It was a stunning moment to read about and it must have been even more stunning to have been in the room last weekend when a billionaire technology investor announced to this year’s graduates of Morehouse College that he would pay off their student loans, for an estimated total of $40 million.
It must have been like winning the lottery when Robert F. Smith, this year's commencement speaker at the all-male, historically black college in Atlanta, made the announcement. Smith is the Founder and CEO of Vista Equity Partners, a private equity firm. He said he wanted to ensure that the students enjoy “all the opportunities of the American dream.”
"I don't have to live off of peanut butter and jelly sandwiches,” said one Morehouse graduate, who had already calculated that it would take him 25 years to pay off his $200,000 in college debt. “I was shocked. We all cried.”
But as heartwarming as that moment was, the vast majority of college graduates this year will have no such luck.
Student debt is clearly a crisis in this country, with more than 44 million borrowers collectively owing $1.5 trillion, according to Forbes magazine. Connecticut had the highest average student loan debt per student from the Class of 2017, at $38,510. That makes student debt bigger than credit cards or auto loans as a category, and second only to mortgage debt.
All of which makes student debt a big industry, since Congress has been allowing more and more of it to be taken over by the private sector while states were also cutting back on aid to public universities, causing tuitions to rise.
A number of Democratic presidential hopefuls have endorsed Sen. Bernie Sanders' idea to eliminate undergraduate tuition and fees at public colleges and universities, but that seems unlikely to happen. A less-radical provision would be to lower interest rates and allow those with student loans to refinance. President Donald Trump would prefer to cap the amount of federal aid a student could take out.
It’s impossible to say what this or the next administration or Congress will do about student loans. It’s also alarming to note that the delinquency rate on this borrowing is high and continues to rise.
For these reasons, prospective college students and their parents are cautioned to look long and hard at the numbers before taking on college debt.
“Students shouldn’t assume their loan servicer has their best interest in mind,” Judith Scott-Clayton, a Columbia University associate professor, told Bloomberg.com.
Words to the wise.