Some argue that loan debt for college should be forgiven
By Christina Couch
After the landmark $787 billion bailout, numerous mergers and a few bankruptcies, Wall Street and the auto industry have received lots of assistance as they attempt to get back on their feet.
But what about college students who face crushing debt? With two out of every three undergrads taking out loans and the average student loan topping the $20,000 mark, should those with education debt be the next recipients of federal bailout funds?
One Facebook group is pushing for that.
"What we're proposing is radical," explains Robert Applebaum, a Brooklyn-based attorney who manages Forgive Student Loan Debt, a Web site and Facebook group with 193,500 members. "We want the government to spend the $550 to $600 billion necessary to completely cancel all student debt. That's a drop in the bucket compared to what has been spent and what will be spent to bail out U.S. companies. And with this type of incentive we can achieve real economic stimulus that focuses directly on the middle-class student borrowers who are really struggling."
He's got a point. With over 16 million students enrolled in higher education this year, an economy with a decreasing number of entry-level positions, and student-loan default levels at their highest in more than a decade, should the government provide the same economic relief to the future work force that it does to major companies?
"I don't see a lot of political support for that kind of measure," says Terry Hartle, senior vice president of the American Council on Education, a trade association based in Washington, D.C., that represents 2,000 two- and four-year colleges and universities. "The vast majority of borrowers graduate with a modest amount of debt and they experience relatively little difficulty in repaying. Instead of offering a bailout, we need to increase funding for low-income students and we need to start educating students about responsible borrowing."
Responsible borrowing is the exact opposite of what across-the-board loan forgiveness encourages, adds Kristen Fischer, author of "Ramen Noodles, Rent and Resumes: An After-College Guide to Life." If students are given carte blanche on borrowing now, how will they learn to budget, save and borrow within their means when it comes to a mortgage?
"That's the whole reason of going to school," she says, "not to avoid debt, but to get a job that enables you to pay it off."
A student loan for $20,000 may be manageable for grads in their early 20s, but for families with extreme loans, low-paying jobs, or other financial obligations, it can be insurmountable. The National Center for Public Policy and Higher Education reports that even with substantial financial aid packages, families in the lowest income bracket (the bottom 20 percent of the population) contribute over half their incomes to attend public four-year colleges and universities.
"It is an extremely serious problem and getting worse," says Patrick Callan, president of the National Center. "If you get too far in over your head, you can't have student debt canceled in bankruptcy like you can credit cards. There's no getting rid of it."
Some hope for upcoming students
While a full-on bailout isn't realistic as of yet, current and future students can expect certain economic breaks. Thanks to the stimulus package, an additional 800,000 students enrolled for the 2009-2010 school year will be eligible for increased Pell Grants of up to $5,350, an amount that will increase to $5,550 for students enrolled in the 2010-2011 school year. The changes may mean more aid for unemployed workers seeking additional education. This year the Free Application for Student Aid recognizes dislocated workers -- those without jobs due to the current economic crisis -- though it's unclear how much aid will come their way.
Those shying away from enrolling because of excessive debt will get a helping hand, too. Starting July 1, 2009, Uncle Sam will roll out a new income-based student loan repayment plan that will cap borrowers' monthly loan payments at 15 percent of their discretionary incomes -- any earnings above 150 percent of the poverty line -- and would eliminate the remaining balance after 25 years of payments.
New boosts in aid extend to worker retraining programs as well. The recently passed Trade Adjustment Assistance Program provides up to two years of free job retraining for employees laid off from farming, manufacturing and service industries.
How much will it help?
While increased aid, more moderate loan repayment plans and affordable retraining programs gesture in the right direction, they'll only solve the education accessibility problem temporarily if tuition prices continue to skyrocket.
"In the early '80s, the Pell Grant covered about 98 percent of the average tuition at a four-year public university," says the National Center's Patrick Callan. "Now it covers about half, yet we've got about four times as much money in the program. The problem is that financial aid is being absorbed by higher prices. It's sort of like a treadmill. The faster we run, the faster it spins."
Terry Hartle adds that universities aren't entirely at fault. As endowments drop and states slash higher education budgets, colleges are forced to transfer the economic burden onto students.
"We need more financial assistance for low- and middle-income families, we need for states to do their share in supporting higher education and an enhanced commitment to student graduation by colleges themselves," says Hartle. "Solving this will require action by colleges and universities, by secondary schools, by states and the federal government."
Universal loan forgiveness won't solve the tuition crisis, but investing more in current loan forgiveness programs -- especially ones designed to pull students into public service professions in high-demand fields -- would provide more student aid, solve critical labor shortages and would offer a place for recently dislocated workers to go.
"We shouldn't kid ourselves that [increased loan forgiveness] is the perfect solution, but it would help," says Callan. "We've dug ourselves into a deep hole and there's no one way out."
About the Author
Christina Couch is a freelance education writer and the author of "Virginia Colleges 101: The Ultimate Guide for Students of All Ages." Her work can also be found on aol.com and Yahoo! Finance, and in Entrepreneur magazine and Wired magazine.
(I had to catch Alvin practicing his victory ride. lol) This morning we went on a ride. Alvin told me that we'd just go up Legacy Parkway until the Farmington Station and then if we needed to turn around we would. The day was just too pretty to head back so we kept on and ended up going down through Farmington, Centerville, and Bountiful on the east side of I-15. This makes my first ride over 30 miles! I tell ya what though, the ipod is a God-send... music made it so much easier to bike the longer distance. Here's a good play list if you're looking for some tunes to work out to:
