Game of Loans: The Rhetoric and Reality of Student Debt (William G. Bowen) - Hardcover

Akers, Beth; Chingos, Matthew M.

Hardcover

ISBN 10: 069116715X ISBN 13: 9780691167152

Verlag: Princeton University Press, 2016

Inhaltsangabe

Why fears about a looming student loan crisis are unfounded—and how they obscure what's really wrong with student lending

College tuition and student debt levels have been rising at an alarming pace for at least two decades. These trends, coupled with an economy weakened by a major recession, have raised serious questions about whether we are headed for a major crisis, with borrowers defaulting on their loans in unprecedented numbers and taxpayers being forced to foot the bill. Game of Loans draws on new evidence to explain why such fears are misplaced—and how the popular myth of a looming crisis has obscured the real problems facing student lending in America.

Bringing needed clarity to an issue that concerns all of us, Beth Akers and Matthew Chingos cut through the sensationalism and misleading rhetoric to make the compelling case that college remains a good investment for most students. They show how, in fact, typical borrowers face affordable debt burdens, and argue that the truly serious cases of financial hardship portrayed in the media are less common than the popular narrative would have us believe. But there are more troubling problems with student loans that don't receive the same attention. They include high rates of avoidable defaults by students who take on loans but don’t finish college—the riskiest segment of borrowers—and a dysfunctional market where competition among colleges drives tuition costs up instead of down.

Persuasive and compelling, Game of Loans moves beyond the emotionally charged and politicized talk surrounding student debt, and offers a set of sensible policy proposals that can solve the real problems in student lending.

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Über die Autorin bzw. den Autor

Beth Akers is a senior fellow at the Manhattan Institute for Policy Research. Matthew M. Chingos is director of the Education Policy Program at the Urban Institute and the coauthor of Crossing the Finish Line: Completing College at America's Public Universities (Princeton).

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"Higher education is essential to our nation's future, so how do we pay for it? Game of Loans tackles that urgent question--and it does so brilliantly. With lucid prose and crisp analysis, Beth Akers and Matthew Chingos puncture myths, reveal facts, and chart a sensible course forward. This book is a game-changer, and it should be required reading for everyone interested in higher education and public policy."--Christopher L. Eisgruber, president of Princeton University

"If you want to understand student debt, read this book. Akers and Chingos get past anecdote and hyperbole to explain, with data, what is and is not working in our student loan system. Game of Loans is rigorous, clearly written, and eye opening. Students, policy wonks, and curious observers of the student loan 'crisis' will all benefit from its insights."--Susan Dynarski, University of Michigan

"Clearly written and much needed, Game of Loans provides insight into the student loan market in the United States."--Sarah Turner, University of Virginia

"This insightful book provides an excellent overview of the current student loan system. Presenting evidence about who borrows, how much they borrow, and the burden of repayment, Akers and Chingos refute the idea that there is a general student loan crisis, highlight the real problems that do exist, and propose solutions."--Sandy Baum, coauthor of the annual Trends in Student Aid and Trends in College Pricing

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Game of Loans

The Rhetoric and Reality of Student Debt

By Beth Akers, Matthew M. Chingos

PRINCETON UNIVERSITY PRESS

Copyright © 2016 Princeton University Press
All rights reserved.

ISBN: 978-0-691-16715-2

Contents

Acknowledgments, vii, 
Chapter 1 A Brief Introduction to Student Loans, 1, 
Chapter 2 What Does Student Borrowing in the United States Really Look Like?, 13, 
Chapter 3 How Did We Get Here?, 40, 
Chapter 4 Is a Crisis on the Horizon?, 63, 
Chapter 5 How Are Student Loans Impacting Borrowers and the Economy?, 85, 
Chapter 6 The Real Problems in Student Lending, 100, 
Chapter 7 Solving the Real Problems, 122, 
Notes, 145, 
References, 167, 
Index, 179, 

CHAPTER 1

A Brief Introduction to Student Loans

Student borrowing to pay the costs of postsecondary education has skyrocketed in the last decade. ... Growing student indebtedness has raised questions about the implications of debt burdens for the national economy, for the individual well-being of borrowers, for equality of access to higher education, and even for the educational process itself.

These words capture the prevailing public narrative around student loan debt, with increasing borrowing levels raising alarm among students, parents, policymakers, and the public. But these concerns are not new — the passage above is from a 1986 report commissioned by the Joint Economic Committee in the U.S. Congress. As of that writing, annual student borrowing had quintupled from a decade prior, to about $22 billion in today's dollars, or $2,400 per student.

Those borrowing levels pale in comparison to those seen today. Over the course of the following three decades, annual borrowing quintupled yet again, to more than $100 billion, or about $7,000 per student. The seemingly never-ending increases in debt levels have aroused similar concerns about the impact of debt on borrowers and the nation. Student loans have become a scapegoat for a host of problems ranging froma weak economic recovery to delayed marriage and childbearing to decreases in entrepreneurship.

