What, if anything, should be done to ease the student debt burden?

Congress is considering whether to renew a cap on the interest charged on federally subsidized student loans. At more than $1 trillion, student debt now exceeds American credit card debt. Today’s Question: What, if anything, should be done to ease the student debt burden?

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  • Clark

    Here we go, another victim class for the democrats to add to the moocher list.

    How about honesty. You go to university, concentrate on a major with no value in the market and then complain you must live in your parents basement.

    College has been devalued as more and more stupid people gain access and graduate, yet enter society with no real critical reasoning skills.

    What’s obama recommend? Send even more people to university so we devalue degree to the level of a GED.

  • John O.

    It is not a panacea, but here are a couple of thoughts:

    1) Mandate articulation agreements that require credits and classes from one accredited university/college to be transferable to another. Two generations of our household have experienced cases where University X classes were not recognized or accepted at University Y within Minnesota. At several hundred dollars a credit, this adds up fast.

    2) Students need better on-campus resources and guidance for pursuing career pathways that actually have the potential to convert into a career. For example, how many art history jobs are out there? Graphic designers? Please.

    3) Find ways to mitigate the ridiculous costs of textbooks. My youngest (a sophomore) has had to pay more than $200 for *A* textbook. Plus another $50 for a “workbook” that was never used during that term. Initially, he thought he could use the same Calculus textbook his girlfriend had used two semesters previous in the same class with the same professor. Nope. The 10th edition was not acceptable–the “new” 11th edition was needed.

    And do not get me started on Division I athletics….

  • Louise

    I do agree that degrees have been devalued, but what is a the alternative Clark? It is all but impossible to have any hope of complete self-sufficiency in our economy without a degree, so what to we do with the “stupid people” who aren’t, as you claim, college worthy, drown them at birth?

    The demands of our economy have changed. It takes more education to participate in our workforce. We need to recognize that a high school diploma is not enough and fund basic public education to at least an associate degree level. And really, as much as I love learning for learning’s sake, we need to let go of those romantic notions and recognize that higher education is vocational education.

  • Kurt

    It always amazes me that oil companies are seen as vilians when the price of their product rises but colleges get a pass when the cost of a college education has increased at least 10-fold as much as the price of oil. Why aren’t they marched in front of a Senate sub-committee to explain their price gouching? Part of the problem may be that, as we throw ever more money at education, we inadvertently increase the cost of a more-or-less fixed resource.

  • Rebecca

    expand the eligibility of forgiveness through service. Some teachers at public schools can get loan forgiveness, and so can full-time professors at community colleges. But the academic job market is so bad that full-time teaching jobs are really hard to come by. Many people who would like full-time teaching jobs at community colleges have to patch adjunct jobs together. Why not forgive a small amount for each credit taught in a community college?

  • Clerk

    Students are taking on more of the riskiest debt: unregulated private student loans. Here, students have the least protection and pay the highest rates. For-profit colleges are leading the way in this trend, and minority college students appear to be borrowing a disproportionate share. If this continues, the consequences will be severe: reduced access to higher education, diminished life choices, and increasing rates of catastrophic loan default.

  • Hedge

    It’s too bad that students make these “rational choices”

    about going into debt, and then complain later.

    Myself, I had to work while attending college in the evenings.

    I had to forgo cable-TV, cellphone, hippy-hoppity fashions, and make other sacrifices to put food on my table and a roof over my head. People had no shame in laughing at my lifestyle.

    I’m not in debt, so it was worth it.

    College debt can’t be expunged in bankruptcy. It’ll come out of their Social Security check if need be.

  • reggie

    We should do nothing about student debt, except expect people to pay back their loans. While the overhang of that debt is a drag on the consumer economy — 20- and 30-somethings may not be spending as much on houses, cars and consumption while paying off the debt for their educations — there is no “bubble” like that of the housing crisis.

    We need to get back to holding people accountable for the choices they make, and borrowing for anything without a plan to pay it back (such as, studying something that will lead to a paying job) should not be acceptable. (We shouldn’t have bailed out the banks for their idiotic decisions, either.)

