More On Forgiving Student Loans

By JAMES K. FITZPATRICK

In the May 7 edition of First Teachers, a reader named J.M. offered a suggestion for how the country can extricate itself from what many see as the next financial crisis awaiting us: the likelihood that college graduates will default on the massive student loans that they are carrying, leaving taxpayers with the bill. In an op-ed in The New York Times on Sunday, June 7 entitled “Why I Defaulted on my Student Loans,” the writer, Lee Siegel, explains why he did just that, encouraging others to do the same.
Writes Siegel, “As difficult as it has been, I’ve never looked back. The millions of young people today, who collectively owe over $1 trillion in loans, may want to consider my example.” Several Democratic politicians, including Hillary Clinton, are proposing a loan forgiveness program, paid for by the taxpayers, as an alternate way to deal with the problem.
J.M.’s suggestion was that the colleges and universities, rather than banks backed by the federal government and the taxpayers, should become the source of student loans. He pointed out that “every college and university has a portfolio in its endowment fund that includes stocks, bonds, real estate, mutual funds, etc.,” and that there is no reason why “student loans could not be held as an investment in the same way as any other loan is now held. Students would pay interest on the loans (revenue for the institution just like revenue from any of its other investments) and repay capital which can again be reinvested.”
J.M. added that this approach “would serve as an incentive for colleges to provide a course of study that will increase the odds of gainful employment for their students” to increase the odds that the loans will be repaid.
H.A.L. from Idaho Falls writes to offer a different angle on the question. To begin with, he doubts whether university-issued student loans will be a viable option now that there is the hope that the government will forgive the loans: “With the systemic desire among students who owe money pushing for the government to forgive their loans, good luck with the proposal for endowment loans.”
It is a sound point. The recent college grads with burdensome student loans have become a constituency, much like those pushing for amnesty for illegal aliens. And where there is a constituency there will be politicians pandering to it.
H.A.L. raises another question:
“I recently saw that Harvard has a $35 billion endowment fund. I will assume only an 8 percent return — which is not an unreasonable assumption, considering the innate power of that much principal. That turns out to be $2.8 billion, making available a yearly stipend of $52,915 for each of the school’s students. That leaves me wondering what happens to that money. There are probably thousands of hands out siphoning off those ‘profits,’ including the board that oversees the funds, administrators, researchers, vice presidents of minority affairs, etc.
“Besides, why would universities want to accept the burden of issuing student loans when they can go on sticking students with [costly] tuition?”
I recently came across an article on student loan debt in The Catholic Transcript, the newspaper of the Archdiocese of Hartford, Conn. It provided an insight into this problem that, I must admit, I had not considered until now. It turns out that educational debt is having an effect on vocations to the religious life.
Transcript reporter Mary Chalupsky writes of “Sr. Clara Mahilia Roach” who “entered the Apostles of the Sacred Heart of Jesus two years ago” with “two things: a call to her vocation and $90,000 in educational debt acquired after earning an undergraduate degree in international studies and a Master of Arts in international trade and policy.”
Sr. Mahilia, writes Chalupsky, is “not unlike many young aspirants today who enter religious communities with an average of $28,000 in college debt,” putting “a strain on religious institutes.” Chalupsky interviewed Sr. Anne Walsh, provincial of the Apostles of the Sacred Heart of Jesus, who told her that “in the past, candidates came after high school and we paid for college. But now vocations are coming later, after college.” The religious orders do not have sufficient resources to assume the debt that they bring with them. “There are vocations that have not come to fruition because of debt,” said Walsh.
The problem, Chalupsky informs us, is being addressed by two organizations, the Chicago-based National Religious Vocation Conference (NRVC) and the Center for Applied Research in the Apostolate (CARA) at Georgetown University. A 2012 joint study was issued by these two groups, funded by the Conrad N. Hilton Foundation. The study found that “seven in 10 institutes (or 69 percent) turned away at least one person because of educational debt; that every third person who approaches a religious community has debt of at least $28,000; and that in the last 15 years, institutes have lost more than 1,000 applicants because of college debt.”
A $2 million grant was awarded to the NRVC in 2014 by the Conrad N. Hilton Foundation. Chalupsky informs us the Hilton Foundation, founded by the hotel entrepreneur in 1944, “has tagged the work of Catholic sisters as one of its priority funding areas.” Hilton’s “esteem for Catholic sisters is based in part upon his years attending a Catholic school in New Mexico.”
Where do things stand at this moment? According to Sr. Walsh, “each community handles the educational debt differently. Some communities assume the debt, others require the debt to be paid before entering” and others “have aspirants make monthly installments over an agreed-upon period of time.” The Hilton Foundation has also “launched the National Fund for Catholic Religious Vocations,” which enables “institutes of women religious to apply for grants for candidates who enter with educational debt.”
The Knights of Columbus, the U.S. Conference of Catholic Bishops, the Serra Vocation Fund, the Mater Ecclesiae Fund for Vocations and the Labouré Society in Minnesota have also offered to work with men and women with vocations to find a way to deal with the problem of outstanding student loans.
Holy Cross Brother Paul Bednarczyk, executive director of NRVC, told Chalupsky, “The whole question of educational debt is only going to get worse.” By facing the problem now, “we hope to meet the needs of candidates for religious life in the future.”

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Readers are invited to submit comments and questions about this and other educational issues. The e-mail address for First Teachers is fitzpatrijames@sbcglobal.net, and the mailing address is P.O. Box 15, Wallingford CT 06492.