Colleges helping to battle student debt
TEXT OF INTERVIEW
Scott Jagow: Yesterday, Stanford University announced a huge boost in financial aid for students from middle-class families. Most families making under $100,000 will be able to send their kids to Stanford for free. Assuming they get in, of course. But what this does is eliminate the need for student loans, which just like home loans and car loans, have ballooned.
Let’s bring in our economics correspondent, Chris Farrell. Chris, what’s your take on this idea?
Chris Farrell: So what they’re doing is they’re saying to the low-income and lower-income families, you know what, you’re not going to have to borrow. It’s going to be a combination of grants and work-study programs. And this is spreading throughout the private college system. And it’s been dismissed, Scott, you know, by people saying, well it’s these really wealthy universities, you know, they can afford to do this. And well, that’s true. But I think they’re in a vanguard of a movement where just what you’re talking about — college has gotten too expensive. The debt burdens have gotten way too much. And so therefore, colleges are under increased pressure to lower their cost to low and middle-income families.
Jagow: But can public universities afford to do that?
Farrell: Well, this is where you believe in the benefits of competition. And we’ll have to see. Now, a lot of public universities are going to go through a very difficult time, because take a look what’s happening, state and local finances. We’re in recession, or we’re heading into recession. But I do believe that in the economy as it’s evolving, most state governments recognize that they need to be competitive with their university systems. So yes, they will step up to the plate, but it’s gonna take time. The private universities are gonna move faster simply because they can, and they’ll dip into their endowments. But you’re going to see the public universities increase their efforts to raise their endowments, which they’ve been doing already. Plus, I think the states are gonna simply have to step up to the plate and be more competitive going forward.
Jagow: Well, let’s get down to the bottom line here. Parents and students are filling out the financial aid forms right now. What do you tell ’em?
Farrell: They actually have right now, is there is the government student loans. That’s what you want to borrow, you really want to get those STAFFORD loans if you can. You want to steer clear as long as possible in the private student loan market. There are a lot of abuses in that market, there are high interest rates, high fees, and I would be very concerned. You may have to do that, but I would limit what you do in that private student loan market, which is where all the lenders want you to borrow from, which it’s more profitable to them. Which means the better deal for you: Get those government student loans.
Jagow: All right. Chris Farrell, our economics correspondent. Thank you.
Farrell: Thanks a lot.
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