Lending Perspectives: Our role in solving the student loan crisis
Credit unions can leverage their trusted advisor status to help college students compare income potential and likely debt before they enroll.
Recently, a group of credit unions that made private student loans to consumers who attended ITT Technical College were ordered to pay $7 million to finalize a previous settlement. This $7 million was on top of the $150 million in loans that had been ordered by a court to be forgiven.
In 2014, ITT Technical College made Time magazine’s list of “the five colleges that leave the most students crippled by debt” before its closing and bankruptcy in 2016. Before 2016, a year’s tuition at ITT ranged from $45,000 to $85,000, depending on the degree program. Unlike the old adage about “you get what you pay for,” many of the students received a worthless degree.
Over the last 20 years, the costs of college education and the resulting debt have gone up faster than personal incomes. There is no way we as an industry can look at this as anything other than an unsustainable trend. But what’s causing it? Pew Trust has shown that while higher education is supported by both state and federal funding, states have slowed the growth of spending on high education. First result: a larger gap borne by students. Second result: that gap has been financed by an exponential growth in private student lending. Third result: a generation of college grads are now faced with nearly catastrophic debt.
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