- Skip to main content
- Keyboard shortcuts for audio player
Value Of A College Education
Is the student loan crisis fact or fiction.
Claudio Sanchez
There's a new book out about the student loan crisis, or what author Sandy Baum suggests is a "bogus crisis." Baum, a financial aid expert and senior fellow at the Urban Institute, claims it has been manufactured by the media in search of a spicy story and fueled by politicians pushing "debt free college" proposals.
There's a new book out about the student loan crisis, or what author Sandy Baum suggests is a bogus crisis manufactured by the media in search of a spicy story and by politicians pushing "debt free college" proposals. So we've asked Baum, a financial aid expert and senior fellow at the Urban Institute, to tell us more about her book - "Student Debt: Rhetoric and Realities of Higher Education".
We had a few questions for Baum about the book, Student Debt: Rhetoric and Realities of Higher Education .
Roughly 43 million people today hold more than $1.3 trillion in student loan debt and many are struggling to pay the money back. But you say Americans have been misled about the seriousness of the problem.
Roughly 43 million people today hold more than $1.3 trillion in student loan debt. And many are struggling to pay the money back. But you say Americans have been misled about the seriousness of the problem?
I think what is most important is for people to understand that the common image of the student loan problem really misses the point. People have an image of a recent bachelors degree recipient who went to college for four years and is now 22-23 years old and is working at Starbucks. Those people are very rare.
I think what is most important is for people to understand that the common image of the student loan problem really misses the point. People have an image of a recent bachelor's degree recipient who went to college for four years and is now 22-23 years old and is working at Starbucks. Those people are very rare.
People who earn bachelors degrees, by and large, do fine. The problem is that we have a lot of people actually borrowing small amounts of money, going to college, not completing (a degree) or completing credentials that don't have labor market value. They tend to be older. They tend to come from disadvantaged, middle income families and they're struggling, (but) not because they owe a lot of money.
People who earn bachelor's degrees, by and large, do fine.
In your book you argue that the student loan crisis has been manufactured to justify loan forgiveness and other schemes. Your say proposals like those put forth by Bernie Sanders and Hillary Clinton touting "free college for all" and "debt-free college", are simplistic even misguided.
The problem is that we have a lot of people actually borrowing small amounts of money, going to college, not completing [a degree] or completing credentials that don't have labor market value. They tend to be older. They tend to come from disadvantaged, middle-income families and they're struggling. [But] not because they owe a lot of money.
Its not realistic to say we're going to pay people to go to college(for free). Someone has to pay. We can have everyone pay much higher taxes. But short of that, it's not clear how we would pay
In your book you argue that the student loan crisis has been manufactured to justify loan forgiveness and other schemes. You say proposals like those put forth by Bernie Sanders and Hillary Clinton touting "free college for all" and "debt-free college" are simplistic ... even misguided.
For the record, you have advised Hillary Clinton's campaign on higher education issues.
Its not realistic to say we're going to pay people to go to college [for free]. Someone has to pay. We can have everyone pay much higher taxes. But short of that, it's not clear how we would pay.
Yes. The focus on college affordability, on acces to college and removing financial barriers, is very important. (But) how we solve those problems has to be decided in the policy arena rather than in the throes of a political campaign
You also cite two big trends in your book. First, the surge of older students who've enrolled in college full time, mostly people in their mid to late 20's. Second, you write about the dramatic growth of for-profit schools that require students to borrow more money than they would at public institutions.
Yes. The focus on college affordability, on access to college and removing financial barriers, is very important. [But] how we solve those problems has to be decided in the policy arena rather than in the throes of a political campaign.
It is true that for profit schools are disproportionately associated with big student debt problems. (But) you have to be careful about painting any sector with a broad brush because there are certainly for-profit schools that serve students well and there are public and nonprofit private schools that don't. That said, a growing proportion of student debt is held by students who went to for-profit institutions. That sector enrolls low income, older students. It does well getting people short term certificates. Some pay off, some don't.
You also cite two big trends in your book. First, the surge of older students who've enrolled in college full time, mostly people in their mid to late 20s. Second, you write about the dramatic growth of for-profit schools that require students to borrow more money than they would at public institutions.
It is true that for-profit schools are disproportionately associated with big student debt problems. [But] you have to be careful about painting any sector with a broad brush because there are certainly for-profit schools that serve students well and there are public and nonprofit private schools that don't. That said, a growing proportion of student debt is held by students who went to for-profit institutions. That sector enrolls low-income, older students. It does well getting people short-term certificates. Some pay off, some don't.
