The student loan debt crisis and the economic and societal consequences: Reflections on the United States and England

In the United States the student loan indebtedness issue has become a subject of national concern impacting 44 million student borrowers with nearly $1.8 trillion of debt. The complexity of this problem in the U.S. can be traced back to 1972 when federal policy makers created a federal funding scheme that has rewarded state governments for decreasing their funding support, encouraged tuition-based funding policies at most colleges and universities, and allowed an American aging population to avoid their financial responsibility to the next generation of students. The economic consequences of this complicated issue are already beginning to be felt in the small business, housing, automobile, and most consumer spending markets.

At the core of this complicated issue are decades of state government disinvestment resulting in ongoing tuition and fee growth with the federal government backstopping the system through its over $100 billion in federal loan programs. As federal loan programs expanded many public colleges and universities began shifting their financial reliance from state government to more tuition-based revenue models backed by the federal programs. In reacting to the largess of these available federal loan programs higher institutions including private colleges and universities developed a fiscal addiction to the availability of federal loans while a plethora of for-profit institutions saw this as a federal funding “gravy train” to be maximized at all costs to the detriment of vulnerable student populations.

In addition to this mounting student loan debt problem in the U.S., England adopted a higher education funding scheme similar to that of the U.S. in 2012 when universities were allowed to increase university tuition fees from 3,600 pounds to 9,000 pounds. A decade later, England is now facing its own student loan debt issue that has surpassed 205 billion pounds with student borrowers owing an average of over 45,000 pounds making England the largest average student loan debt per borrower in the developed world.

This presentation and a future CGHE working paper on the topic will focus on the development of this crisis in the United States and the economic and societal consequences facing the U.S. and England if the problems are left unaddressed by policy makers for decades to come.