To date, our analysis of the U.S. student loan system has mostly critiqued ‘over-reliance’ on student debt and
discussed asset-based initiatives such as Children’s Savings Accounts (CSAs) as complements rather than
alternatives to student loans (see Elliott & Lewis, 2013). This nuance was in part informed by our understanding of
the evidence at that point, which seemed to suggest that debt loads above a certain threshold (say, $10,000) were
particularly problematic (e.g., Dwyer, McCloud, & Hodson, 2011), and that ensuring that students did not depend
entirely on student borrowing might mitigate the worst effects. However, we acknowledge that some of our
reluctance to more completely indict the student loan system was rooted in our recognition of the considerable
policy inertia and significant vested interest behind it,

 and our concerns that our core message—the potential for
superior educational and financial outcomes through the lever of asset development (Assets and Education Initiative,
2013)—might be lost if our voices were marginalized as stridently or unrealistically opposed to student loans. It is
intentionally, then, that we here pivot to this more absolute critique of student loans and a clearer proposal to move
away from debt-financing of higher education.
We are still willing to admit that the evidence is not clear that there can be absolutely no role for student loans;
however, their role may be more justified in the case of higher-income students, to facilitate attendance at more
selective institutions, avoid employment while studying, or preserve familial assets, but we no longer see a
compelling rationale for maintaining a significant government stake in perpetuating a student loan system. Nor do
we see a way to adequately capitalize the asset-based alternative that holds such tremendous promise to restore
higher education as a catalyst for equity and prosperity in our society as long as we continue to divert such high
levels of precious resources to a student loan program whose greatest recommendation is that its customers seem to,
for the most part, eventually rebound from their use of its products. The realizations below, which cumulatively lead
to our proposal to replace the current student loan system with a coherent savings structure and a robust reparation
for damage already inflicted on student borrowers, have not come without careful consideration. 

The U.S. federal student loan program has received considerable policy attention in recent years, particularly as
popular media coverage of repayment woes skyrocketed following the financial collapse (see Frizell, 2014; Korkki,
2014; Levin, 2013) and the associated increase in unemployment for even college graduates (Mishcel, Bivens,
Gould, & Shierholz, 2013). However, the policies proposed in the aftermath have almost exclusively focused on
softening the blow dealt by student loans, rather than avoiding the damage in the first place. Approaches such as
income-based repayment plans, in their various iterations (Talbott, 2014), are designed to help borrowers cope with
the consequences of their student borrowing,

 yet none have been demonstrated to truly avoid the educational, social,
and financial hazards of our debt-dependent system. Temporary reductions in interest rates would reduce the cost of
borrowing, at least in the short term (Lindstrom, 2013), but would not address loans’ deterrent effects (Baum &
O’Malley, 2003), particularly since few prospective students understand the real cost of financing.
Even as understanding of student loans as a dis-equalizing force has permeated popular discussion to some degree
(see Thompson, 2014), there has been little reconsideration of the fundamental wisdom of relying on debt to
facilitate such an important part of the U.S. path to economic mobility. Indeed, some proposals might exacerbate
inequity in higher education.

 For example, if we encourage low-income students to enroll in less expensive two-year
schools to reduce their expenses (Goldrick-Rab & Kendall, 2014) and, then, need to borrow, but economicallyadvantaged students can choose their schools without such considerations, we run a real risk of creating an explicitly
two-tiered structure, particularly since all institutions are not created equal in terms of educational outcomes (for an
example of how institutions are not created equally see NCES, 2011).
Reimagining, and, then, rebuilding, the U.S. financial aid system must begin with more completely accounting for
the true costs of student loans, to students and the larger economy (see, Hiltonsmith, 2013; Elliott & Lewis, 2013;
Dugan & Kafka, 2014). 

In this light, it is clear that, while current proposals center on reducing monthly payment
burdens because these ‘tweaks’ can reduce the incidence of delinquency and default (Sheets & Crawford, 2014),
potentially masking the problems, they do little to address the long-term effects of student loans, before and after
college, and may even move in the wrong direction. Indeed, innovations that seek to reduce the strain on student
borrowers by extending the repayment period or making other modifications may only prolong the harmful effects
on financial and life outcomes (e.g., Egoian, 2013).
Today, we cannot claim ignorance of student loans’ failure to catalyze greater educational achievement, increase
students’ engagement in school, and foster stronger economic foundations (Cofer & Somers, 2000; Perna, 2000;
Heller, 2008; Kim, 2007; Dwyer, McCloud, & Hodson, 2011; 

Fry, 2014, among others). There is a growing body of
evidence that reveals the dimensions on which student loans endanger the well-being of individual borrowers, the
institutions dependent on them, and our macro-economy (Frizell, 2014; Korkki, 2014). Data reveal that
disadvantaged students, particularly low-income and students of color, are disproportionately affected by these
forces (Fenske, Porter, & DuBrock, 2000; Kim, 2007). These disparate effects are particularly unacceptable given
the role of higher education in fostering greater equity and upward mobility (Greenstone, Looney, Patashnik, & Yu,
2013). When we measure the student loan system comprehensively,

 looking beyond repayment burden to consider
the fullness of what we should expect from our financial aid system, the imperative for reform becomes more
urgent, and our way more apparent.
This fuller accounting of the effects of student loans reveals not only the different dimensions on which student
loans may harm prospective, current, and former college students and their households, but also the serious
limitations of any reforms that do not reduce absolute dependence on student borrowing. Contrary to popular belief
(Sanchez, 2012), it is not only the extremely ‘high-dollar’ loans—still relatively rare—that should be alarming
(Egoian, 2013). Indeed, since some of these loans are incurred by relatively advantaged students pursuing
exceptional degrees, 

these outliers may be far less dangerous than the ‘routine’ assumption of several thousand
dollars in debt by millions of Americans. What is increasingly clear is that there is no ‘safe’ level of student loan
debt. Analysis reveals negative effects on asset accumulation and subsequent financial well-being at levels even far
below ‘recommended’ thresholds, revealing the limitations of any efforts to protect students by simply trying to
avoid huge loans (Akers, 2014; Egoian, 2013).
Indeed, to the extent to which the collective narrative focuses on high-dollar debt as the problem (e.g., Edmiston,
Brooks, & Shepelwich, 2012), the psychic toll may be increased for those who wonder why their ‘small’ loans are
still crippling. Additionally, while talk of high-dollar debt may be particularly off-putting to debt-averse low-income
students, even the prospect of relatively small student loans may deter some prospective college-goers and,
certainly, does little to motivate their engagement (Cunningham & Santiago, 2008).

 It is absolutely true that some
students manage to borrow for college and still do fine, at least eventually. It is also true that, in what is becoming a
predictable outcome, many students who borrow even fairly small amounts experience disruptions in their college
experience, thwarting of their academic aspirations, and/or delay in their life progression (American Student
Assistance, 2013; Mishory, O’Sullivan, & Invincibles, 2012). In no other area of U.S. commerce do we invest so
heavily in a product that we acknowledge may be quite harmful, without knowing the threshold at which such
negative effects might commence. With the caveats required before student loans can be safely recommended, we
should focus our policy energies on reducing the utilization of student loans through the most efficient and equitable
means possible.

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