Around 43 million Americans owe around $1.7 trillion in student loans, according to data from Forbes. Forbes pegs the average debt at just under $29,000. That is about what I owed when I completed my coursework for a doctorate, after having obtained several graduate degrees. That sounds like a lot of money, but it really is not. Young people tend to have smaller loan balances than older people. Those age 24 and under have average balances of less than $14,000, while those 62 and over have average balances of nearly $50,000. You would expect the opposite, but the reason is that one-third of debtors are not making payments on their loans, the balances of which grow over time.
Student loans are not rated for risk. Nobody assess whether one degree is worth more than another; and whether one college is too expensive compared to another. Nobody limits borrowing based on degree. The mediocre student studying English Literature at an expensive private university far from home is treated the same as a gifted student studying mechanical engineering at a state school, while living at home. The mechanical engineering graduate with $50,000 in debt is in better shape to repay their loans than the English Lit graduate with $200,000 in debt. However, there are no restrictions about what you borrow for, and how much. The latter may change.
The Trump Administration has proposed limiting the amount of federally guaranteed graduate school debt students are allowed to borrow. Reform is certainly needed. One reason for the inflated cost of college is easy access to student loans.
The New York Times, worries that President Trump’s proposal will adversely affect medical education, saying:
President Trump’s proposed budget would make deep cuts in government health plans and medical research, and, critics say, could also make finding a doctor more difficult. It restricts loans that students rely on to pursue professional graduate degrees, making the path to becoming a physician harder even as doctor shortages loom and the American population is graying.
The domestic policy bill, which passed in the House last month, would cap direct federal unsubsidized loans at $150,000 — far less than the cost of obtaining a medical education — and phase out the Grad PLUS loans that help many students make up the difference.
Medicine education is expensive:
Four years of medical education costs $286,454 at a public school, on average, and $390,848 at a private one, according to the Association of American Medical Colleges. Medical school graduates leave with an average debt of $212,341, the association found.
If students borrowing for graduate school is capped students needing more funding could turn to the private loan market. There they would have fewer consumer protections and debts would not be eligible for public loan forgiveness.
Sara Robertson, the press secretary for the Republicans on the House Education and Workforce Committee, said the proposed loan limits “will drive down the cost of medical school and thus reduce the need for students to borrow in the first place.”
Ms. Robertson is probably incorrect that reducing access to student loans will reduce the cost of medical school. The price of medical education is high because faculty members are highly paid, and graduates can expect to earn far more than the average wage. However, reducing access to student loans could save a lot of would-be Humanities PhD graduates the sting of realizing there are 10 times more graduates than tenure track positions available. I am only being a little facetious: students should be advised about the prospects of their degrees and whether they will be likely to be able to repay.
The American Medical Association is worried about the possibility reduced funding available for medical education and has asked Congress for a special exception.
The irony of slashing loans for medical school, many officials said, is that medical students are more likely than many other graduates to be able to repay them.
There are other ways for government to finance medical education. Congress could create a special program or create an exception to fund medical education. Congress could possibly even tailor funding to needed specialties like family medicine. Years ago, a family member even participated in a program with loan forgiveness in return for practicing in an underserved area. As I recall, the requirement was not practicing medicine in the sticks. It was a suburb near a major city. It is about time that student loans are more restricted to people likely to repay them.
Read more at: Trump Budget’s Caps on Grad School Loans Could Worsen Doctor Shortage