”Neither a borrower nor a lender be" are the words of wisdom Polonius imparts to his son Laertes just before the latter's voyage to France in Shakespeare's Hamlet.
If we in the 21st century were only as wise – or as fortunate -- as medieval Danes, life would be swell. No, in a country such as the United States, in which the reported personal savings rate lingers at slightly less than six percent of discretionary income (as of fiscal Q4 2010), most citizens come to feel all too palpably the need to borrow. This holds particularly true in the area of higher education. Rocketing tuition prices, which outpace the rate of inflationary several-hundred fold, mean that the days of saving for junior's college education have long passed most families by.
Endemic low rates of household savings are sure to make their drawbacks acutely felt as the U.S. federal government, in coming to grips with a yawning budget deficit, finds ways to cut costs. In this project no government program remains safe, not even the various student aid programs. In an opinion piece appearing in the March 7, 2011 edition of The Chronicle of Higher Education, Mark Huelsman surveys the current austerity measures to be imposed on federal student aid programs. "There was much to-do last month over the Obama administration's fiscal-2012 budget proposals for higher education," he writes.
Specifically, many education observers took issue with the administration's suggestion to fiscally shore up the Pell Grant program by ending year-round Pell Grants for students attending summer school, as well as ending the "in-school interest subsidy" that prevents some low-income graduate students' loans from accruing interest until they have left school. The administration defended the proposals, arguing that the programs were redundant, and that fiscal austerity requires sometimes painful cuts.
Phasing out year-round Pell Grants and interest deferment for federal loans will have the net effect of forcing students of insufficient means to borrow more money to fund their university education. The end of interest deferment means that, should students have no way of defraying interest while the matriculate, the principal amount borrowed will balloon by virtue of all the capitalized interest added to it. College graduates carrying such debt will likely discover that come the end of the customary sex-month grace period, they face years upon years of high monthly payments to amortize an amount that will have doubled over this term.
The U.S. government's changes to Pell Grants and federal loans thus changes the incentives attending the pursuit of postsecondary education. Saving shines as the more attractive option in the absence of low-interest credit on easy terms. And saving is precisely what Huelsman prescribes. "Although many families find it difficult to put aside additional income, there are significant benefits to helping families save that might not accrue from supporting or restructuring financial-aid programs," he writes. "Obviously, in many instances, saving replaces future debt.... Giving more low-income students an opportunity to save early and often could decrease the need to pay off loans upon graduation, and it could help keep in college students who otherwise would drop out for financial reasons."
Huelsman recommends changes to the tax code along the lines of those made in years past with respect to home mortgages and retirement savings, which offer tax credits as a means of incentivizing homeownership and retirement planning. Should Huelsman get his way, thrifty families interested in sending their children to college would find themselves rewarded with tax breaks.
Perhaps equally as important as reducing student loan debt burdens, however, is finding every way to reduce costs in higher-education itself. Among the various fixed and variable costs traditional "brick-and-mortar" incur the greatest ones remains those attached to the physical amenities themselves. Dormitories, lecture halls, research facilities -- all require regular reinvestment in terms of money and labor, and these costs, like all others, are passed on to consumers. Eliminate some of these facilities and you eliminate some of the costs (or so the logic goes).
The various pedagogical strategies and technological enhancements known collectively as "distance learning" promise to eliminate exactly these institutional costs. An article in the March 8, 2011 edition of The UK Telegraph brings news of distance learning developments currently happening in merry ol' England:
Research carried out recently among a group of students enrolled on a distance MA Tesol course at Leicester University offers a glimpse into a not-too-distant future when learners distributed around the world but linked via the internet will be able to enhance their learning experience with the use of some simple and low-cost digital tools.
The article goes on to list some of the simple and low-cost digital tools that have brought this graduate-level TESOL course such grand success. These include:
Hopefully, the progress enjoyed by distance learners in Great Britain will translate into similar triumphs on this side of the Atlantic, because distance learning represents college students' best hope for bring tuition rates back down to earth -- which means back down to amounts for which families can realistically expect to save.