“Student Debt Viewpoints” is an occasional series looking at the student debt crisis — its causes and possible solutions — by speaking with different stakeholders in the issue, including government officials, students, school administrators, activists, and others. The views expressed are those of the articles’ subjects and are not necessarily those of Student Loan Hero or its parent LendingTree.
We hear a lot about the student loan debt crisis these days. And it’s a real threat: Outstanding student loan debt has surpassed $1.5 trillion — almost 50% more than total U.S. credit card debt — and the cost of college keeps rising.
Some lawmakers like Tom Reed, a Republican representing New York’s 23rd District in the House of Representatives, are interested in tackling the causes of the skyrocketing cost of college.
Reed has introduced legislation aimed at the problem, and he routinely advocates for different measures designed to make college more affordable for students.
“This is an area that affects the futures of so many young men and women, and it’s time to address the issue before it gets even worse,” said Reed. “We’re shackling our children and grandchildren to debt if we don’t do something.”
Meet Tom Reed
The youngest of 12 children, Reed was born into a busy household, headed by his father, decorated war veteran Tom Sr., and his mother Betty. But after the death of his father when he was 2 years old, Reed was on the hook for paying for his own schooling.
Reed learned, firsthand, the pain of student debt. His own student loans, after finishing law school at Ohio Northern University, amounted to about $110,000.
“The plight of students wanting to make a living is near and dear to my heart,” said Reed, who has two children of his own now in college. “I understand what it’s like to struggle with this debt.”
Reed served as the mayor of Corning, New York, from 2008-2009 and was elected to the House of Representatives during a 2010 special election in his mostly rural district running along the border with Pennsylvania.
Tom Reed on the Student Debt Crisis
“When you talk about the student debt crisis, you have to talk about the reasons college is so expensive today,” said Reed. “There’s no cost containment, and there’s a great deal of price inflation.”
Part of the problem comes from the fact that it’s so easy to get student loans to cover the costs of college. Because schools know that students will get funding from somewhere, Reed said, it leads to complacency about rising costs — and there’s no reason to rein in expenses.
On top of that, Reed also believes that there’s an element of unnecessary price inflation to give parents the illusion that the school is of a higher quality — and to give them something to brag about around the watercooler when their children get scholarships.
“We’re talking price inflation at the used-car salesman level,” said Reed. “People feel like they’re buying a Mercedes because of the cost. They look at it, and they don’t know how they’ll pay, but then the school offers a scholarship.”
Reed added that many of these scholarships don’t cover the full cost of college, so students have to turn to student loans to cover the rest. “But the psychological effect of having received a scholarship is powerful,” he said. “And you can’t discount the fact that we so often equate large expense with value, so people think they’re getting a good deal on a good education.”
Not only do schools inflate costs, according to Reed, but the idea that everyone has to attend a four-year school also contributes to the problem.
“You think you have to get a so-called traditional four-year degree, so you don’t consider other options,” he said. “However, many students could save money by starting at community college, and we’ve got a shortage of people skilled in the trades.”
Today, said Reed, a four-year degree isn’t a guarantee of a good-paying job. “Many grads find themselves drowning in debt they can’t afford, just because they were steered toward a four-year degree,” he said. “That debt delays their ability to meet other life milestones, like buying a house and starting a family. Those delays make ripples through our economy and our society.”
Proposals and solutions
Tom Reed believes it will take multiple strategies to fix the student debt crisis, and some of those ideas have bipartisan support.
Among the proposals Reed backs is making federal student loans eligible for public refinancing at lower rates, without losing access to federal programs like income-driven repayment and Public Service Loan Forgiveness. (Today, the only way to refinance federal loans is privately — resulting in borrowers getting locked out of those useful options.) He also likes the idea of work-off programs: “Expand programs that offer some level of loan forgiveness to graduates who work in underserved areas.”
However, one subject Reed is particularly focused on is universities that hoard money in billion-dollar endowments, rather than using these funds to benefit the neediest of students.
In May 2018, Tom Reed introduced the Reducing Excessive Debt and Unfair Costs of Education (REDUCE) Act into the House of Representatives. (You can keep up with higher education legislation using our Student Loan Bill Tracker.)
Reed said the main thrust of the legislation is to shed light on high-value endowments, citing 90 institutions with endowments amounting to $1 billion or more in tax-free dollars. Unfortunately, he said, there isn’t a lot of transparency in how that money is used.
“If you look at these endowments, there’s some crazy stuff,” Reed said. “Some people can give a tax-advantaged endowment to a university and put strings on how it’s used, including putting in a box at the football stadium for personal use.”
Reed said there are cases of universities spending $3.6 million a year on a finance manager or allowing a college president to spend $800,000 on sports season tickets, money that he believes should instead go toward lowering the cost of attendance for working-class families.
“Under the REDUCE Act, universities with the greatest wealth would be required to distribute 25% of their endowment profits to assist low- and middle-income students,” said Reed. “And the endowments would be required to clearly and transparently disclose exactly where they are spending money.”
Changes to tax deductions would also be made as a way to benefit schools that help students, while punishing endowments that don’t.
Other provisions of the REDUCE Act include:
- Requiring colleges to have a plan for limiting tuition increases to below the rate of inflation
- Encouraging university donors to focus more on low- and middle-income student assistance, rather than making restricted donations that don’t benefit students
“When these schools are required to evaluate their costs, and when the public can see where the money is really going, that should put pressure on universities to put more toward making college costs manageable for students,” said Reed.
How to make college affordable
“In the end, universities are doing a lot of things that inflate the cost of college without providing much value to students,” said Reed.
“There’s an amenity mindset with universities. They think they need all these bells and whistles, but when you talk to students, those amenities aren’t deciding factors,” he said.
While Reed believes that institutions can do a lot more to make costs affordable to students, he also places some of the responsibility on parents.
“It’s hard to tell your child that they can’t go to their expensive dream school,” he said. “But I did it with my own daughter when I told her she couldn’t go to Syracuse University because of its high cost.”
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