The expected passing of legislation in the US House of Representatives requiring university students to receive loan advice before obtaining federal financial aid is seen as symbolising the limits of the government’s efforts to tackle spiralling debt levels.
With the Senate preoccupied by other demands, the proposal – expected to pass on 5 September – is thought unlikely to become law this year. Even if it were to, experts have questioned whether brief mandatory discussions of lending options have any meaningful effect on student decisions about selecting colleges and financing the costs.
Instead, in a nation struggling to find solutions to widespread and debilitating student indebtedness, the House vote may serve most usefully as a sign of the limits of the government’s ability or willingness to do much about the problem.
Earlier this year, the Federal Reserve reported that total US student debt now exceeds $1.5 trillion (£1.2 trillion), up from about $600 billion 10 years ago. That debt is slowing overall US economic output by some $100 billion a year, according to an analysis earlier this year by the Levy Economics Institute of Bard College.
The escalating student debt is driven by a variety of factors that seem destined to persist, including people’s high regard and demand for a university degree and the growing reluctance of the federal and state governments to pay for higher education as a public good. The rapid rise of the for-profit college industry, and its encouragement of borrowing and its touting of unrealistic job placement and graduation rates, has also been identified as a major factor.
Advocates of the House bill argue that better advice could help to stem the tide. Students receiving federal loan money have long been required to receive counselling – typically a half-hour session online at the beginning and the end of their college career. The bill would make that an annual requirement, and expand it to include students receiving any federal grant money, in the expectation that they will likely seek loan money at some point.
The lead sponsor of the House bill, Brett Guthrie, a Republican from Kentucky, has cited as evidence of success an 11 per cent reduction in federal loan money at Indiana University after it began telling students annually what their monthly payment would be after graduation.
Others are less convinced that a chat about loans will rein in indebtedness. Studies involving students and other customers of credit suggest that people borrow for a range of reasons not easily influenced by brief advice sessions. The federal government is assessing the success of its mandatory counselling programme for students, with no published results yet. And the bill pursued by Mr Guthrie has already won House approval twice in previous years without gaining passage by the Senate.
“Counselling is a good thing that can help people,” said Clare McCann, deputy director for federal policy at New America, a non-partisan thinktank whose experts have called for tougher rules on for-profit institutions and for more federal aid to help college students. “But it’s also not a panacea for the problem.”