Financial Literacy & Student Loans

September 6, 2022

Dear Senator Cotton:

One of the most recent national events which amplified the chasm between political party affiliations in the U.S. was the August 24, 2022 announcement by President Biden of a plan to wipe out significant amounts of student loan debt for tens of millions of low- and moderate-income Americans.

Sen. Tom Cotton (R, Ark) was on the rapid response team to counter the Biden announcement, saying:

There is no such thing as student loan forgiveness—this is a bailout, paid for by the large majority of Americans who never went to college or who responsibly paid off their debts. President Biden’s plan ignores the true culprit: bloated, self-serving colleges. I’ll be introducing a bill to hold these colleges accountable for debt, lower tuition, support non-college career paths, and save the taxpayers billions.”


Cotton’s comments strike me as purely partisan, at best, and likely incendiary and divisive.

Meanwhile, some on the ultra-progressive side have dismissed this initiative as ‘too little, too late’’, while others on the far right have said, ‘It’s just not fair to those who sacrificed to pay off their student loans; and to those who are more deeply in debt”.

I must confess:  I’m not convinced that broad-based blanket cancellation of student loan debt is an optimum solution to the real problem at hand.  But, based on current conditions in the world of student loans, it’s probably a necessary step toward creating a new paradigm for educating the future workforce in America.

My personal preference is to look at a problem not just at the surface, but right down to root causes.
[i.e., ‘I don’t like this situation. How can it be fixed?’].

So:  What is the real problem, and where do the root causes lie?

I am sympathetic with Sen. Cotton’s sentiment: ‘this plan ignores the true culprit: bloated, self-serving colleges’.

What Sen. Cotton fails to mention is that – beginning in the late 1950’s, and codified by the passage of the federal Vocational Education Act of 1963 — our elected officials created and sustained an environment which enabled an acrimonious socio-economic division between:

  • those who go to college to earn a 4-year degree, intending to pursue a ‘white collar’ career;
  • those who pursue the training, experience and credentials needed to become a ‘blue-collar’ professional (electrician; plumber; carpenter; auto mechanic; machinist; etc.); and today
  • those who opt into a ‘new-collar’ career in a middle-skill job which requires some tech skills, but not a 4-year degree. Some examples include: I-T support; coding; cyber security; and developing web applications.

Passage of The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 marked an expanded view of the value of ‘occupational education’ and the various pathways along career ladders in a wide variety of occupations which would likely lead participants to family wage jobs and careers. Missing from the 1996 legislation was a roadmap to help parents understand, encourage and support their children to pursue their dreams and passions within the framework of economic and financial reality.

Many parents continued to encourage their children to attend a 4-year college to pursue a college diploma in any major, including Art History; Religious Studies; Philosophy; Music Studies; Sociology; Archaeology; English Literature; Film; and myriad other fields, rather than pursue a potentially lucrative vocational education.

College degrees are important and admirable, yet they can result in credentials not valuable or important to employers.  From a potential income perspective, some majors are terrible for those who need to borrow – and subsequently repay — loans for tuition and ancillary college expenses.

Some simple interventions which might help transform our currently broken student loan system:

  1. Mandatory Financial and Economic Education: A critical and logical step to enhance Student Loan Debt Relief is to mandate successful completion of a comprehensive financial and economic education program prior to any student loan borrowings;
  2. Develop an income rating system informed by U.S. Department of Labor projections on salaries and future job openings which would limit the amount of eligible student debt based on major. (See addendum).
  3. Realistic oversight of private colleges and private lenders: The Financial Crisis of 2007 opened our eyes to private and unregulated ‘shadow bankers’ which originated predatory mortgage loans.  There is current evidence that our student loan crisis has been enabled by similar private, lightly regulated lenders which prey on uninformed borrowers, frequently those who are first generation college students and/or those who are enrolled in for-profit colleges.

Dear Senator Cotton: We have identified a few ideas which we think deserve deep and thorough investigation, hopefully leading to appropriate regulatory oversight: a truly honest and valuable use of your time and position.  Instead of offering partisan, incendiary and divisive commentary which serves no useful purpose at all, you are invited to use any and all of these ideas to embark on a positive and affirmative journey to make durable and favorable changes to our entire post-secondary system.

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