| These past weeks there has been talk in the | | | | They were initially a means of providing loans for |
| higher education press about private lenders and | | | | graduate and professional school students who |
| state guarantee agencies either withdrawing from | | | | could not qualify for the maximum amounts for |
| the government-subsidized student loan market | | | | subsidized interest loans. |
| or refusing to underwrite new loans. These | | | | During the go-go Eighties, a graduate or |
| financial institutions cite either a cash crunch or a | | | | professional student could borrow up to $5,000 a |
| credit crunch, or reductions in the federal interest | | | | year from the subsidized interest loan program - |
| subsidy as the reasons for pulling back on such | | | | but had to prove financial independence or go |
| loans. | | | | through a means test along with their parents. |
| These are all legitimate reasons for the private | | | | Then they had to turn to the unsubsidized loans - |
| financial markets to back out. Student loans were | | | | popularly known as PLUS loans to make up the |
| never meant to be a profit center when they | | | | difference. Back in those days, the subsidized loan |
| were first proposed by the federal government | | | | and the unsubsidized loan together with some |
| under President Eisenhower. The purposes of | | | | employment could pay almost the full freight. |
| student loans are to make college affordable and | | | | That's not the case today. |
| accessible to anyone who is admitted to college | | | | It's easy to blame the colleges; their |
| and to help them establish good credit early in the | | | | administrations make the tuition decisions, not the |
| working lives. | | | | federal government. But they are just like other |
| When I applied for my first student loan 30 years | | | | businesses that must deal with escalating health |
| ago, I could borrow up to $2,500 and I didn't need | | | | care costs (tenured college faculty are more |
| to pay an origination fee. Today, the maximum a | | | | senior level workforce than most government |
| college freshman can borrow under the subsidized | | | | agencies and private corporations); fuel prices |
| loan program is $3,500; considering inflation it's a | | | | (larger schools own and operate as much housing |
| lot less than I could have borrow 30 years ago | | | | as some medium and large-sized cities) and |
| and covers a much smaller share of the costs! | | | | pensions. |
| The $2,500 I could borrow in 1978 would have | | | | There will need to be a major redesign of the |
| covered more than half the cost of my freshman | | | | student loan programs in the next presidential |
| year at Rutgers. The $3,500 I could borrow today | | | | administration not only to reconsider outdated |
| would cover less than a fifth of the | | | | borrowing limits, but also the means tests and |
| freight-assuming I received the full amount after | | | | multiple government loan programs with their own |
| going through a means test! | | | | set of regulations and bureaucracies. In an ideal |
| The federal unsubsidized interest (unsubsidized | | | | society, students should not end their higher |
| meaning the borrower or their families pay the | | | | education owing more than their first year's salary |
| interest while the borrower is in school) loans | | | | in their chosen field. |
| were a creation of the Reagan Administration. | | | | That's a lofty ideal, but one worth reaching for. |