Are student loans a problem for our industry?


There’s more than one reason that boating is struggling to attract millennials, but the problem of student loans is high on the list. Is it a crisis? Yes.

Millenials were born from the early 1980s to the late 1990s and the age range is now 20 to 36. There are 75.3 million millennials and no group is more saddled with student loan debt than this one, according to the Pew Research Institute.

Between 2000 and 2014, the number of student-loan borrowers more than doubled to 42 million and the volume of outstanding federal student debt nearly quadrupled to more than $1.3 trillion. That's more than any other type of consumer debt except for home mortgages.

Moreover, the default rate is now at the highest level in two decades.

And while it’s primarily a millennial problem, it doesn’t end there. Many of the youngest Generation Xers (ages 36 to 51) who would be prime boat-buying candidates are caught up in it, too. For example, I have a friend, an accomplished journalist, who is still shackled with student loan debt. More than 60 percent of Gen Xers attended college. In many cases, when the Great Recession hit and they saw their jobs disappear, they returned to college for new skills to once again get a job . . . and got more student loan debt.

Unfortunately, there doesn’t appear to be any easy answer. And because it’s a time when our “public servants” in Washington can’t agree on the date for a New Year’s Eve party, it’s hard to see any leadership out of this mess. But there are things to consider.

For example, the Obama administration, through the Department of Education, has reduced repayment pressures by calculating loan payments based on earnings. Further, loan balances are totally forgiven after 20 years. And if a student gets a job in “public service,” the balance will be forgiven in half that time — 10 years.

This is reasonable, despite the fact that taxpayers must pick up the losses (an estimated 90 percent of student debt is guaranteed by taxpayers.) But it is a double-edged sword. Certainly these policies help students, but they also encourage more easy borrowing as student loans can be used for any college-related expense like tuition, room and board, books, computers and transportation.

Still another consideration is that Congress should get involved. Specifically, changing the bankruptcy code by removing this particular distinction from the kinds of debts that cannot now be discharged is a notable suggestion by George Leef at the John William Pope Center. The result, he explains, would make private lenders far more circumspect about their education loans. Many students might be turned down, but for the good reason that their educational "investment" looks like a bad one, he contends.

Further, perhaps, it’s time the schools themselves put some skin in the game. How about establishing some new rules for schools getting Title IV money? (Title IV of the Higher Education Act sets up federal student aid.) In this scenario, the schools would have to shoulder some responsibility if a student defaults on a loan. Perhaps this would cause schools to evaluate the risk of enrolling any student, Leef suggests.

Finally, there are serious questions about whether changes legislated after the 2007-2008 school year that, essentially, assured schools of increased steady income streams could have triggered school hiking tuition costs. These changes increased access to federal programs and raised the loan amounts of undergraduate students in subsidized loans (government pays all interest during enrollment) and unsubsidized loans (relatively few); as well as higher-limit Pell Grants that don’t require any repayment by students in financial need.

Overall, the federal student loan programs appear to be a mess and need a thorough review for major changes going forward. Moreover, the current $1.3 trillion student debt hanging mostly over millennials impedes consumer spending that drives economic growth and could have a negative impact on boat sales for years to come.

As an industry, we should look for proposed actions we can support that will bring about needed changes.


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