US News reported recently that unpaid student loans have surpassed credit cards as the biggest form of debt in America at just over $1 trillion owed. The average debt for students graduating today? $25,000 according to The Institute for College Access and Success’ Project on Student Debt.
Yet compared to other forms of debt, that can be defaulted on and dissolved, student loans are made of Teflon; bankruptcy can’t touch them.
The argument is simple. If consumers who spend beyond their means are able to get a ticket out, why not afford the same luxury to students who simply get an education beyond their means? And if the government can bail out the banks, why cant it bail out the struggling, educated masses?
According to a Northeastern University report, 1.5 million college diploma-holders under the age of 25 are either unemployed or underemployed.
Graduating students may have to postpone buying a house, or car because of the debt incurred while in college.
To add to the problem, the student loan interest rate, which currently sits at 3.4 percent, is set to double July 1 unless Congress acts.
Sure, there is the Public Service Loan Forgiveness (PSLF) program. Started by President Bush in 2007, the program forgives loans after 10 years of making payments for debtors in a broad range of public service industries, from teaching to healthcare, but the program doesn’t go far enough.
Those debtors who are in the program face problems if fired or laid-off, an increasingly common occurrence in today’s era of shrinking government. It also ignores millions in the arts and the private sector who face the same tough economy.
The newly proposed Student Loan Forgiveness Act of 2012 aims to restore fairness in higher education in America through student loan forgiveness and capping interest rates.
It strengthens the PSLF program, by lowering the10 year period to only 5 years, increasing the chances that a person will be able to stay employed in public service. It also broadens the number of debtors who can get relief, as well as freezes the interest rate at the current level.
The act will make great progress in evening the playing field for those with education debt, and in doing so it will strengthen our workforce.
Education loan reform and student bankruptcy relief is not just fair. It’s not just right. It’s smart.
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