The last decade has seen especially large increases in student debt, with two key moments attracting significant attention: total outstanding student debt surpassed total credit card debt in 2010 and then passed the $1 trillion mark in 2013, according to data assembled by the Federal Reserve Bank of New York (figure 1.1). Other estimates date the passing of the $1 trillion mark as early as late 2011.

The opening quote, drawn from a 1986 report titled "Student Loans: Are They Overburdening a Generation?," makes clear that fears of a student loan crisis are not new. But public attention to student loan debt has surged in recent years. Figure 1.2 shows that coverage of this topic in the New York Times reached an all-time high in 2014, and that in recent years it has gained levels of attention last seen in the early 1980s, when crackdowns on delinquent borrowers and political fights over the loan program garnered public attention.

Perhaps surprisingly, the 1986 report commissioned by the U.S. Congress found little evidence to support all of the hysteria around student loans:

[S]ome frequently-heard concerns about student borrowing are not supported by the evidence available to date, although the paucity of good data and studies make it unwise to dismiss these concerns out of hand. In particular, it is not yet clear that high debt levels are causing serious problems for many students; that educational, career, and personal decisions are being affected by indebtedness; or that the growth in student borrowing poses a threat to the national economy.

The purpose of this book is to examine whether reality has caught up with the hype and fear generated by student loans. In short, we find that it hasn't. There is no evidence of a widespread, systemic student loan crisis, in which the typical borrower is buried in debt for a college education that did not pay off. The crisis that permeates public discussion is a manufactured narrative based largely on anecdotes, speculation, shoddy research, and inappropriate framing of the issue.

The problem with this false narrative is that it makes it harder to fix the real problems in student lending. There is not a single student loan crisis, but there are many crises, ranging from the fact that most students have no more than a vague idea of how much they've borrowed, to the hundreds of thousands of borrowers needlessly defaulting on their student loans, to the pockets of students who are making decisions that lead to predictably bad completion and repayment outcomes. These are pressing problems that need solutions, but unfortunately the myth of a broad-based loan crisis has led to well-intentioned but poorly targeted policy proposals aimed at all borrowers, which work to the benefit of those with the most debt rather than those in the greatest distress.

Accurately assessing the state of student lending today requires an understanding of why student loans exist in the first place, and why they are largely made by the federal government. The remainder of this chapter develops this rationale, which provides a set of basic principles that are useful to keep in mind as we examine borrowing levels (chapter 2), trends in borrowing over time (chapter 3), the financial well-being of borrowers (chapter 4), and the possible impact of education debt on the economy (chapter 5).

We return to this set of ideas in chapter 6 by viewing the facts about student lending in the United States through the lens introduced in this chapter. The stark contrast between how student lending is supposed to work and how it works today identifies several important problems facing student lending in the United States. We conclude in chapter 7 by proposing a comprehensive set of reforms to bring reality closer to this ideal.

HOW STUDENT LOANS ARE DIFFERENT

The national dialogue about student debt often compares education loans to credit card debt. In fact, there was quite a stir in the media when total outstanding education debt surpassed total outstanding credit card debt. But it's important, for both individuals and policymakers, to recognize that student debt is different. First, let's go back to basics.

What is debt? Debt is a tool that enables an individual to consume more today by taking money from her future self. Of course, we can't travel through time to interact with our future selves, so we rely on a third party, the lender, to make this transaction possible. In practice, a loan is an agreement between a borrower and a lender, but it's important to bear in mind that a loan actually is a transaction between an individual and her future self.

There are a number of instances when taking on debt is a reasonable thing to do. For example, it makes sense to borrow when you expect that your future self will be much wealthier than your present self. It also makes sense to borrow when you make a purchase that will benefit your future self. For instance, the price tag for a new car is due when you drive the car off the lot, but the benefits of owning that car will be enjoyed over a number of years. The prevalence of borrowing to finance car and home purchases suggests that many people are comfortable using debt in this way.

But we're all familiar with the fact that many people also use debt in less constructive ways. In particular, many fall into the habit of using debt, particularly credit cards, to purchase items that they simply cannot afford — not now and not in...

Details zur Ausgabe

• Verlag: Princeton University Press
• Erscheinungsdatum: 2016
• Sprache: Englisch
• ISBN 10: 069116715X
• ISBN 13: 9780691167152
• Einband: Gebundene Ausgabe
• Anzahl der Seiten: 181
• Kontakt zum Hersteller: Princeton University Press; https://press.princeton.edu/books; ; 7th Floor, New South Building; PRINCETON; NJ; 8544; USA
• Verantwortliche Person: Nicht verfügbar