Betsy DeVos: America’s $1.5 trillion student-debt problem is ‘stealing from future generations’

The question of whether America’s $1.5 trillion student loan problem represents a national crisis or simply a financial challenge for some has been a source of controversy over the past several years.

On Tuesday, Secretary of Education Betsy DeVos weighed in: “I’m here to raise a warning flag with American students and American taxpayers: We have a crisis in higher education,” she told an audience of financial aid professionals gathered in Atlanta for the Federal Student Aid training conference.

The speed with which the nation’s outstanding student debt grew, essentially doubling in just six years, as well as the challenges borrowers face paying off their loans — roughly 43% of borrowers haven’t made progress paying down their debt, according to DeVos’s speech — are signs of this crisis, DeVos said.

“The student-loan program is not only burying students in debt, it is also burying taxpayers and it’s stealing from future generations,” DeVos told the audience.

The idea expressed by DeVos that the nation’s student loan program is posing untenable challenges for the nation’s economic future is one embraced by the advocates who are often in her cross-hairs.

The idea expressed by DeVos that the nation’s student loan program is posing untenable challenges for the nation’s economic future is one embraced by the advocates who are often in her cross-hairs.

For borrower advocates, the challenges students face are the result of a combination of factors, including disinvestment in public higher education that has pushed college costs too high, stagnant wages that have made it difficult for families to afford to tuition and for borrowers to make meaningful progress paying down their loans and student-loan companies that have made it harder than necessary for borrowers to repay their debt.

But DeVos framed the source of the challenges and the possible solutions to the problem differently.

“It’s something that I thought was pretty surprising to hear from her,” Colleen Campbell, the associate director for postsecondary education at the Center for American Progress, a left-leaning think tank, said.

“The problem here,” Campbell said, is that DeVos and other Republicans aren’t talking about the challenges faced by the loan program “in terms of borrower relief, that doesn’t seem to be their concern, they seem to be more concerned with protecting taxpayer dollars.”

Others put it in harsher terms. DeVos’s speech featured “lots of fear mongering about a student-loan crisis that’s completely out of control and borne mostly by the taxpayer,” said Rachel Fishman, deputy director for research with the education policy program New America, a think tank. Fishman also read the speech as a dig at left-leaning proposals to make college debt-free or provide some form of debt cancellation.

In her speech, DeVos placed the blame for the distress borrowers face and the risk the loan portfolio poses to taxpayers squarely on the Obama administration’s 2010 decision to make the government the sole lender in the federal student-loan program, while at the same time sending “not-so-subtle signals,” as DeVos put it, that a four-year degree is the only path towards success.

“The government monopoly has proven costly to taxpayers and it hasn’t been a panacea for students either.”


Betsy DeVos, Secretary of Education

“The government monopoly has proven costly to taxpayers and it hasn’t been a panacea for students either,” she said.

That kind of language not only represents a different analysis of the student-loan problem than that of many — largely left-leaning — borrower advocates, it also has both Campbell and Fishman concerned the Department might be considering making more room for private companies in the student loan program.

Placing blame on the government’s control of student lending for the growth in borrowing signals to Fishman that the Department supports returning to the pre-2010 student-loan program where the government guaranteed loans issued by private lenders. Research, including by right-leaning experts, has shown that approach to be “a horrific waste of taxpayer dollars,” Fishman said.

House Republicans have also proposed capping the amount students can borrow for graduate school, which some borrower advocates are concerned could push students towards a private market with fewer protections. “I worry that that’s something that the Department is going to be pursuing with Congress as time goes on if this is the attitude at the Department,” Campbell said.

“I really worry that is placing the blame and the onus on students when really the Department should be looking at itself and looking at its servicers and holding them accountable.”


Colleen Campbell, the associate director for postsecondary education at the Center for American Progress

DeVos never explicitly mentioned the idea of expanding the role of private lenders in the student loan program in her speech, but she did offer some principles for policymakers to consider as they think about curbing the challenges the government’s student loan portfolio faces. Those include, innovating, increasing access to information for students and remembering that, “nothing is free. Someone, somewhere ultimately pays the bills.”

Both Campbell and Fishman said they’re skeptical buzzwords like innovation are code for expanding access to the federal student-loan program to schools that offer short-term credentials without a proven track record of helping borrowers in the long-term. That approach is particularly concerning, Campbell said, given that the Department of Education has pushed to rewrite two Obama-era rules cracking down on poor performing for-profit colleges.

What’s more, she says, helping students and parents access more information about their debt — a major priority of FSA under DeVos — will solve the fundamental problems challenges borrowers face repaying their student loans.

“I really worry that is placing the blame and the onus on students when really the Department should be looking at itself and looking at its servicers and holding them accountable,” she said.

Get a daily roundup of the top reads in personal finance delivered to your inbox. Subscribe to MarketWatch’s free Personal Finance Daily newsletter. Sign up here.

Jillian Berman covers student debt and millennial finance. You can follow her on Twitter @JillianBerman.

We Want to
Hear from You

Join the conversation

الموقع يستعمل RSS Poster بدعم القاهرة اليوم