Dive Brief:
- A new book by two University of Kansas associate professors in the School of Social Welfare shows how the financial aid system and some reform proposals contribute to inequality.
- University Business reports that the Higher Education Act held the roots of the problem, which started showing up in the 1980s as student loans became a larger portion of financial aid packages, and new income-based repayment plans actually exacerbate the problem by preventing former students from saving for other things because they’re paying off loans for longer.
- The authors highlight Children’s Savings Accounts as a positive model, offering matching funds for early college savings, unlike traditional 529 programs, which don’t offer a way for low-income families to maximize the return on investment.
Dive Insight:
Average student debt for those who borrowed while completing their degrees and graduated in 2014 has risen to nearly $30,000. Not all students borrow and many who do have significantly smaller debt loads. "The Real College Debt Crisis: How Student Borrowing Threatens Financial Well-Being and Erodes the American Dream" by William Elliott and Melinda Lewis, however, explains how the low-income students who borrow are at a disadvantage when compared to their wealthier peers.
For some students, taking on student debt is an investment that more than pays off throughout their careers. For others, it is a trap that keeps them from buying cars and homes. While politicians have suggested debt-free or tuition-free options, college administrators must join the conversation about how to deal with what, in some circles, is certainly a crisis.