Running head: ANALYSIS OF STUDENT DEBT POLICY PAPER B

Analysis of Student Debt Policy Paper B

Jessica L. Eckmeter
Wayne State University

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In the United States, policy regarding student debt and college expenses is very
representative of the overall culture of the country. It is a culture that values the individual over
the group, relies heavily on consumerism, and one in which debt is the norm rather than the
exception. In a similar way, the policies in place in Germany and Finland are representative of
the overall cultures of each nation. German culture values society as a whole over the good of the
individual and still uses a guild system rather than the consumer driven capitalist one of the
United States. Finland is a culture that values the achievements of the individual while holding a
strong sense of national pride. The following will compare the student debt and secondary
educational policy of the United States as discussed in paper 1 to the policies of both Germany
and Finland, then propose a policy derived from the three countries to effectively combat the
social problem of student debt.
In the United States the average cost of education, factored between both private and
public colleges, is $13,856, while the median income is $26,990. In Finland the average cost of
education is $1,243 while the median income is $21,010. In Germany the average cost of
education is $933 with the median income of $22,020. (Taylor, 2012) These costs do not include
living expenses while attending college, just the costs of tuition, administrative fees, and course
materials.
In the United States students can apply for loans, grants and scholarships, the most
common of these being loans provided by the federal government. The average student loan
borrower in the United States currently owes $15,000 (Dynarski, 2015). In Finland there is no
student debt as tuition is free, and only a small amount of money is paid in administrative fees.
The school system in Finland is not designed for students to be able to work full time while
attending, rather than leave students completely responsible for their living expenses the country

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offers The Education Fund. The Education Fund is a program that provides a scholarship to pay
living expenses for adults who have been working for 8 years taking up to 19 months off to go
back to school. In addition to this, it is law in Finland that employees may take up to 2 years off
in a 5 year period to attend college while their job is held for them (Myllymiki, 2013). In
Germany there is no student debt either, as tuition is free and administrative fees are low. At the
time this paper is written, no programs for living expenses while in school could be found.
In both Germany and Finland the low cost of college education is paid for with income
taxes. The income tax rate in the United States has a maximum of 39.6%, based on income
(Rosen, 2015). In Finland the income tax rate can be up to 31.75% based on income (Nordisk
eTax, n.d.). The tax rate can be up to 47.5% in Germany, also based on income (Trading
Economics, 2015). Though there are other opportunities in each country for the government to
earn revenue, such as taxes on businesses, the expenses ultimately fall of the citizens in each
country and most of the governments revenue is generated in income taxes. With the tax rate in
the United States falling between the two, the commonly made argument that in the United
States pays lower taxes than those countries with free college tuition holds little ground.
Another argument commonly made to support the high cost of college in the United
States is that the quality of education is better in the US. In global rankings of the top 100
colleges, the United States has 51 colleges, while Germany has 9 and Finland has 1. This can be
argued in part by looking at population sizes. The United States has more than 322 Million
people, while Germany has a population under 83 million, and Finland fewer than 5.5 Million
(Worldometers, n.d.). Fewer schools are present in countries with smaller populations, as there
are fewer students to attend classes.

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In both Germany and Finland education is seen as a service that benefits the country as a
whole, where in the United States secondary education is seen as something that benefits only
the individuals receiving the education. A better educated population leads to better overall
health of citizens, less dependence on public assistance, lower levels of unemployment and
greater civic involvement among other benefits to society (Baum, 2013).
In looking at the policies of Finland and Germany compared to that of the United States
in regards to education, it is astounding that American students pay so much for a college
education. Factors contributing to the high cost of education in the United States are not limited
solely to government policy in regards to tuition. High administrative fees and increasing tuition
rates are a significant contributing factor.
Bernie Sanders has proposed a bill to congress titled the College for All Act. This bill
would make tuition in public colleges and universities free with the Federal Government paying
67% of the cost through a tax on stock trades, bonds and derivatives, called a Robin Hood Tax.
In this plan individual states would be responsible for paying the remaining 33% of college
tuition. This plan also addresses interest rates on existing student loans and simplifies the
application process for federal financial aid to students (Schramm, 2015). This plan partnered
with current student loan forgiveness policy has the potential to completely eliminate student
debt. The plan does not increase income tax and the proposed tax Robin Hood Tax is anticipated
to generate far more money than the expected costs of implementing the College for All Act.
This policy is a realistic solution to eliminating student loan debt.
Though the College for All Act is feasible, it is unlikely to pass in the current political
climate in the House of Representatives and Senate, which is mostly republican and opposed to
increasing taxes on the rich. An alternative solution to this includes raising income tax by 2.6%,

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which would generate $70 billion dollars, calculated by dividing the estimated $70 billion
needed in the College for All Act by the $3.7 trillion anticipated to be collected in income tax in
2015 (US Government Spending, 2015). Given that this tax would place a greater burden on
those with lower incomes than those with higher incomes, it could more easily pass through a
majority Republican Congress.
Two of the existing policies in the United States to alleviate student loan debt are the
Student Loan Forgiveness program and the Public Service Student Loan Forgiveness program.
These two policies have been legislated, but with the current criteria no graduate is eligible for
forgiveness until 2017. The strict requirements on this policy make it difficult for graduates to
become eligible, as it only applies to federal direct loans, requires all qualifying payments to be
made on time, and only when they are due, not while a student is attending school, in
forbearance, or in deferment. One of the requirements of the Public Services Student Loan
Forgiveness program is that all qualifying payments must be made while the loan recipient is
working for a 501c3 organization. In this program 120 qualifying payments must be made before
a graduate can apply for forgiveness (Forgiveness, Cancellation, and Discharge, n.d.).
An alternative to this portion of the policy would be to extend forgiveness after 10 years
to all former students, regardless of where they have worked, rather than the current 20 year plan
in place for those who have not worked for a not for profit for 10 years. This alternative would
keep the part of the current policy limiting payments to 10% of the persons income above a
standard living allowance, but would extend the program to cover indirect loans in addition to
the direct loans already covered. This plan can be paid for in either of two ways, by raising taxes
by less than 1% or by decreasing spending on defense by .5%, making available $4.5 billion to
cover this cost annually. This amount does not cover the $1.27 trillion in outstanding student loan

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debt in America, but it is not designed to, as the proposed portion of this policy only covers
accounts in good standing in which debt is not outstanding. The current policy already budgets
for a 20 year payment limit, this policy would only shorten the timeframe before borrowers are
eligible for forgiveness.
This policy aligns with the social work values of social justice and service in that it grants
an opportunity for all people, regardless of income to obtain an education. Education is the key
to social justice as higher education levels positively correlate to higher incomes, better working
conditions, better physical health, and greater opportunities for the children of college graduates
(Baum, 2013). This set of policies allows for people of all socioeconomic backgrounds to have
an opportunity at education and the advantages it provides while eliminating the obstacles to
success after college created by crippling student loan debt. The value of social justice means
that social workers pursue social change, particularly with and on behalf of vulnerable and
oppressed individuals and groups of people (NASW Code of Ethics, 2008), and those unable to
afford a college education are particularly vulnerable to predatory student loans. The value of
service means that social workers primary goal is to help people in need and to address social
problems (NASW Code of Ethics, 2008). Student debt and affordability of secondary education
are huge obstacles to those in need while being a growing social problem in the United States.
To implement this policy alternative I will begin by contacting my house representative
and senators on both the federal and state levels, as both levels provide funding for college
education. Contacting presidential candidate Senator Bernie Sanders in regards to my support for
his plan and my alternative suggestions is the next logical step. All of these officials have public
email addresses designed for communication with the citizens they represent. I can also embrace
the occupy movement and the power that social media has had in increasing awareness of the

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issue by reaching out to those I know who were interested and involved. Harnessing the power of
social media is something that I have had some experience with in running business pages and is
an effective tool in mobilizing grassroots activism.
I personally prefer Senator Bernie Sanders Robin Hood Tax as a way to fund the changes
needed in our current educational policy over my policy alternative but am discouraged by the
current political climate in regards to making it a reality. I feel that shortening the time that those
who have already accrued student loan debt as proposed in my policy alternative is beneficial to
the economy, as borrowers can then spend money in places that benefit small businesses rather
than huge banks. To me it is disgusting that in order to better our futures, students must start their
adult lives in debt, especially as someone who is looking at debt greater than double the value of
my home by the time I finish my masters degree. My policy alternative shortens the time those
who have already accumulated debt have the financial burden of student loans and prevents
future college students from beginning their adult lives in debt. I see education as a huge benefit
to society in more ways that those addressed by the Education Pays Report, seeing that an
increase in education allows people to problem solve better and seek non-violent ways to resolve
conflict, become more educated consumers of the news, and generally better members of society.
As a social worker, one of the roles I have is to advocate, and though my goal is to work
with homeless populations, I see the problem of student loan debt contributing to my client
populations challenges as well. It is difficult enough to navigate current student loan and
educational policy as someone attending college, but I cannot begin to imagine how difficult it
could be for someone to navigate if they are undereducated and looking to go to college to
improve their future. Current student loan forgiveness programs are not mentioned when
applying for financial aid or in the exit loan counseling I last saw. It makes the process difficult,

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and I can see how the cost of education can further complicate finances for someone already at
risk of homelessness. As a social worker I am an advocate for the causes I believe in, including
eliminating student loan debt, but additionally I am in a position to empower my clients to
navigate the complicated secondary education system. I can help my clients who are already in
debt due to student loans by guiding them through the process of eliminating their debt, giving
them the tools to navigate the process themselves and teaching those interested how to advocate,
and by, myself, advocating on their behalf as well as my own.

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References
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