    All that said, I’d be completely supportive of programs that would let people work off their student loans through various kinds of public service, as Rebecca noted at 6:43. It would be a small cost to the nation, but one with enormous benefits.

  • Robert Baxter

    I’m currently a college student with more loans, government and private, than I even want to think about right now. One particular private loan I have has an incredibly high interest rate. Why? Because when I took it out I was 18 and had no credit history nor any substantial income. Private lenders should stop considering ONLY financial situations of its customers. If they had known I was going for electrical engineering at a highly ranked engineering program, looked at my high school grades, etc.. I don’t think it would have been as much of a hassle trying to take the loan out, I was a safer investment for them realistically.

    I also think America needs to stray away from this “everybody goes to college” mentality. Because then you have unmotivated students, in debt, pursuing a useless degree they don’t even care about.

  • Larry

    I think that a nice auto da fe would put the fear o’ god into them and the whole lot would pay up right away. It’s too bad we don’t have nice big public squares like in the good old days.

  • Allie

    Subsidizing (including government guarantees) student loans has led to a surplus of student loans. In particular, it has led to a surplus of loans to students who aren’t likely to finish college, and to students who are studying subjects which are unlikely to lead to career paths that will enable loan repayment.

    A few suggestions:

    Yes, let students pay off loans as a fraction of their future incomes, which the IRS can help collect. But the government shouldn’t take the risk, because the government will make loans to all sorts of people with no hope of repayment. Let banks hold the risk (or investors), or even better, make universities pay for the risk out of their earnings. That will certainly change their thinking.

    Finally, 18 year olds often make terrible decisions. Nobody in their right mind lends money to an 18 year old for a car, much less a house. But we lend them tens of thousands of dollars for college. If someone wants a subsidized loan for college, they should have to do a year or two of government service, in the military or otherwise. That will make the commitment more real than just another piece of paper to sign while applying to college.

  • Steve the Cynic

    I reject the premise that the sole purpose of higher education is to make a person a more useful cog in the economic system so as to be able to demand a higher salary from the plutocrats who do the hiring. Some things are worth studying regardless of whether the Free Market will pay you more for knowing about them. The world is a better place when more folks are thoughtful about truth, justice, beauty, compassion, etc. That’s why subjects like history, philosophy, art, music, literature, psychology, sociology, anthropology and political science are valuable, even if they won’t get you more lucrative employment. The trouble is, we’ve built a social system where the only way we know how to value something is in terms of money. Money is effectively in charge of our lives and rules all of our decision-making. The problem of oppressive student debt is a consequence of this misguided way of thinking. Until we learn how to value what’s really important, in stead of what’s merely lucrative, we won’t find good answers to questions like this one.

  • Steve (your name here)

    Paid for my degree by working on farms, and then paid 90% of the cost our kids’ college.

    There’s a lesson there somewhere, but I’ll be darn if I can figure out what it is…

    Excuse me while I go sniff a flower

  • Paul Gillis

    As someone who went to a Private College and walked out of undergrad in the early 2000’s with $90k in Student Loan debt I think the issue lies within the student load offices and with the banks. Its the exact same principal as the mortgage crisis, people who cannot afford to have large loans, receiving them and then being owned by the banks the rest of their life. Should student loans be forgiven? No. I was 18, I made a stupid decision and thought by going to a private college doors would be opened and $ would be made. They were not. Some $ was, but not enough. I am paying the price for that poor decision, what I do think should happen is that if the student loan office and banks don’t think you should receive a loan, then you should go to a different school or work and save up $. Oh and btw….I did work 40+ hours per week during school and took a full course load, so was doing what I could. In the end we can’t keep letting banks own us and our financial freedom.

  • John Peterson

    I sympathize with the burden that some students feel, but do not believe that entitles them to debt relief.

    A better solution might be to give them an opportunity to earn their way out of the debt through community or social programs, relief agencies, Peace Corps, etc.

