With another academic year underway, many thousands of American students have taken on far too much student debt—often unbeknownst to them. Some, particularly those entering financially lucrative fields, will be able to pay off their loans with little trouble. Many more will be “financially hobbled for life,” as a recent Wall Street Journal feature put it, trapped under the weight of their debt for decades to come.
 

It does appear, though, that America is waking up to the reality of the student debt crisis. We’re seeing more and more pieces exposing just how bad the problem is both on the undergraduate and graduate level. The National Association of Scholars has been warning about the growing crisis for years—as well as the related problem of administrative bloat—culminating in our February report, Priced Out: What College Costs America.
 

With this influx of writing on student debt has come a plethora of new tools and proposed solutions. Some are pushing for student debt forgiveness, though this is only a true solution if you believe that money isn’t real and that debts can just be *poofed* away with a magic wand (believe me, I have heard this “argument” before). For those of us who can do more than imagine our wallets, it’s not that simple. That’s why the NAS has been closely monitoring the student debt discourse, as well as contributing our own ideas, in an effort to highlight the best strategies on the market.
 

Here are three ways to better inform prospective students of the reality of the debt crisis and to help those who are already trapped in it:
 

1. Avoid bloated bureaucracies. NAS Research Associate Neetu Arnold recently argued in Priced Out that administrative bloat is one of the leading causes of sky-high college prices. Just take this sobering statistic: “In 2018, there were 2.6 administrators at 4-year public and private universities for every full-time instructor.” Increasingly, these administrators are brought in to fill newly created positions within the Diversity, Equity and Inclusion (DEI) Industrial Complex. There will always be more of these positions created—never less—and students will have to foot the bill every time. Simply put: When researching colleges, target the ones with minimal administrators, particularly of the ever-expanding DEI variety. Your wallet will thank you later. A neat new interactive tool created by the Heritage Foundation will help you do just that, which displays the number and administrator-faculty ratio of DEI bureaucrats at all Power Five universities in the country.
    
2. Examine debt-to-income ratios in your field. A debt-to-income ratio (DTI) is a simple metric to help determine whether or not a degree in a particular field is likely to be financially worthwhile. A DTI of 1 means that you earn just as much as you owe. A DTI of less than 1 is optimal, as it means that you owe less than you earn. Students get in trouble with a DTI greater than 1, where they owe more, sometimes several times more, than they earn. The Wall Street Journal recently published a handy DTI tool that lists ratios for bachelor’s, master’s, doctorate, and professional degrees for a wide variety of fields and institutions. For example, a J.D. at Stanford (DTI = 0.7) is likely to be a good investment. On the other hand, a master’s in music from NYU (DTI = 3.55 … ouch!) is likely to cost you big time in the long-run. The Department of Education’s DTI data (which it calls debt-to-earnings) provides similarly helpful information. A simple DTI reality check will help prospective students get their heads out of the clouds and make smart financial decisions for their education—before they commit to a school.
    
3. Allow students to discharge their debt by declaring bankruptcy. If all else fails and students still incur debt they can never pay off, bankruptcy should be a viable option. As recently argued by Manhattan Institute Senior Fellow Allison Schrager, students (particularly heavy-laden graduate students) ought to be able to discharge their loans by declaring bankruptcy. As she notes, it is now incredibly difficult to do this, but declaring bankruptcy is a key way to hold universities and student loan providers accountable for granting excessive loans to students unlikely to pay them back. She writes, “The prospect of bankruptcy would transform the private student loan market. Private lenders will be much less likely to lend tens of thousands of dollars to someone seeking a film studies degree who may declare bankruptcy. This would make credit less available to certain degrees, which would make students more price conscious and demand better value.” Of course, this doesn’t solve the larger problem with the other 90% of student loans. The Federal Student Indebter Department—errr, I mean, the “Department of Education,” currently provides and services the lion’s share of student debt in the U.S. Without reform of this market, the options above will only provide students opportunities to save themselves from the clutches of Uncle Sam’s loan officers.
    

There are many more strategies we may pursue to curb the student debt crisis. Those mentioned in the conclusion of Priced Out include reducing international student recruitment (students who willingly pay full price and therefore allow costs to remain high), creating 2-3 year vocational tracks at universities, and making institutions liable for part of a student’s loan payments if he defaults. The student debt crisis is a complex issue that will require a multi-pronged approach to effectively mitigate—we hope that students, legislators, and higher education institutions will put these strategies in action before even more students are permanently crippled by excessive debt.
 

Until next week.
 

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