing an education, particularly a residential education, is not trivial; however, educational institutions seem to innovate in almost every aspect of education except that of the business model. As such, colleges and universities are given something of a free pass to spend regardless of how much support they are receiving from taxpayers via federal aid.

In the end, Biden’s student loan forgiveness addresses only a consequence of the higher education system. Student loan forgiveness reinforces the underlying dynamics of the higher education industry which is too often aimed as something other than student learning or shepherding the public funds that make higher education possible. Perhaps loan forgiveness is a necessary evil, but, in isolation, it is not a solution. Instead of creating policies that allow higher education to continue to operate as it always has, what we need is a set of reforms that will redirect higher education back to its intended purpose: educating students.

After working in higher education for over 15 years, Dr. James Spencer currently serves as President of the D. L. Moody Center, an independent non-profit organization inspired by the life and ministry of Dwight Moody and dedicated to proclaiming the Gospel and challenging God’s children to follow Jesus. His book titled “Useful to God: Eight Lessons from the Life of D. L. Moody” was released in March 2022. He previously published “Thinking Christian: Essays on Testimony, Accountability, and the Christian Mind,” as well as co-authoring “Trajectories: A Gospel-Centered Introduction to Old Testament Theology.”

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