You blame the media, though, for inaccurately reporting that the student debt problem is widespread throughout higher education. You say your research shows that the actual number of borrowers who are truly struggling is not that big, and that we know exactly which institutions have saddled students with too much debt with little to show for it.
Exactly. There are some people who borrowed under fraudulent, deceptive situations and their debt should be forgiven. There are people for whom education did not work out through no fault of their own and their debt should be forgiven.
Twenty-four percent of those who left school without a degree, defaulted. So non-completion is a huge problem.
Some schools don't serve students well. Some students aren't prepared to succeed no matter where they go to college. We just tell everybody: "Go to college. Borrow the money. It will be fine."
We don't give people very much advice and guidance about where ... when to go to college, how to pay for it, what to study.
So if we've exaggerated the seriousness of the student debt problem, should we stop worrying?
I'm not suggesting we shouldn't worry. There's plenty to worry about. [But] we should worry about the single mother of two, going back to school in her late 20s to try to get some training to help her get a job and support her children. We need to worry about supporting her and directing her in a way that will allow her to succeed. We should worry about her student debt. We should worry a lot less about 18-year-olds going off to college and borrowing $20,000, $25,000, for a bachelor's degree.
What Will It Take to Solve the Student Loan Crisis?
by Daniel M. Johnson
Summary .
Every day, there are news stories about the college tuition crisis. But what is the crisis we are seeking to solve? Is it the staggering amount of student debt? The rapidly rising cost of higher education? The interest being collected on student loans? The high default rate on student loans? Or all of the above?
Partner Center
Get expert insights delivered straight to your inbox.
Top 5 Student Loan Myths
7 Min Read | Apr 21, 2023
Listen, there are a whole bunch of myths about student loans that we need to take a second to debunk right now. It’s time to call the student loan industry out on its lies so you can have a healthy financial future. I’m sick and tired of seeing students losing their freedom, stability and peace of mind to one of the biggest lies in our culture today—that you have to take out student loans to go to college. It’s simply not true.
So, let’s get right to it.
Myth #1: You can count on student loan forgiveness.
When you’re trying to figure out how to pay for college, this is how a typical thought process might go: I’m desperate. I need to take out loans to go to school because that’s the only way I’ll be able to afford it. But it’s cool—I can get them forgiven later.
I hate to break it to you, but it’s not that simple. Any time you have to rely on the government for anything, prepare to be disappointed (or at least super confused).
Even if President Biden’s forgiveness plan goes through (which isn't looking likely right now), it will only cancel a portion of federal student loan debt for certain borrowers. But while that may offer some relief, it definitely doesn’t solve the problem for most. What about people who owe more than $10,000 in loans? What about those who have private student loans? Forgiveness like this is not something you can count on happening multiple times—let alone once.
And the traditional route of applying for student loan forgiveness is a pretty sketchy system too, considering the fact that there are a ton of fine-print requirements that are constantly changing. Way too many people work in low-paying public service jobs for up to 10 years—because they were told that’s how they could get their loans forgiven—only to find out they don’t qualify after all and wasted a whole bunch of time. People have even been granted forgiveness, only to get denial letters after the fact. And the only way they could finally get their loans forgiven was by suing the U.S. Department of Education. 1 That’s pretty shady.
Keep in mind, the lenders aren’t really interested in helping you with your student loan debt out of the goodness of their hearts (wouldn’t that be nice?). If there’s money in it for them, they’re going to try to find a way to keep you stuck in that system—and that involves changing the requirements for forgiveness on a whim.
So, if you’re trying to figure out how to pay for school, a better mindset would be, Okay. College is freaking expensive. How can I find a way to pay for it without student loans so I won’t be in debt for the rest of my life? The student loan industry wants you to believe it’s impossible, but I promise you, it’s not.
Myth #2: Income-driven repayment is a good idea.
First, let’s talk about what an income-driven repayment plan actually is: a plan that bases your monthly payment amount on your income and family size. It’s marketed as an easier, more convenient alternative to a standard repayment plan, but really, it’s just a way to keep you in debt longer.
Let me tell you why. There are a few different income-driven plans out there—all requiring a monthly payment of about 10–20% of your discretionary income (that’s income after taxes are taken out). Most repayment periods for income-driven repayment plans are 20–25 years.
Do you want to spend 20 years of your life giving 10–20% of your income to the government every month while they’re making money off the ridiculous amount of interest you have to pay? Heck no.
