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Student indebtedness: what can be done?

Staff September 24, 2012 News No Comments

By Thomas Wolber
Associate Professor of MFL

In 2011 and 2012, the amount of student loans crossed the $100 billion mark for the first time.

The total loans outstanding now exceed $1 trillion, which is far higher than either credit card or car loan debt.

Students finish college with an average debt of more than $25,000; in Ohio, it is $27,713. Some students owe more than $100,000.

Many start their adult life deep in debt and have no choice but to delay buying a car or a house, or getting married and having children.

Some are so saddled with debt that they can never dig their way out: Americans 60 or older still owe about $36 billion in student loans. In addition, many students default on their loans (Ohio’s delinquency rate is 8.5 percent) and may end up in bankruptcy.

Given the steep price tag of college, it also means that fewer students may opt to to go to college and graduate schools in the future.

The implications for the national economy and America’s international competitiveness are clear – college debt has ballooned to such unprecedented proportions that the country is now in the midst of a real crisis.

The problem of student debt is not “a side show,” as a commentator dismissively wrote earlier this week. It could well be the next economic bomb that sends the country in a tailspin.

There is no shame in having student debts. It is not a personal problem and burden, but a collective experience.

Also, student indebtedness is not an inevitable disaster and inexorable fate. There are solutions to the problem.

Colleges, private banks, and the federal government can and should do a much better job of disclosure and counseling before students take out loans.

All lenders, public and private, should cap their interest rates at no higher than 3.4 percent instead of charging exorbitant rates of 15 percent or higher.

And colleges and universities should do everything in their power to keep tuition as low and affordable as possible; in recent years, tuition increases have far exceeded inflation.

When students start paying back their student loans after graduation, their repayment should be tied to their income.

Income-based repayment (IBR) means that low earners and the unemployed pay less per month than high earners. This rule should become the norm for the entire nation.

Perhaps we should also have another look at bankruptcies. Currently, there are no statute of limitations on student loans, and declaring bankruptcy will not allow you to start with a clean slate.

Another idea is loan forgiveness.

If someone commits to working as an educator, physician, or soldier for a number of years (ten, let’s say), why not give the individual credit for his/her community service and waive the balance of the loan?

One such program is the Stafford Loan Forgiveness Program for Teachers, created with the intent to encourage individuals to enter and remain in the teaching profession.

Why not expand the program to include all public-service occupations, for example social workers, doctors, lawyers, and scientists?

If we add together grants, stipends, low-interest loans, principal reduction, loan forgiveness, income-based repayments, deferments of payments, and more, then perhaps higher education can remain affordable to all who qualify.

This fall, politicians need the help of students to be elected or reelected. Student indebtedness could be and should be a central bipartisan campaign issue. Students should make their voices heard and demand debt relief from those running for office.

The key demand is to keep colleges and universities within reach of not only the 1 percent, but of the 99 percent. The Pentagon has a defense budget of $690 billion, not counting many secret programs. Surely, higher education is as important to the national security and economy of our country as the military, and perhaps is even more important than the wars of choice in Afghanistan or Iraq, where the United States has so far spent over $1 trillion.

Because it is the foundation of the nation’s future, our education system deserves to be fully funded from top to bottom.

Editor’s Note: This article was written in Spring 2012 by Thomas Wolber, German professor and associate director of the Modern Foreign Languages Department.

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