Here’s Another Way To Think About Student Loans Notice
By Steve Winnie
Every year in April when many students receive their college acceptance, I remember how lucky I was.
Growing up in extremely modest circumstances, I saw post-secondary education as the way to achieve my American dream. I became the first person in my family to go to college and then to law school.
There were many times when I felt as lucky as Charlie Bucket when he landed the Golden Ticket. For example, I was in disbelief that Cornell not only accepted me into their JD program, but also provided the financial help I needed. Their generosity opened the door to the life I had always wanted, including marriage, kids, home ownership, and an exciting leadership role.
Rethinking the conversation
Growing up in Pennsylvania, the country of the Declaration of Independence, I am proud to believe in “life, freedom and the pursuit of happiness”.
But to achieve happiness, we all need equal access to higher education. This is why I firmly believe that we need to rethink the conversation about student loans.
The current discussion of whether $ 10,000 or $ 50,000 in loans should be canceled is extremely important, but it obscures another central truth.
Without these loans, those with limited means but unlimited potential would be forever sidelined – and the nation would be worse off.
The point is, undergraduate and graduate education continues to be associated with increased earning power. Additionally, as our nation re-emerges from COVID-19, we need a greater pool of skilled and creative talent. In a world transformed forever, this is the only way to innovate for a new and more prosperous future.
That future depends on our coming together to stand up for responsible and ethical lending practices to help those who will benefit the most, rather than adopting a defensive or apologetic stance. In the process, we will help each other as well.
Galvanize everyone to float all the boats
Pennsylvania has one of the highest concentrations of colleges and universities in the country. It’s also home to some of the nation’s largest student lenders and lending platforms, and central Pennsylvania is teeming with small banks and credit unions.
It is time for us to float all the boats.
In our region, we know many families who sacrifice more than they should to send their children to school. They may have been comfortable before and then lost their jobs during COVID-19. For whatever reason, if their students are suddenly faced with high bills for textbooks or laptops, they may give up permanently.
Just think about the ripple effects here, even in the short term.
Educational institutions, which may be struggling to renew their courses, need to maximize graduation rates and increase these all-important college scorecard scores.
Banks and credit unions seek to deploy capital and forge long-term relationships with young borrowers. Meeting their financial needs now can prevent other institutions from getting started later when they are ready for their first auto loan or mortgage.
Conversely, ignoring these borrowers when they need it means they risk losing their business for good.
Exploit the opportunity
The opportunity is there. Many large lenders will only work with families with the best credit scores or those who are able to take on larger loans.
Hard-working families who need small loans will look elsewhere. What if more community banks, credit unions, and schools right here could give them a hand?
They are in a unique position to help families who don’t send their students to Yale, but struggle to find $ 1,000 for their local college, which trains graduates for jobs in the nearby town.
Independent banks and credit unions can easily step in with modest private loans, lower rates and the personalized relationships that are their hallmarks.
Expect these programs to help our local financial institutions and communities in unexpected ways.
Focus on reliable borrowers
People who take out private loans can be counted on to repay them.
Unlike the three-year cohort default rate for federal borrowers, which is just under 10%, the private loan rate is less than 2.5%.
Almost 90% of private student loans are also co-signed by a parent or other adult and are subject to very strict underwriting criteria.
In addition, these loans provide multiple points of contact with students and their families, who may need other types of financing, such as car loans.
They represent an annuity, and it is up to us to invest in them.
Efficient and sustainable solutions
Bring together our banking, manufacturing and trade associations; community banks; credit unions; and public schools / community colleges within 60 miles of Harrisburg. Together, let’s build cohesive programs that allow every student to fund a local education, with the promise of a job in the state after graduation.
It is above all about innovating sustainable and targeted lending solutions, rather than resorting to a temporary approach of replacing all loans with grants or canceling existing debt.
Pennsylvania is a state of courage and conviction. These qualities allowed me to overcome the difficulties of my childhood and gave me hope. Let’s build on them with a new approach to student loans that will lead to the pursuit of happiness for all.
Steve Winnie is CEO of CampusDoor in Carlisle, Pennsylvania.