    I think the lesson learned from the mortgage crisis is that people are over reliant on debt, and need to consider how they will repay a lender who allowed them the opportunity to pursue what they wanted, whether an education, a home or a flat screen TV financed on their credit card.

    It may be that there is too much focus on higher ed, and in Minnesota right now there is a dearth of manufacturing employees, and a trend toward few plumbers, carpenters and other trades. Perhaps some students might want to consider opportunities that don’t require a 4 year degree.

  • T

    I went into this knowing my debt would be high as a first generation college graduate for our family(public undergraduate, private medical school), but also came out knowing my income would cover this. My wife and I both worked two to three jobs during both portions of our education. We sit on no credit card debt, a mortgage, and school loans. We invest a nice portion of our income. I am happy to pay back my debt, but not everyone is in the same boat.

    In terms of stimulating the economy, I could easily start our home remodeling project if we weren’t paying out $1800/mo in school loans. That would be a wonderful way to bring in contractors and such for work. I would take a school debt forgiveness approach (I guess some would call a “handout”), and we would in-turn drop that money back into our local economy because we can afford it. I’m not looking for this, but just a thought to our current economic state.

  • Scott

    In all of this I think that people forget that an educated society is a public good, and one we must maintain if the US is going to continue to have a competitive economy with the rest of the world.

    Out tuition rates at this point are insane. We are headed towards a place were a whole generation will be unable to start a normal “adult” life as we’ve understood it because we won’t be able to afford to start a family, buy a house or what not.

    I have $80k of debt between undergrad and graduate school. I did things “right”, I went through undergrad in 4 years, did a Masters degree in 2 years. I worked, I paid what I could along the way.

    The cost of college is only getting higher, while the number of reasonably paying jobs is dropping. The top is getting more while the rest of us are getting crushed trying to maintain a place in the middle class. We need to reevaluate our priorities or we will not be a rich society for anyone down the road.

    Some policy ideas:

    1) Make student loans dischargeable in bankruptcy. This should be true for private loans as well as public. Why should be have a special class of debt that stays with you forever, when we allow people a fresh start for doing things far less socially beneficial then getting an education?

    2) Reduce interest rates on student loans to 2-3%. This is an investment in our nation’s intellectual and economic future. Education has a huge social pay off, why make students pay 8-9-10% interest for something that helps our society collectively?

    3) Eliminate private student loans and stop federal aid from going to for-profit colleges. Students with few options and little choice should not be lining the pockets of big banks and fly-by-night “colleges”.

    4) Expand student loan forgiveness for public service and it extend it to graduates who get trapped in low income occupations. Trapping people under crushing debt for decades is socially destructive and we are headed toward seeing the full consequences of this.

    5) Stop out of control tuition increases and reduce college tuition to manageable levels. We need to accept as a society that run away college prices are not going to help us in the long run. Getting an education shouldn’t mean starting your adult life $50k+ in the hole if you don’t come from an already well to do family.

    We have to stop looking at education as an individual thing and start viewing it as a societal issue. We need an educated work force that is not burdened under crushing debt to compete globally. We can afford to do this, but we have to make it a priority. Businesses need to recognize that pricing young people out of a good education will ultimately mean that there won’t be the skilled workers needed to compete globally.

  • GregX

    We need to adopt and outcome based test for every degree program. Taking classes and getting a degree is worhtless if, after 4 years the student doesnt acutally possess the abilities that the degree implies. Once that test exists, there needs to be a test-out option for entire degree-equilvalents. Anyone should be able to test out of certain entire degree programs – business degees come to mind. If an individual can self-study individual and the pass the test … grant them a “national certification”. that person is now qualfied for work in that field. Colleges and Universities have overblown their “value-addition” to the knowledge and skill set of a student. They are more like an impediment to success then a facilitator of it.

  • GergX

    Option # 2 – set tuition based on expected national average income. If you are going into investment banking and the potential income is 200K – theres your sticker price for that degree. If you are training to be a teacher … and the income will be 36K — there’s your sticker price … AT THE SAME SCHOOL. its called market commodity pricing. Want a Lexus or a BMW – then pay for it. Want a Kia … than you only have to pay for that. IMPACT .. you’ll see Stanford, Yale and Harvard drop a lot of programs. And you’ll see a lot of colleges specialize in degree areas, which is far more efficient.

