Until debt do us part!

A case for design interventions in 1.5 trillion dollar student loan debt crisis in America. The plethora of problems and how design can shift this conversation?

“ Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit. Education shall be directed to the full development of the human personality and to the strengthening of respect for human rights and fundamental freedoms.”

- Article 26: Right to Education, United Nations 1948

Over 70 years ago, On December 10, 1948 the General Assembly of the United Nations adopted and proclaimed the Universal Declaration of Human Rights. Article 26 was about right to education. Education, including higher education has evolved during this period but one thing which stands out is the exploding cost of colleges in America and the ensuing crisis of student debt. This debt is not only making new generations financially unstable but is now linked to numerous mental health and other lifestyle conditions. As many as 44.7 million Americans have student loan debt, according to a 2018 report by the Federal Reserve Bank of New York. The total amount of student loan debt is $1.46 trillion as of the end of 2018 — more than credit cards or auto loans.

The rise of student loan debt

Every day, there are news stories about the student loan debt crisis. But what is the crisis we are seeking to solve? Is it the staggering amount of student debt or the rapidly rising cost of higher education? The interest rates on these student loans or the high default rates? Or all of the above? Let’s take a look:

The 1950s and 60s

Introduction of Student Funding

As early as 1950s the federal student loans have their origins in efforts to help middle-income families afford a college education. Lack of math, science and engineering manpower, Cold War and increasing poverty accelerated the creation of various federal programs to fund higher education during that period.

Massachusetts Higher Education Assistance Corporation (MHEAC) began when a group of people approached Massachusetts local businesses for philanthropic donations with the idea of creating a pool of money to guarantee loans for higher education. This program provided a model for a future federal student lending program.

Around the same time, influenced by the Soviet Union launch of Sputnik in 1957, the first federal loan program, the National Defense Student Loan (NDSL), was created in 1958 by the National Defense Education Act emphasizing science, mathematics, and engineering fields. Supported through U.S. treasury funds, financial resources were provided to campuses to distribute to students. In an effort to combat the “War on Poverty”, President Johnson’s proposed national need-based scholarship simultaneously created a loan program geared towards middle-income students.

The Guaranteed Student Loan, (GSL) today known as the Stafford Loan Program, was authorized through the 1965 Higher Education Act (HEA) to provide federally insured loans for middle-income students.

https://www.luminafoundation.org/looking-back-to-move-forward-1

The 1970s and 80s

Growth in borrowing

In the 1970s, federal loans increased in volume primarily due to the rising college fees, federal loan programs and expansion of eligibility limits. The HEA Reauthorization Act, as part of President Lyndon Johnson’s Great Society domestic agenda, created the Student Loan Marketing Association, which later became Sallie Mae provided incentives for states to establish loan guaranty agencies, which insured federal student loans made by lenders. The HEA Reauthorization created the Basic Educational Opportunity Grant (BEOG, later renamed the Pell Grant)

In 1978, The Middle Income Student Assistance Act (MISAA) eliminated the income requirement for student loans, allowing middle- and high- income students to qualify for loans.During the early 1980s PLUS program was created to allow parents to borrow for their children.

The Omnibus Reconciliation Act repealed MISAA, replaced the PLUS program with Auxiliary Loans to Assist Students (ALAS) and extended borrowing to graduate and independent undergraduate students. It also imposed borrower loan origination fees on new loans.

1990s and 2000s

Accountability and repayment programs

The growing number of loans and spike in default rate of repayment pushed the federal government to create programs and laws to create more accountability for loan repayment. This came in form of sleuth of acts in late 1980s — mid 1990s. This included HEA Reauthorization of 1986, Establishment of Cohort Default Rate. In the 1992 HEA Reauthorization, direct lending was introduced introducing unsubsidized loans available to all and removing limits on loans.

