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The politics surrounding student debt and college financing could wind up exacerbating inequality, a prominent monetary policymaker warned Tuesday.
Patrick Harker, the president of the Federal Reserve Bank of Philadelphia, told an audience of students at St. Joseph’s University in Philadelphia, “I am concerned that the looming shadow of student debt, coupled with increasing uncertainty about loan forgiveness programs and income-driven repayment, may dissuade some potential students — particularly those from low- and middle-income families — from going to college or pursuing jobs in public service.
He added, “I’m additionally concerned that schools’ budgetary constraints may contribute to fewer of those students succeeding if they do attend.”
Harker’s comments echoed concerns of some college affordability experts, and higher education leaders. They also point to ways that lawmakers and other government officials may be making it more challenging for students, particularly those with fewer resources, to attend college.
Over the past several years, lawmakers on both sides of the aisle have proposed changes to the repayment and forgiveness programs that help borrowers repay their federal student loans. Republican lawmakers and officials have threatened to get rid of a loan forgiveness program for public servants and repayment programs that help borrowers manage their debt during times of economic distress.
These kinds of proposals may sow distrust among students considering attending college, Harker said. They can also be alarming for borrowers.
But state and local lawmakers as well as higher education leaders also shoulder the blame for some of what Harker says he’s worried about. Decreases in state funding to public colleges over the past few decades have, in part, pushed schools to raise tuition, leading families to increasingly rely on student debt to finance school.
What’s more, as Harker, the former president of the University of Delaware, noted, those same budget constraints mean that public colleges may be forced to cut programs that offer mentoring, advising and other services aimed at helping low-income and first-generation college students succeed.
Obviously these decisions, which may limit access to college for low and middle-income students, pose challenges to the students themselves. But in his speech, Harker argued that their plight is of concern for the entire economy.
“We’re talking about our future workforce, and to misallocate those resources, or funnel exceptional minds away from areas where they could have the most impact, is shooting ourselves in the foot,” he said.