By Charlie Javice, CEO and Founder, Frank
America prides itself on good customer service. One can show up to a Nordstrom store with a tire (not a product Nordstrom even carries), demand a refund, and Nordstrom accommodates. If one isn’t happy with a product, just return it. Not happy with a service? Satisfaction guaranteed, have a lifetime warranty!
But when it comes to higher education, which often amounts to one of the largest purchases an American will ever make, there is no such warranty. Consider this:
- The amount of student loan debt outstanding in the US is $1.7 trillion
- The average amount of student loan debt per borrower is $37,584
Source: Federal Reserve
The time has finally come for students to demand the same level of customer care from their universities that we expect universally. Too many Americans are simply underwater from their investment decision in higher education. Let’s take a look at where things stand:
- By 2023, it’s estimated that as many as 40% of borrowers could default on their student loans, according to the Brookings Institute
- 80% of borrowers are not in current repayment status (portfolio by loan status)
- 40% of all student loan borrowers don’t even end up with a degree
- Only 1/3 of students actually graduate from public college in 4 years
- 35% of students at private colleges drop out within 6 years
Source: US Department of Education
Our system has failed American students and their families for decades and still continues to fail to this day. It makes perfect sense that students are demanding a refund.
After all, a classic tenet of American consumerism is that “the customer is always right.” Even so, in much of the dialogue surrounding student debt forgiveness, the opposite sentiment is often unfairly assumed. If student debt is to be “forgiven,” who are we suggesting is to blame?
Instead of calling this policy “student debt forgiveness,” we should be saying what it really is: a big college bailout.
There are more than 5,000 American colleges and universities and the sad truth is that many of them are repeatedly failing their students and saddling them with debt. They market an American dream to their students with very little disclosure: “Go to college and you’ll be successful. Don’t worry, we’ll help you get a job.” The fact is that ~53% of college graduates are unemployed or working a job that doesn’t require a bachelor’s degree.
Now, Americans are faced with a harsh reality: students have accumulated $1.7 TN of student debt and are nowhere close to paying it back. Student loan forgiveness is so needed now that it’s undeniable. The question is, why does the burden fall on the American taxpayer? Are colleges truly too big to fail?
As the Biden administration and Congress begin to define the contours of their plans for student debt forgiveness, let’s be frank about who is being bailed out here: colleges and universities. And this bailout must come with strings attached, like in the 2008 financial crisis when banks were told to shape up or go bust. This time, we need to hold the higher education industry to a higher standard and correct for the long term, not just the past.
As part of this college bailout, schools must be held responsible for the promises they make to their students and the actual results they provide. They should be required to publish data (without hiding it deep on their websites) on their outcomes, including the true average cost of out-of-pocket tuition, debt held by graduates, employment outcomes, and graduation rates. They must rein in out-of-control tuition expenses. And they should be cut off from federal aid if they don’t perform for their students.
This type of accountability is already expected in the for-profit world, though historically it has not always been properly enforced. Even so, for-profit colleges and universities have faced scrutiny on this topic time and again. Kaplan, University of Phoenix, ITT, Grand Canyon, and others have all come under fire for the outcomes of their services, and multimillion-dollar settlements with them almost always include the college paying off the student loans of their students. The government holds the for-profit college accountable and if the college can’t afford to pay, the college goes out of business. But in the non-profit world, colleges and universities have not faced such scrutiny or steep penalties. That double standard needs to end.
This college bailout should not let schools avoid accountability for the part they’ve played in breaking our higher education financing system. As students suffer with debt across the nation, it’s time to remind colleges and universities of another pillar of American consumerism: “You break it, you buy it.”