Here’s another way to think about student loans

Opinion piece by Steve Winnie in

by | May 3, 2021

Every April, when many students receive their college acceptances, I remember how lucky I am.

Growing up in extremely humble circumstances, I saw post-secondary education as the ticket to my American dream. I became the first person in my family to go to college, and eventually law school.

There were many times that I felt as fortunate as Charlie Bucket when he snagged the golden ticket. For example, I was incredulous that Cornell not only accepted me into their J.D. program, but provided the financial aid I needed. Their generosity opened the door to the life I’d always wanted—including marriage, children, home ownership and an exciting leadership role.

Rethinking the Conversation

Having grown up in Pennsylvania, home of the Declaration of Independence, I’m a proud believer in “life, liberty and the pursuit of happiness.”

But to achieve happiness, we all need equal access to higher education. That’s why I strongly believe that we must rethink the student loan conversation.

The current discussion of whether $10,000 or $50,000 in loans should be forgiven is extremely important, but it’s obscuring another central truth.

Were it not for these loans, people with limited means but unlimited potential would be forever sidelined—and the nation would be worse off for it.

The simple fact is that undergraduate and graduate-level training continue to be associated with increased earning power. Moreover, as our nation re-emerges from COVID-19, we need a larger pipeline of skilled, creative talent. In a world that’s forever transformed, it’s the only way to innovate a new and more prosperous future.

That future depends on our coming together to champion responsible, ethical lending practices to help the people who will most benefit from them—rather than taking a defensive or apologetic posture. In the process, we will also be helping ourselves.

Galvanizing Everyone to Float All 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 filled with small banks and credit unions.

It’s time for us to float all boats.

In our region, we know many families who are sacrificing more than they should to put their children through school. They may have been comfortable before, and then lost jobs during COVID-19. For whatever reason, if their students are suddenly confronted with high textbook or laptop bills, they may drop out forever.

Just think of the ripple effects here, even in the short term.

Educational institutions, which may be struggling to refill their classes, need to maximize graduation rates and boost those all-important College Scorecard Results.

Banks and credit unions are looking to deploy capital and forge long-term relationships with young borrowers. Meeting their financial needs now can pre-empt other institutions from getting their business later—when they are ready for their first auto loan or mortgage.

Conversely, ignoring these borrowers at their time of need means they may permanently lose their business.

Harnessing the Opportunity

The opportunity is there. Many major lenders will only work with families with top credit scores, or those who are in a position to take out larger loans.

Hardworking families who need smaller loans will be turning elsewhere. What if more community banks, credit unions and schools right here could give them a helping hand?

They’re in a unique position to assist families who aren’t sending their students to Yale, but are struggling to come up with $1,000 for their local college, which is training graduates for jobs in the next town.

Independent banks and credit unions can comfortably jump 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.

Focusing on the Dependable Borrowers

The people who take out private loans can be depended upon to repay them.

In contrast to the three-year cohort default rate for federal borrowers, which is just under 10%, the rate for private loans is less than 2.5%.

Nearly 90% of private student loans are also co-signed by a parent or other adult, and are subject to very strict underwriting criteria.

Moreover, these loans provide multiple touchpoints with students and family members—who may need other kinds of financing, such as car loans, too.

They represent an annuity, and it’s up to us to invest in them.

Purposeful, Sustainable Solutions

Let’s convene our banking, manufacturing and business associations; community banks; credit unions; and state schools/community colleges within 60 miles of Harrisburg. Together, let’s build cohesive programs that make it possible for every student to finance a local education, with the promise of in-state work after graduation.

It’s all about innovating sustainable and purposeful lending solutions—rather than the Band-Aid approach of replacing all loans with grants or forgiving existing debt.

Pennsylvania is a state of grit and conviction. Those qualities got me past my childhood struggles and gave me hope. Let’s build on them with a new approach to student loans that will bring the pursuit of happiness to all.

Steve Winnie is CEO of CampusDoor in Carlisle, Pa.