Who Pays for the Student-Loan Crisis?

In the UNCF chief's first column for us, he hopes that Obama keeps his pledge on college costs.

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The parents of HBCU students, for example, are more than twice as likely as non-HBCU students' parents to take out a Parent PLUS loan. Perversely, however, African Americans and Hispanics experienced the highest denial rates on PLUS loans -- 65 percent and 47 percent respectively -- even before last year's tightening of eligibility standards. For whites the denial rate was 28 percent.

Could the system be more perverse? Faced with the economy's need for more college-educated workers, and the demographic reality that many 21st-century workers will need to come from communities of color, we force students and parents into the student-debt spiral and then deny them the loans they need.

Four years ago, soon after his first inauguration, President Obama pledged before a joint session of Congress that by 2020, now just seven years away, the U.S. would once again lead the world in the percentage of its citizens with college degrees. That goal cannot be met without reinventing Parent PLUS Loans and the rest of our broken financial-aid system. The challenge is to provide students the loans they need without burdening them with debt they cannot repay.

In fact, without root-and-branch student-loan reform, our number of college graduates is likely not to rise but to shrink. African-American and Hispanic babies and other babies of color born last year already outnumber white babies. As they grow up, they will become a majority of high school graduates. But given the lower average incomes among people of color, they, like their counterparts today, are likely to be short of funds to pay for college.

Inevitably, instead of growing to meet the economy's need for college-educated workers, the number of college students, then of college graduates, will shrink, forcing employers to look abroad to find the workers they need.

President Obama's Obligation

How could the president and the administration, for which education has been a top priority, be on the brink of presiding over a slow slide in college graduates? The president and his secretary of education, Arne Duncan, have remade federal policy toward the education that comes before college, the education that children get from prekindergarten through high school.  

But the administration has not been so bold when it comes to higher education. It has supported Pell Grants and direct student loans. It gave college the visibility that came with mentioning it in the president's first address to Congress. And it has called on colleges to lower their tuition.  

But rhetoric and patchwork programs don't add up to a comprehensive strategy. And a crisis demands a strategy. 

Organizations like UNCF can help. But the crisis is far bigger than even our 13,000 scholarships every year worth more than $100 million can address. The Parent PLUS Loans program alone awarded 1 million loans a year, worth $10 billion. Total student-loan debt is approaching $1 trillion, exceeding credit card debt. We teetered on the brink of the fiscal cliff over less.