Lessons Learned: Lifting the Burden of Student Debt (Spring 2010 Trust Magazine article)

Source Organization: The Pew Charitable Trusts

Author: Glee Holton


03/19/2010 - College graduation has long symbolized a major educational achievement for youth and a critical first step to a productive future in the work place. However, an increasing number of graduates are leaving four-year colleges and universities with student loan debt, a financial burden that they carry forward as they attempt to launch their careers and begin life as independent adults.

For nearly two decades, rising college costs and limited grant aid have combined to produce a large increase in the demand for loans by students. Two-thirds (67 percent) of all four-year college graduates now have debt (compared with fewer than half in the early 1990s), and among these students, the average amount of debt has more than doubled over the 15 years from 1993 to 2008.

As a result, the young graduate ventures into the real world armed with a degree and filled with expectations, yet shouldering a debt that could very well equal a sizable share of a year’s salary, a liability that is only likely to increase as interest builds year by year.

Recently, there has been an emphasis on the importance of public service, which encourages students to employ their talent and education for the public good. Yet the very real burden of student debt can complicate the graduate’s motivations and choices, and in response, some students will shy away from public service positions.

Debt also affects the lives of those who ultimately do not earn a degree. Borrowers who drop out of college typically earn lower incomes and face a high risk of accumulating unmanageable debt that is likely to result in forbearance, default or even bankruptcy. For these students, the debt burden and the inability to acquire a higher paying job compound each other.

In 2005, recognizing the public policy implications of such rapid increases in borrowing, Pew’s Health and Human Services program—now known as the Pew Health Group—helped launch the Project on Student Debt, housed at the Institute for College Access and Success, an independent, nonprofit organization that works to make higher education more available and affordable for people of all backgrounds.

The project has two goals: (1) to raise awareness among the public and policy makers on the need to reduce the burden of student debt; and (2) to develop and advance practical federal policy options—not by advocating for one particular policy solution, but by identifying an array of policy solutions that could be achieved cost-effectively through reducing inefficiencies in the student loan program.

From 2005 to 2008, the institute and its partners helped inform and advance several federal policy changes on student debt. These included (a) congressional action to close a loophole by which student loan companies used a government-subsidy program to earn a guaranteed 9.5 percent rate-of-return on student loans they issued (even as students, on the same loans, paid market interest rates as low as 3.37 percent); (b) loan repayment reforms that include the creation of an income-based repayment program in the 2007 College Cost and Reduction and Access Act; and (c) plans for simplifying the free application for federal student aid by using Internal Revenue Service data. They also made recommendations that were incorporated into both the House and Senate versions of the Higher Education Reauthorization bill, which was later passed and signed into law.

In 2008, at the request of the Pew Health Group, the Planning and Evaluation unit launched a review to examine the role of the Project on Student Debt in improving federal programs that reduce the student-debt burden for post-secondary students. The consulting team consisted of Derek V. Price, Ph.D., of DVP-PRAXIS, a firm that assesses and advises on organizational effectiveness; and Fred Galloway, Ed.D., associate professor in the School of Leadership and Education Sciences at the University of San Diego.

They conducted the review through interviews with stakeholders and informed observers, representatives of higher education associations, lenders and Capitol Hill staff, and they also examined records of project activities and coverage in the national media.

In sum, the evaluation concluded that the project was a key participant in the student-lending debate and had a substantial part in informing and advancing several policy changes to reduce the burden of student debt.

It played 

  • a decisive role in educating policy makers and the media on the problem of student debt and highlighted the long-term consequences of student debt on borrowers;
  • an important role in the 2005 legislation to close a federal subsidy loophole through which student loan companies had exploited the outdated government program guaranteeing a 9.5 percent return from the U.S. Treasury, regardless of the interest rates students actually paid on those loans; and
  • a decisive role in the enactment of income-based repayment legislation in the College Cost Reduction and Access Act of 2007. This legislation contained a new loan repayment option for student borrowers that caps monthly payments based on income and family size. For most borrowers, it would cap them at 10 percent of borrowers’ income and forgive all remaining unpaid debt after 25 years.
The evaluation identified several aspects of the project’s approach that were fundamental to its success:

  • The project effectively repositioned the policy debate away from the issues of rising college costs or the role of lenders—issues that had formerly stalled policy conversations by polarizing stakeholders—and instead focused the debate on student debt.
  • It engaged a strong, experienced and respected project director who was accessible to the media and had constructive relationships with Hill staff.
  • It used high-quality nonpartisan research to develop a range of options for addressing student debt.
  • It introduced the voices of students themselves into the debate.
  • It built a successful coalition that deployed a sophisticated communications strategy.
The features of the project’s approach that the evaluators cited as important contributors to the campaign’s success parallel those Pew has observed from other effective public policy efforts. These include (a) a knowledgeable, experienced and credible project director; (b) a compelling reframing of the policy debate that attracts support from an array of constituencies; (c) high-quality and nonpartisan research conducted by respected experts that addresses important questions and fills gaps in understanding; (d) new and credible voices that bring fresh perspectives to the discussions; and (e) a communications strategy that raises the visibility of the issue and informs key decision makers about significant developments and advances in knowledge.

This is not to suggest that advocacy work can be reduced to a simple formula, i.e., when an initiative meets a particular set of requirements, success is assured. After all, unanticipated developments in the real world far beyond a project’s control have the potential to undermine the best-laid plans, the efforts of talented leaders and even the most impressive execution of strategy.

Yet Pew has seen concrete and positive change happen as a result of its work, suggesting that campaigns incorporating the key elements that guided the Project on Student Debt and other initiatives are crucial for success.

Learn more about Pew’s Planning and Evaluation unit on www.pewtrusts.org.

Glee Holton is a senior officer in Planning and Evaluation at Pew.

This article appeared in the Spring 2010 issue of Trust magazine.

Pew is no longer active in this line of work, but for more information, visit the Project on Student Debt Web site or visit the The Project on Student Debt on PewHealth.org.

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