Ready to get rid of your student loans once and for all? Get our guide.
No matter what kind of repayment plan you have, your student loans are still debt, and you need to find ways to get intense and pay them off ASAP. Plus, just like student loan forgiveness, there are all kinds of shady requirements and loopholes for these plans that you can read about on the Federal Student Aid site. But save yourself the time and energy, and instead put that energy into paying off your student loans quickly .
Myth #3: Deferring payments will make my life easier.
Student loan deferment is what happens when you temporarily don’t have to make payments, but you may or may not still be responsible for interest, depending on the type of loan(s) you have. But it’s not available to everyone. There are only a few different ways to possibly qualify for deferment, including if you’re on active-duty military service, serving in the Peace Corps, or on welfare.
But even if your request is granted, the loan doesn’t go away. Deferment is basically saying you’ll deal with it later. That could end up hurting you more in the long run, especially if you still have to pay interest.
Myth #4: Always consolidate or refinance student loans.
If you took out multiple student loans, you might’ve heard that consolidating or refinancing are ways to get more manageable payments. They’re similar concepts, but they have a few key differences.
Student loan consolidation is the process of taking all your different loan payments and turning them into one big payment. It also takes the weighted average of your interest rates on your loans and rolls them into one. But only federal loans can be consolidated for free through the government.
Consolidating your federal student loans can be helpful if you’re juggling multiple loans, especially if they have variable interest rates. Having to keep up with only one fixed monthly payment is nice. But you might be better off tackling your smaller loans one at a time, rather than lumping them all together into one massive loan. And consolidating doesn’t give you a lower interest rate—so it’s more a matter of motivation than saving money.
Student loan refinancing is different from consolidation in that it deals with private loans—or a combination of federal and private loans—and you have to find a private lender or company to do this for you. They will then pay off your current loans and become your new lender. And at that point, you’ll have a new rate and new repayment terms.
But only refinance if:
- It’s 100% free to refinance.
- You can get a lower interest rate.
- You can keep a fixed rate or trade your variable rate for a fixed rate.
- You don’t have to sign up for a longer repayment period.
- You don’t need a cosigner.
- You haven’t recently declared bankruptcy.
- It will actually motivate you to pay off your student loans faster.
And remember: When you already have student loan debt, you shouldn’t be asking, How can I get more manageable payments? You need to ask, How can I destroy this debt as fast as possible?
Myth #5: Student loans are forever.
Y’all, I get so sad when I hear young people talking about how they believe they’ll be paying off their student loans until the day they die. It doesn’t have to be that way.
I’ll be real with you—there’s no quick and easy fix to your student loan problem. At the end of the day, you chose to borrow the money, and you agreed to pay it back. But you have the power to take control of your money situation. You’ll have to work hard, change your lifestyle, and say no to stuff when you don’t want to, but you can attack this debt and get it paid off way faster than you could on any repayment plan.
If you’re ready to say goodbye to student loan payments, check out my course— The Ultimate Guide to Getting Rid of Student Loan Debt . I walk you through everything you need to know about forgiveness, budgeting for your payment, and the surefire way to pay off your student loans fast .
You don’t have to live with your student loans forever. You have what it takes to ditch student loan debt for good !
Did you find this article helpful? Share it!
About the author
Kristina Ellis
Kristina Ellis is a bestselling author who believes no student should be burdened by loans. Drawing from her experience of earning over $500K in college scholarships, Kristina helps thousands of students graduate debt-free through her syndicated columns, podcast appearances, online courses and books. She’s a co-host of The Ramsey Show, the second-largest talk show in America, which reaches 18 million weekly listeners, and she appeared in the award-winning documentary Borrowed Future. Kristina has appeared on NBC News, Business Insider, Fox & Friends, USA Today and Yahoo!, where she’s shared practical, real-world strategies for going to college without debt. Learn More.
Student Loan Updates: Biden's Latest Forgiveness Plan
A lot’s happened with student loans over the last three and a half years. Here’s a rundown of the major student loan updates since 2020—including Biden’s latest forgiveness plan.
Student Loan Default: What It Is and How to Get Out
Fallen behind on your student loans? Here’s what happens if you end up in default—and how to get back on track.
To give you the best online experience, Ramsey Solutions uses cookies and other tracking technologies to collect information about you and your website experience, and shares it with our analytics and advertising partners as described in our Privacy Policy. By continuing to browse or by closing out of this message, you indicate your agreement.
IMAGES