Student debt loads just may be America's next big crisis

Student debt loads just may be America's next big crisis

Lori Sturdevant
Minneapolis Star Tribune
November 26, 2011

With posters assailing the greed of "the 1 percent" as a backdrop, Will Knapp described the reason he decided to spend the last half of the 2011 fall semester at the College of OccupyMN -- student loan debt.

The 22-year-old South Dakota native and Army veteran told me he started racking up debt while still in the Army. He took expensive University of Phoenix online classes at the Army's encouragement, only to discover that the credits he earned would not apply to the law enforcement degree he wants.

Now, several semesters into a program at Minneapolis Community and Technical College, his debt load has reached $24,000, and he's not through yet. Meanwhile, it hasn't escaped his notice that not many cities are hiring more cops these days.

Too much student debt, and too few jobs. It's a situation that's inspired Knapp and several thousand like him around the country to find a sleeping bag and camp under an Occupy banner this fall.

They are drawing attention to an issue that's climbing on the nation's worry list. For a couple of decades, the cost of higher education has been shifting from taxpayers to students and their families, and from grants to loans.

The recession is accelerating that trend. Student-loan debt has been the fastest-growing type of personal debt in the country since 2008, jumping in aggregate from $440 billion to $550 billion in less than three years. At that pace, it will exceed total U.S. credit card debt in a few years.

Minnesota is among the leaders of this pack. Average student loan debt hit $29,100 for Minnesota's public and private college class of 2010. That's fourth-highest among the 50 states.

The last three years also saw job prospects for college graduates wither and family borrowing capacity decay.

As a result, some economists have taken to referring to student debt as a "bubble," the kind that injures the whole economy when it pops. The collateral damage if that happens could be just as scary.

Large numbers of young Americans could find themselves financially barred from college, and unhappy enough about that to join an Occupation, or worse.

That makes this a fascinating time for Larry Pogemiller to leave his longtime state Senate perch and take the helm of the state Office of Higher Education. It administers the State Grant Program, Minnesota's taxpayer-funded assistance for low- and middle-income students, and advises the governor and Legislature on higher-education policy.

For 31 years, DFLer Pogemiller represented a district that included the University of Minnesota and Augsburg College campuses. He knows their issues, and as majority leader for four years, he probably helped decide a few of them.

But he wasn't known as a higher-ed wonk. His views about, say, how to slow or stop the rise in student-loan burdens aren't widely known -- and are about to matter. (Or so I told him when I asked for an interview.)

"It's going to take two things," Pogemiller said about the debt problem. "We need to bring the whole cost structure of higher education down, in a way that makes spending better align with quality. And we need to reform and broaden the state's financial aid system."

What does "reform and broaden" mean?

"The expectations about family responsibility for college costs are out of whack" in the State Grant Program's distribution formula. "They're too high, and should come down.

"And we've got a large and growing number of older students who have their own families, and who aren't served well by the financial aid system. They need a fairer system."

Gov. Mark Dayton is encouraging the new administrations at the University of Minnesota and the Minnesota State Colleges and Universities to economize boldly, Pogemiller said. The three administrations agree that public higher education will be stronger, or at least more stable, if it's leaner.

But a broader, reformed State Grant Program likely would be a more expensive one for taxpayers. It won't be easy to secure more money for student aid in the face of the budget deficit that's likely to recur in 2013 -- not to mention the shortfall in the current budget that many watchers expect will be announced on Thursday.

Make that: It will take someone with legislative know-how, statewide contacts and political skill to rally support for more and fairer student aid.

That sounds like a job for Larry Pogemiller.