During this period the other big theme apart from accountability was introduction of myriads of loan repayment programs. Few of these programs came into existence through various Acts and programs:

  • 1993 Omnibus Budget Reconciliation Act, Income-Sensitive Repayment Plan
  • 2005 Higher Education Reconciliation Act, Emergency Appropriations Act allowing borrowers to reconsolidate loan between lenders
  • College Cost Reduction and Access Act (CCRAA)
  • The Higher Education Opportunity Act (HEOA)
  • The Health Care and Education Reconciliation Act (HCERA)
  • In 2010 the Obama Administration created the Pay As You Earn (PAYE) and further expansions of the program in 2014

Let’s Breathe!

Let’s take a pause here. For us it was overwhelming to go through this metamorphosis of student funding in last 70 years. For students at ground zero, the challenge of how to fund higher education has not gone away, albeit it has become even more compounded with myriads of programs and other devices leading into debt cycles.

How have we come this far? Is it a policy challenge, economics question or just a behavior change conundrum? Is it just pure simple business for economical and educational institutes? There are just too many questions around this issue and very little promises.

So the question we have asked ourselves at yform.studio is very basic and could be naive as well (more on that later) — How can design address this 1.5 trillion dollar problem?

Re-frame the problem

The history, size, and complexity of the student loan crisis, combined with the interlocking, interdependent higher education networks — universities, lending institutions, and government agencies — defy simplistic reforms and have largely immunized the student loan industry from having to make significant changes.

https://hbr.org/2019/09/what-will-it-take-to-solve-the-student-loan-crisis

The roots of rising college and university costs are not difficult to identify, the chief culprit has been major reductions in state support; public investment in higher education has been in retreat in the states since about 1980. The other key aspect is inflating cost of higher education, including, tuition, boarding and facilities at educational institutes. The third key cause is the ‘administrative burden’ to run these institutes and a direct conflict of interest of people managing these institutes.

Before we discuss any approaches, let’s look at what will impact the education funding in short and long term.

Future of Education

In 2030 there would be around 16 million students in US availing higher education. 90% of that would be primarily public colleges. This figure would grow insignificantly from 2020 (less than 1%).

As per www.stanford2025.com The nature of how we seek education will start inherently shifting towards:

  • Open Loop — Students applied when they were ready and learning is distributed across their lives as they saw fit.
  • Paced Learning — Students moved through phases of learning based on their individual readiness.
  • Axis Flip — Instead of building foundations solely in a unique discipline, students mastered skills and competencies.
  • Purpose Learning —Whereby students declared a mission, not a major. The intent was that students couple their disciplinary pursuit with the purpose that fueled it.

The education of future is shifting more towards the concept of ‘Lifelong Learning’. The focus and impetus is to build basic building blocks of learning and acquire skills and knowledge as you journey through life. Online education is primarily driving these changes on how and when students absorb knowledge. What it does to the education institutes in the future and subsequently funding to attend those is to be seen!

Jobs in next 20 years?

Degrees aren’t the deciding factor for future jobs. Around half of Young Americans (Gen Z and Millennials) say their degree was not important in getting their current job.

Here are some interesting trends:

  • Increased process automation, an AI-augmented labour force, and increased consumer demand for AI-enhanced products and services will reshape the jobs of future. Data science enrollment itself has grown about 7x in last 15 years.
  • Shift in opportunities towards emerging markets. Skills would be required to build empathy towards those markets.
  • Newer models of working, including location time and longevity in a specific role.

Technology Shifts

Technology is re-framing existing models of learning, living and working. The rapid rise of automation, information networks and smart devices will keep on shifting these models.

  • Personalized education through Data and AI
  • Rise, maturing and consolidation of mobile learning
  • Automation of education services
  • AI and Robotics are changing the nature of job market and inherently the skills required to succeed in those.

Ideas for Change

There has been an inherent interest in what can be done about the 1.5 trillion student-loan debt problem. It calls for policy shifts, new models of learning and funding the same. Models and programs like community driven funding and partnerships. Mission based approach to learning would be driving some of these changes as well.

The fin-tech push

There is a huge push in the startup world to discover ways of funding, reduce and manage loans. From automating the financial paths for individuals to federal savings + forgiveness programs and creating pathways for employers to contribute towards student loan debt. Notable amongst those are:

yform.studio is a strategy + design firm using design to bring clarity to complex problems, frame new opportunities and build meaningful and impactful products.

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