Don't just delay student debt, prevent it

The Biden administration this week announced another 90-delay in federal student loan interest, payments and collections. This is welcome news to tens of millions of borrowers and an important decision but — at best — it’s a short-term solution.

At worst, we’re at risk of treating a symptom when an underlying condition is what ails us.

The truth is, we can’t delay or cancel our way out of America’s student loan debt crisis. We must prevent debt to begin with.

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That means thinking holistically about our system and embracing affordable, employer-backed education programs that don’t make students pay out of pocket and having a broader conversation about associating high cost with high quality.

The federal government, including the Biden administration, is doing everything that it can to right past wrongs, but it’s apparent that it is not enough and a complete solution sits with the private sector and a broader solution.

America’s student loan debt has grown ceaselessly, and it’s been exacerbated by our nation’s slow recovery from the COVID-19 pandemic. In the U.S., there are more than 44 million borrowers who collectively own $1.5 trillion in student loan debt. (That’s just behind mortgage loan debt, and higher than credit and auto loans.) 

As the Biden administration’s action to delay payments suggests, many Americans simply can’t pay: 11.5 percent of student loans are at least 90 days delinquent or in default. And it’s a recurring problem; in the class of 2018, for example, more than 69 percent of students who took out student loans graduated with an average debt balance of $29,800.

Using a pen to strike an existing debt, or putting a moratorium on it, can provide some relief for a few, but it won’t create a long-term solution. These types of one-offs also tend to benefit a single generation of people.

Student debt is a byproduct of the value we place on prestige and “elite” education.

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We associate a higher cost with a higher quality, automatically. This also leads students to make bad decisions: They may take on debt in order to achieve an elite credential that may not necessarily align with their career goals. Or they may avoid educational opportunities because they fear taking on more than they can afford — limiting their opportunity. 

What no one can question is that we need more education and skilling: More than 80 million people in the American workforce right now lack either college or skilled training, and they are four times more likely to be displaced from their roles by impending automation and augmentation. One byproduct of overpriced education and student debt is that they choose to price themselves out of career-advancing opportunities.

There are also tens of millions more workers who will need more education as our economy shifts, our workforce automates and other changes come. We’re doing nothing to serve this group by failing to address our country’s soaring costs of education and student debt.

We should think about longer-term policies that take debt out of the equation and make it easier to support learners who want to move forward and avoid debt.

My company, Guild Education, works with leading employers to provide debt-free education benefits for working adult learners. Some 97 percent of our students graduate with no debt at all. More and more employers are embracing education and skilling benefits, but policy lags their investments despite strong, bipartisan interest in this area.

Earlier this year, U.S. Sens. Maggie Hassan (D-N.H.) and Todd Young (R-Ind.) and Reps. Danny Davis (D-Ill.) and Jason Smith (R-Mo.) backed bipartisan, bicameral legislation that would expand what employers can pay, tax-free, to contribute to their employees’ education. Employers have shown that they’re eager to contribute more — and employees will benefit from programs that don’t require them to pay anything out of pocket. 

This solution is also more sustainable in the long run. By some estimates, companies already spend $177 billion on education programs. They see longer-term benefits in having more skilled and trained workforces.

And it is a part of a solution that treats our underlying condition: When finances are alleviated, and the process reduces risk for students, the only cost that students have to face is time and opportunity costs.

To be sure, this isn’t the only solution, but it’s indicative of the more expansive way we should think about the problem. 

The Biden administration — and Congress — can continue to explore ways to deal with student loan debt. But employer-backed education is a sustainable, additive solution — one with broad appeal and one that reaches potential learners who need education the most.

This is one way we can prevent debt, not just delay it.

Paul Freedman is president of edtech company Guild Education’s Learning Marketplace.