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Ensuring Student Loan Security: Universities and Colleges as Guarantors

Updated: Nov 5

by Ram ben Ze'ev (Conservative Values)

Today's Supreme Court ruling (Department of Education v. Brown 6/30/23 - 22-535) prohibiting President Biden from using taxpayers' money to forgive $400 billion in student loans has reignited the national conversation surrounding the burden of student debt. As the need for alternative solutions grows, it is imperative to explore innovative ways to ease this financial strain. Although not the first, I propose a solution that shifts responsibility to higher education institutions themselves, suggesting that Universities and Colleges in the United States should be required to guarantee all student loans for their enrolled students using their substantial endowments. Such a measure would not only alleviate the burden on individual borrowers but also promote accountability within the education system.

The student loan crisis in the United States has reached unprecedented levels, with outstanding student loan debt exceeding $1.7 trillion. Recognizing the urgent need for relief, President Biden proposed using taxpayers' money to forgive $400 billion in student loans. However, the Supreme Court's decision to prohibit this plan has highlighted the necessity for alternative solutions. While the ruling acknowledged the significance of the issue, it emphasized that the executive branch does not have the power to unilaterally forgive such a substantial amount of debt. This ruling underscores the importance of exploring alternative approaches to address the crisis and calls for innovative ideas that involve all stakeholders, including universities and colleges.

Universities and colleges in the United States are not passive bystanders in the student loan crisis. They play a pivotal role in shaping students' financial futures by setting tuition rates, awarding financial aid, and making decisions that impact the overall cost of education. These institutions have substantial endowments that have accumulated over the years, often reaching several billions of dollars. By requiring universities and colleges to guarantee all student loans for their enrolled students using their endowments, a significant burden would be shifted from individual borrowers to the institutions themselves. This proposal holds institutions accountable for the outcomes of their students, as they would bear the financial risk associated with defaulting loans.

Requiring universities and colleges to guarantee student loans with their endowments would offer several benefits. Firstly, it would enhance the financial security of borrowers. Students would be more likely to pursue higher education, knowing that their loans are protected by their respective institutions. This assurance would help alleviate the fear of default and empower students to make career choices based on their passions and long-term goals rather than purely financial considerations.

Secondly, this approach would incentivize universities and colleges to prioritize the success of their students. Institutions would have a vested interest in offering quality education, student support services, and career development programs to ensure the employability of their graduates. This alignment between institutional success and student outcomes could lead to improved graduation rates and better employment prospects.

Thirdly, the burden of student loan defaults would be shared across the higher education sector, rather than disproportionately falling on individual borrowers and the federal government. By utilizing the substantial endowments of universities and colleges, the financial risk would be spread more equitably, ensuring a fairer distribution of responsibility.

Requiring universities and colleges to guarantee student loans for their students would have a significant impact on the way applications are assessed. This shift would necessitate a focus on merit rather than on race or other immutable characteristics. By making loan guarantees contingent on merit-based admissions, educational institutions would be motivated to evaluate applicants based on their academic achievements, talents, and potential rather than their demographic background. This change aligns with the Supreme Court's decision in (Students for Fair Admissions, Inc. v. President and Fellows of Harvard College 6/29/23 20-1199), where the court ruled that race cannot be the sole or predominant factor in college admissions. By emphasizing merit, universities, and colleges would be promoting equal opportunities for all students and ensuring that admission decisions are based on individual qualifications and accomplishments.

This shift towards merit-based assessments would bring numerous benefits. It would create a fairer and more transparent admissions process, where students from all backgrounds have an equal chance to succeed. Removing considerations of race or other immutable characteristics from the equation helps to eliminate any potential biases or discrimination that might arise during the evaluation process. By focusing on merit, universities, and colleges can foster a competitive environment that encourages students to strive for excellence, fostering a culture of achievement and rewarding hard work. Additionally, this approach would allow institutions to attract and retain the most talented and deserving students, resulting in a more diverse and intellectually stimulating campus community that benefits everyone involved. Overall, requiring educational institutions to guarantee student loans based on merit promotes fairness, equal opportunity, and the principles of yesterday's Supreme Court decision.

Implementing this proposal would require careful consideration of potential challenges. Some institutions may argue that using their endowments in this manner would hinder their ability to fund other initiatives, such as research, scholarships, or infrastructure development. It would be crucial to strike a balance between ensuring the financial security of borrowers and preserving the long-term sustainability of universities and colleges.

Additionally, there may be concerns about the governance and oversight of these guarantees. Establishing clear guidelines and regulations, along with appropriate reporting mechanisms, would be essential to prevent the misuse or mismanagement of funds.

The student loan crisis demands innovative solutions that alleviate the financial burden on borrowers and promote accountability within the higher education system. Requiring universities and colleges to guarantee student loans with their substantial endowments offers a promising approach. Such a policy shift would enhance financial security for borrowers, incentivize institutions to prioritize student success, and distribute the risk of loan defaults more equitably. By working collaboratively, higher education institutions, policymakers, and students can forge a path toward a fairer and more sustainable system that fosters educational opportunities without compromising future financial stability.


Bill White (Ram ben Ze'ev) is CEO of WireNews and Executive Director of Hebrew Synagogue

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