A Bailout for Students

Click here to help quash the Federal Family Education Loan Program.

In May, tens of thousands of young Americans turned in their last exams, collected their college diplomas and commenced... a lifetime of debt. According to the Project on Student Debt, two-thirds of four-year college students graduate with loans averaging almost $22,000 per borrower. Many face much higher levels of debt--more than $100,000--on which they pay interest rates as high as 19 percent.

In an ordinary economy, $22,000 might be manageable, though the pressure to pay it back would still push young people into more lucrative professions instead of fields like teaching, journalism, the arts or civil service. But this is no ordinary economy; the unemployment rate is 9.4 percent, wage growth has crashed and recent grads face the unappetizing prospect of competing against their parents for low-paying jobs to make their college loan payments, which start six months after graduation. Unsurprisingly, the default rate on federally guaranteed student loans has spiked to a ten-year high. That's bad news for the Treasury but worse for borrowers: these loans cannot be discharged in bankruptcy, so lenders will claim their pound of flesh by garnishing wages. If that fails, Social Security checks are fair game down the road.

The system is clearly broken. Student loans should create opportunities for the young, not cripple them for life, making them less able to save, own a home, start a business, obtain credit, continue education or retire. No wonder that each year 400,000 qualified high school graduates do the math and choose not to go to four-year colleges. This amounts to a crisis not just for students but for our entire society, as Liza Featherstone notes in this week's cover story.

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