  • GregX

    Amen Scott.

    the future involves all of us – or so our political leaders say. either they are full of rubbish and its a Hobbesian ( cold, brutal, ) world and we’ll slowly fall apart as the vast majority ( the 90%) fall farther into poverty every generation OR we have an group-obligation to get more of the herd moving in the success column. the idea that America is based on pure competition is blarney. there is no level playing field. we either fix that or … wait till it tips far enough to dump us all.

  • JimG

    We need to cap loan interest rates at the current level. In addition, increase the funding of Federal Pell Grants and state funding of the University of Minnesota System to the levels Minnesota college students received in the 1960-1990’s.

    • A Federal Pell Grant, unlike a loan, does not have to be repaid.

    • The maximum Pell grant for the 2011-12 award year (July 1, 2011, to June 30, 2012) is $5,550.

    • The amount depends on your financial need, costs to attend school, status as a full-time or part-time student, and plans to attend school for a full academic year or less.

    I was a graduate of the University of Minnesota in 1974. I was eligible to receive a Pell Grant of $400 yearly. I am the oldest of four siblings, however I didn’t receive a maximum award. I specifically remember tuition for one quarter of $212. The tuition for three quarters approximated a total cost of $636. This means that 63% of my tuition costs in 1973 were supported by the grant. A Pell Grant that does not need to be repaid. Although they did get a quality teacher serving this state for the next 34 years.

    Obviously, our leadership in the 1970’s thought that it was important to make college affordable for its young people. Today, I would hope this country’s leaders will continue to see this wisdom of investing in its citizens.

  • EAL

    NPR recently did a “on-site” segment on the Occupy New York movement. A recent graduate was interviewed. The host asked, what his major was and why he was protesting. The protester stated he graduated with a degree in “German Romance Languages” and could not find a job thus he was protesting the financial industries. The problem resides with the kid and his parents for their failure to recognize that an education is not just to make one feel good but needs to allow one to stand on their own feet and contribute to the broader society (marketplace). The industry I work for cannot fill jobs in what is considered blue collar jobs. Chances are this kid would not have considered the industry becuase it required work not just feel good. The solution is obvious…grow up.

  • Jen

    As a 30-something who has a MNSCU Business BS (total cost LESS than $20k) and still has $12K of student loans, I’m fine. I worked through college and took out loans, but I went to a cheap school because it was a cheap school. I think many kids don’t consider the fact that once you have your first job, it doesn’t matter where you went to school, and most employers don’t care about where you went before you get your first job anyway.

    That said, I am now looking at a masters program that would increase my debt SEVEN FOLD. When all is said and done my debt will match “potentially” one year of my income. My husband is in the same boat. Together, he and I will have nearly $150k in student loan debt. That is as much as our mortgage.

    I’m not saying that our debt should be forgiven. I do believe that it would be in society’s best interest though, if we paid little to no interest. Or if our payments were capped at a set amount for the life of the loan. For those of you who were in your thirties when college was still affordable, could you have graduated and started a family, bought a home, and lived your life with TWO house payments? We look at our future and wonder if it’s worth it. But we look at our past and see that it isn’t what we want either.

    Our parents never had to deal with this kind of societal pressure, and they have a hard time understanding how we can mortgage our lives like this. But without degrees that will be accepted by employers in the professions we want, we are doomed to whatever we can get. It will be interesting to see what we may be forced to give up. Maybe we don’t get to have children because we can’t afford them, maybe we don’t get to keep our house because two mortgages is too much. We don’t get new cars because we can’t afford payments, and we have very little savings because all of our extra income after bills goes towards food and necessities (of which we keep very minimal).

    Our generation is saddled with debt from every direction (home, gov’t, school, life). It’s impossible to move forward when you’re always paying for your past, and if a whole generation is stuck in that rut, the nation will be too.

