Guess Who Is Hurt the Most by Student Debt and Higher College Costs

As Americans continue to struggle with the exploding costs of higher education and crippling levels of student debt, one constituency is getting hit hardest: low-income individuals.

While student debt is an issue that impacts Americans from all income brackets, races, ages, and from every part of the country, low-income Americans face unique challenges:

Student debt has a greater impact on low-income borrowers than other Americans. In fact, borrowers in the least affluent one-fifth of American households faced education debt that averaged 24 percent of their income in 2010. The average for all households was 6 percent.

Grant aid is not nearly enough to cover the cost of college for low-income families. Even after factoring in grant aid, a family in the lowest quintile--with an average income of $17,011--would have to pay more than 70 percent of their income to cover college costs.

When starting out, students from low- and middle-income households already face a higher burden. They are less likely to have family assistance and more likely to have other pressures, such as a part-time job or family caretaking role in addition to classes. And many low-income students avoid applying to college altogether, citing the cost. This has resulted in a shrinking economic diversity at schools.

Low-income Americans have become a target of private lenders and for-profit colleges. Some private lenders have even manipulated financially unsophisticated borrowers in an effort to profit.

What's more, for-profit colleges often target and take advantage of low-income individuals and people of color, leaving them with high levels of debt that they are later unable to pay off. Investigations into these corporate education giants have found deceptive and misleading practices to recruit students and more than half of students at for-profit colleges drop out within a few years.

Despite numerous investigations highlighting the deceptive nature of the for-profit college industry, this issue has ballooned. More students are enrolling in for-profit institutions, more students are dropping out before receiving a degree, and CEOs of these education corporations continue to make millions.

Mane Lavadenz knows firsthand about what a bad deal for-profit colleges are for many students. After the real estate market collapsed, it was difficult for her to earn a living and support herself. She enrolled in some courses at UEI College, a for-profit school. Advisors there assured her, she says, that her student debt would be manageable and that she would have no trouble finding a job after graduating.

But that simply wasn't the case: Like many of her classmates, Lavadenz graduated without any job prospects and, she says, UEI did nothing to help her. Lavadenz was stuck with $9,000 in student loans, which has now accrued to $10,000. Her experience is hardly unique. Former students of for-profit schools have found that their schools overpromised on the kinds of jobs they would land after earning a degree.

Further, for-profit colleges charge their students over 3.5 times more than public institutions, but they spend far less per student on instructional costs than public colleges and universities. In the 2008-2009 school year, for-profit schools spent $2,659 per student on instructional costs; by comparison, public universities spent an average of $9,418 per student and private non-profit universities spent $15,289.

The Solution

Now is the time to make student loan debt a top priority in our nation. That is why, earlier this year, Generation Progress and dozens of our progressive allies launched the Higher Ed, Not Debt campaign--a coordinated effort to address the existing $1.2 trillion in student loan debt, caused in part by the predatory practices of the for-profit industry.

More than 60 organizations have already signed on to the campaign, including: the American Federation of Teachers, Demos, Jobs with Justice, One Wisconsin Now, SEIU, Scholarship America, Student Veterans of America, Working Families Organization, and the Young Invincibles.

While for-profit colleges are a main focus of the campaign, we're utilizing this broad reach to focus on four key elements: college accessibility and affordability; addressing the existing $1.2 trillion in debt; civic engagement; and educating the public about the role of Wall Street in the privatization of higher education. In partnership with Higher Ed, Not Debt, Generation Progress will continue to advance long-term policy solutions, like holding private institutions accountable for bad lending practices and giving borrowers the ability to refinance student loans.

Student loan debt has severe and visible impacts on the American economy. Borrowers with tens of thousands of dollars in debt are unable to purchase homes, start families, obtain employment in certain fields, and save for retirement. It's time to address this problem in full force. I encourage others to join in the fight to create long-term solutions to protect current and future borrowers from the economically crippling effects of student loan debt.