One solution: spread the debt burden over 40 years
in considering our various loan programs, we do well to remember that we are in a period of transition in the mode of financing higher education in the United States.
Not long ago, each generation traditionally carried most of the costs of educating the next. The means were parental tuition payments, gifts to endowments, and, of course, tax-based support.
In recent years, however, our ever-rising tuitions have exceeded the means of more and more families, the portion of higher education expense borne by endowment has shrunk, and the taxpayers have grown restless. Increasingly, this generation is being asked to bear the costs of its own education, a phenomenon documented by the growth of work-study, the frequency with which students take leave from school to earn money, and the swelling loan burdens they are undertaking.
Last year, for example, Columbia students received $22 1/2 million in scholarships and fellowship, but they borrowed almost $37 million.
If, as I believe, we have in fact moved a long way towards making each generation bear its own educational costs, it is time to make that a more manageable burden.
Most student loans must be repaid during the years in which our graduates are earning least, trying to acquire homes and putting households together. What a persevere system that is. A student loan should be viewed as a lifetime investment in human capital and amortized accordingly.
To be specific, it seems to me that funding for as long as 40 years should be available. Even if no subsidies beyond those provided by existing plans were provided, the debt burden would still be more manageable that it is today, and at least some first-class people would be willing to bear it in return for the productive life of a scholar.
Subsidization either across the board or for particular purposes is possible.whenever government wishes to promote study in particular areas, induce specialists to serve in particular communities, or further other defined social policies like affirmative action or social equalization, the instrument would be ready at hand -- loan forgiveness and/or interest subsidies.
A subsidy that took into account income expectations in the teaching profession would be a powerful incentive for our best young scholars to remain in academe, a critically important goal if we are to retain our vitality. Ideally, we should be able to persuade America's policymakers that they can make no more prudent investment.
The cash flow needed in the early years of such a program is so large that only government can manage it. But the money would ultimately be returned, and with interest. BAd debt losses could be held very low if discharge in bankruptcy were barred, if eligibility were limited to graduate and professional students, and if collections were by routine additions to one's income tax payments.
I note with some relish that a long-term loan plan would put high inflation on our side for a change. If we are to live with inflation rates like those we have endured for the past few years, at least the effect will be a major shrinkage of the value of the dollars that our colleagues of tomorrow would have to pay back. And the interest portion of their payments will, of course, be deductible.