Federal student loan program doesn’t need more regulations, Baker Institute expert says

EXPERT ALERT

Jeff Falk
713-348-6775
jfalk@rice.edu

Federal student loan program doesn’t need more regulations, Baker Institute expert says

HOUSTON – (June 27, 2019) – Student loans and student loan debt are a hot topic ahead of the 2020 presidential election. More regulations would only make the existing federal student loan programs more complicated, according to an expert in the Center for Public Finance at Rice University’s Baker Institute for Public Policy.

Credit: 123RF.com/Rice University

Joyce Beebe, a fellow in public finance, said the federal government and Congress should focus on simplifying and consolidating existing programs. She outlined her insights in a report, “The Current Student Loan Landscape and Recent Developments,” and is available to discuss the issue with the news media.

At the end of 2017, 44 million Americans collectively owed $1.4 trillion on student loans, according to Beebe’s report.

“Although the statistics vary slightly across different data sources based on student loan providers, the vast majority are federal student loans,” she wrote. “Most of the $1.4 trillion balance was accumulated within the last decade; according to a study by the Office of Inspector General in the Department of Education, the student loan balance was $687 billion at the end of fiscal year 2009, which means the outstanding loan balance has essentially doubled since the financial crisis.”

Around the last quarter of 2009, student loans also surpassed auto loans and credit card debt as the second-largest household debt for American families, exceeded only by home mortgages, Beebe said. In the 2015-2016 academic year, 37% of undergraduate students used federal student loan programs to borrow an average of $19,000, a Congressional Budget Office study concluded. Graduate students amassed much more debt, the CBO reported, with 40% of grad students borrowing an average of $63,000 (including what they borrowed during their undergraduate years).

Beebe’s study focuses on federal student loan programs. State and local government financial aid and the causes of increasing college expenses are beyond the scope of her report.

“We do not need more regulations to make the existing federal student loan programs more complicated,” Beebe concluded. “Instead, the effort should focus on simplifying and consolidating existing programs. Overly generous programs such as the PSLF (Public Service Loan Forgiveness Program) need to be tightened to avoid disproportionally benefiting higher income groups. Furthermore, students and their families are more likely to make good decisions if they are better informed about the costs and benefits of college education, including options for financial aid, employment prospects, risks, potential debts and repayment responsibilities.”

From the government’s perspective, because borrowers with certain characteristics may have higher risks of default, there may be a need for policies that focus on addressing obstacles these borrowers encounter or difficulties that prevent them from making informed decisions, Beebe said. “These policies will lead to positive outcomes in terms of increased government revenue, manageable amounts of loans and ideal levels of students’ education investment,” she wrote.

For more information or to schedule an interview with Beebe, contact Jeff Falk, associate director of national media relations at Rice, at jfalk@rice.edu or 713-348-6775.

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Related materials:

Report: https://www.bakerinstitute.org/media/files/files/f34ecd01/bi-report-121418-cpf-studentloans.pdf

Beebe biography: www.bakerinstitute.org/experts/joyce-beebe

Baker Institute Center for Public Finance: www.bakerinstitute.org/center-for-public-finance.

Founded in 1993, Rice University’s Baker Institute ranks among the top three university-affiliated think tanks in the world. As a premier nonpartisan think tank, the institute conducts research on domestic and foreign policy issues with the goal of bridging the gap between the theory and practice of public policy. The institute’s strong track record of achievement reflects the work of its endowed fellows, Rice University faculty scholars and staff, coupled with its outreach to the Rice student body through fellow-taught classes — including a public policy course — and student leadership and internship programs. Learn more about the institute at www.bakerinstitute.org or on the institute’s blog, http://blog.bakerinstitute.org.   

About Jeff Falk

Jeff Falk is associate director of national media relations in Rice University's Office of Public Affairs.