The financial-aid model that American college students depend on is broken. Unfortunately, media coverage and political skirmishes focus on student-loan interest rates and rising student indebtedness, while ignoring the one strategy that can increase personal responsibility, educational outcomes and long-term financial health for students: college savings.
For decades, the federal government has subsidized student loans, with more than $600 billion in federal student loans outstanding today. As states have cut funding for higher education and tuition prices have increased, students and their families have taken on more and more debt. Total student loan debt now well exceeds credit-card debt with each student carrying an average debt load of more than $27,000.
This debt, combined with an economy in which jobs for recent college graduates, let alone non-graduates, are hard to come by, has led many students to question our postwar consensus that a college education is a pearl of great price.
Providing more access to loans, even at low interest rates, then, is not the answer.