  • T

    The protester stated he graduated with a degree in “German Romance Languages”-EAL

    I cannot find a link to this story so I think this is just another level of bull trying to disenfranchise the occupy movement.

    Please provide a link to the story you quote. I can’t find one.

    I found Sylvia Poggioli has a degree in Romance Languages and she is “such a slacker”….

  • Max

    The easiest and most sensible solution would be to roll back the dischargability protections in the bankruptcy code. Prior to 1998 any student loan debt, both public and private, could be discharged if it was more than 7 years since payment was due. Changes in the code made in 2005 made it much more difficult to abuse the system., you typically need to be below median income to qualify for a Chapter 7. If after more than 7 years since graduating you are still not making more than median income then I think the education you recieved was not worth the debt you incurred to get it. If the debt is unsustainable there is no point in ruining someone’s life over it.

  • Steve the Cynic

    There is no such thing as a “German Romance language,” which you would know if you were at all curious about the truth, instead of just looking for ammunition to make your case, EAL.

  • Owen

    A second to what Clark at 5:13 and Kurt at 6:41 said.

  • Richard

    Look to generation equity, and how student loans have changed.

    When the 1960s generation was in college, public universities were more heavily subsidized by state taxes, tuition was cheap, and even middle class students got GRANTS! Everything was for the young then, the way it is for the old now.

    By the time those at the back end of the baby boom (like me) were in college, it was decided that grants to those who would earn more in their careers due to the degree were unfair to working class people with no such support. So I got loans.

    But these were government-guaranteed loans, with deferrals. When I graduated into unemployment during the worst recession until this one, I was able to defer interest payments due to hardship. When I then entered graduate school (with a scholarship and teaching assistant-ship) I could defer for that reason. I didn’t start paying for 2 1/2 years, but my principal did not go up.

    This was the early 1980s, when overall interest rates were sky high — the bank was getting killed funding that loan. And then, when I started earning money, I paid the thing off as fast as I could, limiting their upside. I was heavily subsidized.

    Others, imbibing the “me-first” ethic of the “sex, drugs and rock and roll” era simply declared bankruptcy and defaulted on their loans, and then went on to high paid careers. It was in response to those abuses that student loans were subsequently made non-dischargable in bankruptcy.

    While the cost of private education has soared due to the aid-cost spiral you describe, with luxury class amenities added and teaching loads cut, 80 percent of U.S. students attend public colleges and universities.

    There tuition has soared due to falling state tax support, and quality is deteriorating, as more and more classes are taught by harried adjuncts hired as freelancers without benefits. Spending on public higher education and infrastructure has gone down as spending on seniors has gone up.

    State and local finance is something I happen to know about, and few public services have been cut as repeatedly as support for public higher education. In some states, schools are getting so little tax-funding they are considering going private and ceasing to charge lower tuition to in-state residents. Others have jacked up rates for non-residents to private college levels, and are desperately recruiting out of state to get that revenue. Public college class sizes and amenities at private college rates.

    About the only part of public higher education that is getting richer is certain sports programs, but those that make money are being squeezed for more revenue because they are asked to pay for all the other sports. Unpaid labor for our entertainment.

    To pay soaring public tuition rates, today’s students often have to turn to private student loans with predatory terms, backed up by the threat of perpetual debt slavery. Meanwhile, they are told they have no future if the don’t go to college. They aren’t given a truthful discussion of what their future will be if they do go to college. College graduates are down there with the other serfs now.

  • Brad

    I’m seconding Steve’s comments 7:42 AM comments. I put myself through college and now am putting my kids through college at a (cheaper) North Dakota University. I understand how people are frustrated, but don’t really feel like an entitled baby boomer while I’m living in my 50’s rambler, driving a 11 year old car with 140k and paying for family health insurance coverage. I do like Max’s idea of rolling back the dischargability protections in the bankruptcy code for student loan debt. No one should have a lifetime of servitude, but there is real incentive to pay your debts in bankruptcy now.

  • http://www.stopmortgagestress.com Jon Seiver

    Nice write up Vic!