Playing the Long-Game on College Financing

Sometimes when I need to motivate myself to do something, cheesy as it may be, I think about how it will benefit "future me." "Future me" will enjoy wearing the clean clothes that "present me" washed. "Future me" will be able to get out the door faster because "present me" packed my son's daycare bag. It works because, like Michael J. Fox a la Back to the Future, I know that "future me" will someday be "present me" and it will pay off. We could use more of this thinking when it comes to federal policies that help students pay for college.

The Senate has been working for weeks to come up with a compromise that deals with the interest rate for subsidized student loans, which doubled from 3.4 to 6.8 percent on July 1st. And so they have. Moving forward, student loan rates will be tied to the market but with caps in place. Crisis averted. This victory, however, came during the same week that the Consumer Financial Protection Bureau announced that federal student loan debt breached the $1 trillion threshold. For students floating in a sea of debt, the agreement on interest rates tosses out some valuable life preservers. But, what about a solution that keeps future students from going adrift in the first place?

In his new report Building Expectations, Delivering Results, Willie Elliott argues that promoting savings could be a valuable policy tool for both students and taxpayers. As the report demonstrates, savings have the ability to put more students on the path to college by boosting their expectations and academic outcomes and improve their financial wellbeing post-graduation. While students likely would still need loans, savings that could substitute for a portion of the amount that would otherwise be required would decrease the perceived financial burden that can keep many low-income students from pursing a college degree to begging with and free up resources after graduation for uses other than paying down student loan debt.

Achieving these outcomes would make savings a way better to pay for college and policies that support doing so a better federal investment. Seeing this return, however, will take time. Playing the long-game on financing college with future students and policy efficiencies in mind should make it worth considering in the present.

To hear more about how savings could be an important complement to existing aid options, take a look at my interview with Building Expectations, Delivering Results author Willie Elliott here: