Tuesday , May 01, 2012 - 3:21 PM
The only thing worse than the hundreds of billions of dollars of student loan debt that too many adults carry like yokes on their necks is the screw-ups in Washington D.C. who are using the fiscal pain for political gain.
To fix the student loan problem, Congress needs to look at why higher education costs have exploded, and craft a student loan program that does not enable those high costs. This requires serious debate and bipartisanship.
Potential solutions would include risk assessment based on a student's ability to pay back the loan and the end of the assumption that a college education always leads to higher earnings. That's true for some majors, but not others. Also, colleges and universities should share in the risks. The option of bankruptcy should be considered. Also, Congress could reform the Pell Grants program, which goes to the poorest students.
In July the interest rate for the feds Stafford Loan Program, which assists low- and moderate-income students pay for college, will double from 3.4 percent, the rate Congress enacted in 2007, to its proper rate, 6.8 percent. Naturally, both parties -- as well as President Obama and Republican Mitt Romney -- are desperate to extend the low rate. The low rate actually costs taxpayers $6 billion now, and that cost will increase annually if it keeps being extended. But that's of little concern to federal pols.
Not surprisingly, pols in D.C. are squabbling over how to pay for the 3.4 percent rate extension. The Republicans, who control the House, want to take money away from the recent health care reform law. The Democrats would like to either end tax breaks for oil companies or increase taxes on the wealthy. What's likely to happen is that Congress will extend the low rate for a year, and avoid responsibility, once again.
These squabbles make for great political theater, but they ignore the real problem with student loan debt and higher education. That problem is the consistent high increases in tuition and other college costs. If those are not addressed, all lower Stafford Loan rates will do is make it easier for financially shaky students to accumulate even more debt.
Student debt should be an investment that provides an education that will provide a good job and a secure future. It should also help students to overcome high college fees, but allow them to pay off those fees early in their careers. It shouldn't be a millstone hanging around adults' necks for decades or longer.
The current rate of student debt, and its onerous payments, are a real problem. It's causing young graduates to avoid life choices such as marriage, home purchases, having children, etc. This procrastination, as well as high unemployment rates for new graduates, slows down the amount of money into our economy and taxes the government can collect.
We can't wish these problems away, or use them for political gain. It's time to get serious. Depoliticize student loans.
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