How Should We Deal with College Student Debt?

How the System Actually Works

Free write (5 min): what do you already expect college to cost you, and how do you expect to pay for it? This is one of the few seminar topics where students' own plans are the subject matter.

The vocabulary, which the deck lays out carefully because everything downstream depends on it:

• Institution types — two-year colleges, four-year public, four-year private non-profit, and four-year for-profit. The last category matters more than students expect.
• Cost terms — tuition and fees; room and board; gross or published costs, before grants and discounts; and net costs, after them. The gap between published and net is where most confusion lives.
• Degree types — associate's and bachelor's at undergraduate level; professional degrees, master's, and doctorates at graduate level.

How the loans work:

• Direct subsidised loans — for students who qualify for financial aid, at rates below what a bank would offer, with the government paying the interest while you're in school and during the grace period.
• Direct unsubsidised loans — available to anyone regardless of need, at the same rate, but the borrower owes all the interest, including while enrolled.
• Private loans — from banks, typically once federal limits are exhausted. Higher rates that may vary with the economy, interest accruing during school, and usually a co-signer.
• Discharge — student loans are far harder to eliminate in bankruptcy than other debts. Some federal loans can be forgiven for people working in government, non-profits, or teaching.

Assign the readings — note the deliberate pairing of two opposing opinion pieces, due before Tuesday:

• All Student Debt in the US, Visualized — Vox (video)
• How Do Student Loans Work? — savingforcollege.com
• Student Loan Forgiveness Is a Gift to the Well-Off — Washington Post (opinion)
• Forgiving Student Debt Will Help Senior Citizens, Too — CNBC (opinion)

The Charts, and One Genuinely Surprising Result

Mindful moment (5 min), then the data:

• Costs over time, shown in "2021 dollars" — meaning older figures have been adjusted upward for inflation. Ask which type of institution has risen most in percentage terms before revealing it.
• Lifetime earnings by education level, reported "with controls" — the researchers used statistical methods to adjust for other differences between the groups, such as parental income and geography. Ask students what such controls can and cannot fix, and in what unmeasurable ways graduates might still differ from non-graduates.
• Graduation rates by institution type. Two questions worth real time: do many first-year students expect not to graduate? And what explains the lower completion rates at for-profit colleges? Debt without a degree is the worst outcome in this topic, and this slide is where it appears.
• The growth of student debt since 2004, set against credit card debt. The comparison is what makes the scale legible.
• Repayment rates by institution type, and who holds the loans.
• Median debt by major and degree, which lets students see which balances are realistically repayable and which are not.

Transfer Payments, and Who Pays

Mindful moment (5 min), then the economic idea the deck says is critical to any debate about fairness.

When government directs money to a specific group, that's a transfer payment — the resources come from people who don't receive the benefit. Social Security transfers from the young to the old. Farm subsidies transfer from non-farmers to farmers.

Applied here: forgiving student debt is funded by people who don't hold student loans. That includes the wealthy — and also people who already paid their loans off, and the majority of Americans who never went to college. Forgiveness also gives up future federal revenue, which must be raised elsewhere or offset by spending cuts.

Then the discussion:

• Why does government provide student loans at all? (The answer the deck wants: an educated workforce produces economic benefits for the whole country.) Who benefits, and where does the money come from?
• If we cancelled some or all student debt, who would benefit most? Do people with student debt tend to earn more than people without it? Who would object, and on what grounds?
• How has the need for a college education changed over time, alongside its cost?

Before students leave: themes, lingering questions, and one new resource for Thursday.

Design the Policy Yourself

Mindful moment (5 min), resources shared, then the deck's best question, which converts an argument into a design problem:

If you were assigned the task of deciding whose debts should be reduced, how would you decide? What would be the fairest approach?

Push students toward specifics — by income, by balance, by degree completed, by institution type, by profession, by how long the debt has been held. Every criterion they propose has a defensible rationale and an obvious unfairness, which is the whole point.

Two further questions the deck raises for classes with the appetite:

• Should college be free, as it is in some other high-income countries?
• Does government assistance itself make it easier for colleges to keep raising prices? This is the sharpest economic question in the topic and it cuts against both partisan positions.

Score Your Participation

The four reflective questions, then the participation matrix. Students also use the participation rubric to score the week and explain the score.