Caught in a Squeeze

A new study confirms what most American families had already discovered: It is getting harder to finance a college education.

The Joint Economic Committee of Congress has released a study that it sponsored showing that most families are caught in a painful squeeze between static incomes and rising college costs. The result over the last 10 years has been a tripling of debt encumbering students. Almost $10 billion in student debt was assumed last year alone. The typical graduate of a private college has accumulated $8,950 in debt after four years of study.

Less clear is how much all this debt is affecting the enrollment of talented young people who may be intimidated by the combination of high debts and less predictability in the job market after graduation. There seems to be a connection to the declining college enrollment of blacks. There has been a 62% reduction in federal grants that formerly helped many minority students gain a college degree. The economic committee says that more research is required to understand the effect of this fast-rising debt on the later lives of students, including their options for graduate work.

The principal federal role now is to guarantee loans made by private lenders. The government pays the interest during the period of study. The cost currently is estimated at $2 billion a year in interest subsidies and $1 billion in annual defaults. At last report, $3.75 billion was delinquent from $58 billion in current loans.

There may be ways to reduce the risk of defaults. There may also be ways to target loan funds more effectively. For example, the study suggests that loans not be subsidized but the repayment be subsidized in the event that the payments take a disproportionate share of a graduate’s income. This would protect women and minorities who still receive lower incomes on average.

Few things are as important as the realization of the full educational potential of every citizen. That is a basic argument for maintaining, if not expanding, the present federal loan guarantee and grant programs. That commitment to continuing the programs does not, however, preclude their refinement and improvement.