Proponents for student loan forgiveness are ignoring a significant cause of excessive student loan debt, according to new research from the Texas Public Policy Foundation. The paper focuses on a system in which colleges and universities face little to no accountability for saddling students with massive debt while providing a low-quality education. The research by TPPF’s Andrew Gillen reveals a new accountability plan for colleges and universities who distribute federal loans, including metrics that will identify problematic programs and reign in the reckless lending practices that have led to the student debt crisis.  

“Like any other investment made with borrowed money, student loans can fund productive and worthwhile pursuits. Conversely, debt can also be squandered on malinvestment. The student loan debt that falls into that category is frittered away on low-quality education that fails to improve the knowledge or skills of students, fails to prepare students for a career, or is used to fund years of leisure and partying,” the paper reads. “Fortunately, new data from the U.S. Department of Education can be used to identify problematic programs, and policymakers should enact new metrics to hold these programs accountable.”  

“Instead of spending hundreds of billions of dollars on student loan forgiveness, lawmakers should focus on the root cause of the student debt crisis- colleges and universities who suffer no consequences for bad loan decisions,” said Andrew Gillen, senior policy analyst for TPPF’s Next Generation Texas. “Our metrics, outlined in our latest research, would bring that accountability to higher education, ensuring that future loans are made with the student’s ability to repay taken into account, not just recklessly providing students with federally guaranteed funds.”  

Key Points 

  • Colleges that leave their students with excessive student loan debt relative to post-graduation earnings are not being held accountable.  
  • The only federal accountability metric, the cohort default rate, is extremely lenient and is rapidly becoming obsolete due to income-driven repayment programs.  
  • Federal and state policymakers should introduce new accountability metrics to hold colleges accountable. Debt as a percent of earnings and gainful employment equivalent are two promising options.  
  • Less than one out of every five college programs would face sanctions under our recommended accountability systems. 

To learn more, read the full publication here.