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So maybe there’s a crisis in student loans. Is there a way to fix it? Perhaps. According to an article by Sandra Block and Christine Dugas in USA Today, there are five possible solutions to the higher education cost problem.
As they explain, one option is to allow impoverished people to discharge student loan debt in bankruptcy. Under current rules, people are essentially stuck paying student loans not matter what happens to their finances.
Another option is just to forgive student loan debt. As Block and Dugas write “Rep. Hansen Clarke, D-Mich., has introduced the Student Loan Forgiveness Act, which would forgive federal student loans after 10 years of income-based repayments. Borrowers who work in public-service jobs would be eligible in five years.” It’s not really clear how Congress would pay for this policy.
Another possibility is to increase Pell grants, the federal money available for poor Americans to attend college. Considering Congress frequently threatens to cut or even eliminate this program, this particular reform is unlikely to be enacted.
Block and Dugas also explain that the federal government could try to reduce college costs by linking federal aid to college affordability. Colleges that try to keep costs to student down will be eligible for more federal money. Colleges that keep hiking tuition will face punishment from the Education Department. President Barack Obama proposed something like this in his State of the Union speech in January.
Another way to reduce student debt, according to Block and Dugas, is just to “educate borrowers.” Many college students have an incomplete understanding of their student loans, in part because the rules are so complicated and agreements keep changing. The more information students have before they sign up, the better they might be at making payments once they graduate.
These are possible solutions. The way to really get this done, to really reduce student debt without making any radical changes, is probably some combination of these things.
I’ve long argued that since state governments have essentially given up on funding affordable higher education, it might be time for the federal government to just step in to ensure access (keep tuition low by statute, that’ll force colleges to operate more efficiently) but without that sort of serious change, it’s very much time for some new rules about bankruptcy and student loan forgiveness.
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JFBow on May 23, 2012 7:20 PM:
H.R. 4170 is the way to go. This 10/10 plan is effective in that it will help students with older loans pay them off quickly and/or forgive the balance, and they will be able to regain their purchasing power, and stimulate the economy, which is now stagnant, and probably getting worse. It will incentivize new borrowers with a cap-line, and help them keep their debt down, which in turn will incentivize colleges to decrease tuition. In a Depression this is the option that best assists the middle class in regaining a foothold and some financial stability, as jobs are scarce, and many degrees are outdated, and basically worthless. Many degrees require one goes on for their Masters to be of any great income value, and this may allow them to do that. The situation is dire, and calls for courageous and innovative solutions. This is the one. It also simplifies the paperwork issues, helps those with private loans, and caps the federal interest rates at 3.4%. The amount forgiven will not be taxable, as is the case, currently, with IBR plans. For those who would like more information, please join us at www.forgivestudentloandebt.com, and on FB. You can get a copy of The StudentLoanForgiveness Act of 2012 FACT Sheet. This will also send a lifeline to student borrowers who have fallen on difficult times. Since our government has no solutions, Rep. Hansen Clarke does, as well as those who exposed the predatory practices for what they are and the Educational Bureeaucracy that has raped and pillaged American students, especially since the removal of Glass-Steagall and Consumer protections and bankruptcy. We the People need to make education affordable for all Americans once again. This two tier system must stop. Education is not a commodity to be sold like a Snickers bar by lenders, the Dept. of Ed, or Educational Bureaucrats.