Seeing Double: We Need Mammoth Student Loans

The student debt crisis sweeping the nation has hit Amherst hard. In 2020, Amherst College’s graduating class possessed $2.9 million in student loans. Amherst parents also had a total of $3.4 million in debt. Those figures don’t include the countless other financial sacrifices, such as additional mortgages or spending cutbacks, that families make in order to pay for Amherst’s tuition, even after financial aid.

About half of Amherst student debt, and all of the parent debt, comes in the form of private, rather than federal loans. That’s worrying because private for-profit loans have interest rates that are, on average, roughly double those of federal loans. Also, private lenders charge interest based on credit rating and family income, which disproportionately penalizes minorities and low-income students. Unfortunately, the merciless for-profit loan system is likely to persist; while the federal government can forgive federal loans, there is no indication that President Joe Biden plans to forgive private loans.

The debt problem is also getting worse. Between 2016 and 2020, overall debt of graduating students increased by 66 percent, and the proportion of private debt increased from 32 percent to over 43 percent in 2020.

My co-columnist and I have proposed a variety of ways to reduce the burden of student debt, but none are sufficient in themselves. Increasing financial aid spending would reduce debt, but short of making Amherst free for everyone, no measure can completely prevent debt. That’s why we need to change the way loans work at Amherst. Students should have the option to borrow all their tuition money from the college itself.

Imagine if instead of giving students a financial aid package and expecting them to scrape up the remainder of their college funds however they can, Amherst gave every student the option to borrow the tuition not covered by financial aid directly from the college. The loans would be low interest, in a manner similar to federal loans, and rather than being tied to some faceless loan shark, they would come from our alma mater. Amherst already gives out low-interest loans to international students, it’s time to extend that to the rest of the campus.

The college has all the materials it needs to lend large sums of money to students. It possesses detailed information about each student’s finances and an enormous reserve of money to draw upon. It also has a tiny number of students in proportion to its resources, so such a policy would require less bureaucracy. Most importantly, it has what most banks could only dream of: a real, concrete connection to its borrowers.

Colleges have an interest in ensuring their students’ success, which makes them good creditors. What’s more, colleges like Amherst value student success in more than just financial terms. If a student decides to pursue a career in public service, teaching, or some other valuable but underpaid profession, Amherst as a lender could forgive parts or even all of that student’s debt. That way, my co-columnist could confidently set aside his financial concerns to live out his dream of teaching snot-nosed children their ABCs in an under-resourced public school. Similarly, if a student faces financial disaster or some other misfortune, Amherst could give them a hand. By selectively forgiving loans, Amherst could foster students’ ambitions even into their early careers, when students with debt tend to struggle professionally and choose less publicly-spirited careers.

This policy could also apply to those who have already graduated. Too often, efforts to solve the student loan crisis forget that millions of alumni have already struggled with debt for years. Amherst could offer to refinance pre-existing student debt with the new, more favorable terms, turning a rapidly compounding debt owed to a for-profit lender into a more reasonable debt owed to Amherst College.

Today, the college refuses to lend money to most students, but that policy only abdicates responsibility. Too often, Amherst has washed its hands of culpability for student debt by forcing students to turn to private lenders. It’s like a bus driver outsourcing the driver’s wheel to passersby, then deflecting blame when the bus crashes.

If all student debt was owed to Amherst, we would finally get the data we need to combat the crisis. Right now, the decentralized and ad hoc nature of borrowing options available to students makes the real financial impact of paying tuition hard to quantify. The numbers cited in the beginning of this article are certainly only a fraction of the total. If Amherst accepted responsibility for student debt and allowed all debt to go under its name, the financial aid system would finally have some accountability. We could see at a glance how much students and alumni owe Amherst, and assess how much Amherst is actually doing to prevent the need for debt.

Offering loans would not only increase the financial options of students attending Amherst, but also open a pathway to far greater reform. By both offering support to alumni and forgiving the debt of those who embark on public-spirited careers, the college could completely transform the prospects of its past, present and future students.