Huffington Post: Time To Get Serious on Student Loan Debt
If I've heard it once I've heard it a thousand times from my Republican colleagues: we have to stop passing debt onto the backs of future generations. There's plenty of room to debate how best to achieve that goal but not enough attention is being given to the crushing debt being placed on the backs of future generations from student loans.
Last month marked the one year anniversary of student loan debt crossing the $1 trillion mark -- making it second only to mortgage debt. Americans now owe more in student loan debt then credit card or automobile debt with the past 10 years showing a staggering 511 percent increase.
Many have tried to down play these facts or flat out deny there is a student loan debt crisis. They argue borrowers should take personal responsibility for what they owe and not look for a bail out from the government.
Borrowers should bear responsibility for their loan obligations but it's just wrong to say there isn't a crisis or to somehow suggest that because these Americans chose to get a good education they should be saddled with a lifetime of debt.
Ask any student loan borrower struggling to land their first job or who is underpaid in their current job and they will tell you the hardships they face making their student loan payments each month -- living proof that the crisis is real.
If their pleas aren't enough then perhaps a recent report from The Federal Reserve Bank of New York will help to quiet the skeptics. The report pointed out many young borrowers are refraining from making purchases that could benefit the broader economy such as homes or automobiles because paying down student loans will likely claim huge amounts of their income.
Given that the majority of the debt is owed by borrowers over the age of 30, delaying these big purchases to pay back increasing student loan costs can have long term impacts that undermine our economic growth.
Still not convinced? Perhaps the Department of Education's claim that over 13 percent of borrowers will default on their student loans within three years of entering repayment might change your mind.
If I still haven't gotten your attention then let's talk about the Consumer Financial Protection Bureau finding that there are now more than $8.1 billion in defaulted private student loans and even more in delinquency. A survey from the bureau found that thousands of students didn't understand the full cost of their loans or the risks they assumed when they took out those loans to pay for college.
Still don't believe? How about a recent TransUnion credit report study which noted that more than half of student loans are in deferred status with deferred loans representing almost 45 percent of all student loan balances.
If I haven't won you over yet then perhaps financial expert Suze Orman could convince you with a statement she recently made while speaking to a group of young staffers on Capitol Hill when she described student loan debt as the single most important financial issue facing Americans today.
All the data can't be wrong right? So what should be done? To start Congress should immediately pass a short term legislative fix to stop interest rates from doubling on July 1st from 3.4 percent to 6.8 percent. A short term fix, as has been proposed by Democratic Congressman Joe Courtney of Connecticut would give Congress enough time to craft a comprehensive solution to the problem and adequately address why college costs have continued to skyrocket in recent years.
I have proposed the Student Loan Fairness Act of 2013 as an initial step toward a comprehensive fix to the student loan debt crisis. This bill attacks the problem in a number of ways including allowing borrowers to have their loans forgiven up to $45,000 after making 10 years of payments at 10 percent of their discretionary income. Interest rates would permanently be capped at 3.4percent and eligible borrowers would be able to convert their private loan debt into federal direct loans.
The unemployed would no longer see the interest on their loans continue to rise while they looked for work.
Our best and brightest need to be able to unleash the full economic potential of their educations by investing in their country, not paying down excessive student loan debt. If we mean what we say about not passing debt onto the backs of the next generation then we have to get serious about student loan debt.
This article was originally published in the Huffington Post.