Two weeks ago, the Brookings Institution, a think tank based in Washington, D.C., released a report analyzing the student debt repayments of first-time entrants from the years 1995-96 and 2003-04. Its findings were particularly troubling for students; the study projects that 40 percent of borrowers will default on their loans by 2023.
Considering the national student loan system has been floundering for years, these findings should not come as much of a surprise. Still, the fact that nearly half of those who receive loans cannot pay them back should open the eyes of both students and colleges nationwide. Put simply, this is a serious issue that has been put on the back-burner for far too long. And if lawmakers cannot create a reasonable solution, then universities themselves have the obligation to organize a sustainable loan system soon — for students, and for their own sake as well.
As a major private university with a large and diverse student body, USC is certainly affected by this crisis. Without the backing of federal funding, the University relies heavily on tuition costs — which routinely rise every year — and private contributions. In fact, according to a 2016 report by Business Insider, USC is the 19th wealthiest college in the nation with an endowment of $4.59 billion.
Considering its large pool of resources, USC should strongly consider allocating its wealth to provide more private scholarships and grants for families in need. A considerable amount of the financial aid provided by the University — 25.9 percent, to be exact — comes from federal, parent and private loans, and much of it may not be paid back at all. Far too often do seemingly manageable financial aid packages fool students into believing they are paying less than they actually are: The same students that constitute the nation’s 40 percent default rate.
USC must also consider the range of economic disparities from its student body to improve its financial system. A 2017 report from The Center for American Progress reveals different levels of loan default across demographics, with black and Latino students more likely to default, compared to their white counterparts.
The data showed 49 percent of black borrowers and 36 percent of Latino borrowers have defaulted on a student loan for their undergraduate education, compared to 21 percent of white borrowers. The report also analyzes college graduates in addition to overall loan borrowers, and within that statistic, 25 percent of black graduates tended to default.
Indeed, the University should be praised for its existing scholarship system. Under it, approximately 200 applicants receive the half-tuition Presidential Scholarship (not including National Merit Scholars), 100 receive the full-tuition Trustee Scholarship and about 15 receive either the Morks or Stamps scholarships, which both offer a stipend in addition to full-tuition aid.
That is not to mention the many scholarships the University offers to a variety of students. In fact, in the 2015-16 school year, the University provided over $300 million in grants and scholarships to undergraduates.
Then again, there is always room for improvement. Stanford, Harvard, Amherst and Vanderbilt University are all examples of universities that have a “no-loans” financial aid policy, which erases most concerns surrounding rising default rates.
As USC strives to increase its reputation among elite colleges and institutions, it must work to decrease student barriers to financial aid. At Stanford, families making less than $125,000 a year are not expected to pay for tuition, and those with an income less than $65,000 also receive free room and board. Harvard offers a similar package — families making $65,000 to $150,000 are expected to contribute at most 10 percent of their income to tuition.
Sure, these standards may be lofty for a college with a population of 45,500, but USC does not need to break the bank to ease student debt. For instance, Duke offers a less generous no-loans policy that lowered average student indebtedness to $22,526 for 2016 graduates — a quarter less than the national average.
On top of this, USC needs to prioritize the financial literacy of its students. If a no-loans policy is not realistic, then students should at least understand how to properly apply for necessary aid, and how to pay it off within the determined time period. Currently, the University partners with “Salt,” a free online-based platform that assists students with financial management. The problem with this, however, is that few students are even aware of these services. And considering the severity of the debt problem at hand, a comprehensive education in financial literacy should be mandatory.
No matter how one approaches the issue, the student loan crisis cannot be taken lightly. USC — and all colleges, for that matter — must find a way to reform the currently failing loan system into one that is feasibly sustainable for both itself and aid-dependent families. Its financial security as an institution is on the line.
Daily Trojan spring 2018 Editorial Board