PROF. ELLWANGER: Student Loans as Public Assistance

Adam Ellwanger is a professor of English at the University of Houston - Downtown. His primary areas of expertise are rhetoric and critical theory. He writes political and cultural commentary for outlets like Human Events, Quillette, American Greatness, The American Conservative, New Discourses, Minding the Campus, and many more.

From 2004-2015, Forbes magazine reports that the number of Americans over 60 years old who take out student loans jumped from just over a half a million people to nearly 3 million people. During that period, the federal government took over student loan lending from the banking industry, and since then, anyone who can get accepted to college is virtually guaranteed low-interest loans regardless of their credit – and may be eligible for Pell Grants, which never need to be repaid.

According to the federal government, the number of Americans over the age of 65 with student loan debt nearly quintupled between 1989 and 2016.  Further, the White House notes that of the senior citizens with outstanding loan debt, no fewer than one-third of them are in default.

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Certainly, there are some senior citizens who take out loans for their grandchildren. But I contend that the recent explosion of people over 60 borrowing for college is at least partly due to a phenomenon that I’ve observed in which the student loan system is used as a stealth form of public assistance.

Obviously, the Department of Education follows long-standing non-discrimination policies in eligibility for student loans: age is a protected class, meaning that even applicants who are approaching (or beyond) retirement age cannot be denied college loans on those grounds alone. The AARP warns that additional college study may not pay off for seniors. But this warning assumes that the seniors applying to college are earnestly seeking college degrees – and not all of them are.

Over recent years, I have seen a rise in the number of senior citizens in my classrooms. It is not unusual that these students stop attending only a week or two after the beginning of the semester. This suggests to me that some seniors are attending college for immediate financial relief rather than an increase in long-term earning potential.

Here’s how it works. American universities are starved for students. Many will accept nearly anyone. And most people they admit will be eligible for federal student loans. These loans are not exclusively reserved for covering tuition costs. In other words, borrowers can take out loans that total far more than the actual cost of school. These additional funds are intended to be used for books and living expenses during the period of active study. As a graduate student, I would sometimes borrow about $10,000 per year above the cost of tuition so that I could focus on my schoolwork and not work an additional job. The lender’s assumption, of course, is that the borrower’s earnings will eventually be enough to pay off the additional debt incurred during study.

But does this policy make sense for someone who begins attending college at 70 years old? If the borrower earns the degree at 74 years old, will they be able to land a job that will compensate them enough to pay off the loans? Will they be healthy enough to work full-time for long enough that their loans are ever paid off? It’s not likely. And yet, the government continues to issue these loans. This invites abuse.

Most senior citizens who attend college do so with the intention of completing a degree and paying off the loans. But surely some intend to complete the degree with knowledge that they will likely never pay the debt. An even smaller group, then, would understand that they likely won’t live long enough to see any financial consequences if they default on the loans, and some of them would deliberately borrow an amount that far exceeds the cost of tuition. These people apply to college for no other reason than the overage check (the balance of the loan that exceeds the cost of tuition). 

The checks are typically cut in the first two weeks of classes. The ones who are bilking the system would be the ones whom I see show up for the first few class sessions, only to stop attending after a week or two when they have received their check. It is, of course, true that many young people are pulling the same scam – almost certainly in greater numbers than senior citizens. But 20-somethings will live long enough to experience some consequences for default. Seniors, though, should know better.

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Taxpayers are generally unaware of this form of abuse – but they are the only ones who suffer any real harm from it. Enrollment-starved universities are happy to admit any students; even if a student stops attending early in the semester, the schools still count them towards their enrollment targets. The university still gets its tuition, of course. The federal government pays that on the front end of the student loan award. The bureaucrats in charge of student lending oversee a system that has so much obvious potential for abuse that it sometimes seems it was designed to be abused.

My intention is not to deny or minimize the financial need of at-risk senior citizens: in many cases, they experience poverty that is dire enough that their abuse of the student loan system is understandable. Nevertheless, there are forms of public assistance that are intended to respond to these needs. The fact that the student loan industry is sometimes used as a form of welfare is one more indication of the bloat and excess of the American university system – a system which, at this point, seems virtually inextricable from the federal government.