In this October 6, 2011 file photo, Gan Golan, of Los Angeles, dressed as the “Master of Degrees,” holds a ball and chain representing his college loan debt. (AP Photo/Jacquelyn Martin, File)
With interest rates on federally subsidized Stafford Loans set to double on July 1, from 3.4 percent to 6.8 percent, student debt has finally started getting the attention it deserves. Unfortunately, most of the coverage of the metastasizing student debt crisis fails to take note that the fight over interest rates is but one small battle in the overall war against exponentially mounting student debt.
Senator Elizabeth Warren recently introduced her first piece of stand-alone legislation, the “Bank on Students Loan Fairness Act,” which would set interest rates on federally subsidized Stafford loans at .75 percent, the same rate at which the big banks are able to borrow at the Federal Reserve’s discount window. According to Senator Warren, if we as a society deem it so vital to our economy that we need to subsidize the big banks that nearly destroyed our economy, then what is the rationale for charging students a rate nine times higher simply to obtain an education?
We’ve lost sight of the fact that higher education is not a product but rather both a public good and an investment in our collective future. How are we ever to compete on the global stage in the new, twenty-first-century economy if we’re saddling our best and brightest with mortgage-sized debts just as they’re starting out in life? What most media coverage fails to emphasize is that a well-educated workforce benefits everybody, not just the individuals obtaining the educations in question.
The debate over interest rates for federal student loans is not unimportant but only concerns current and future students and, therefore, legislation like Warren’s does nothing to address the more than $1.1 trillion in outstanding student debt that is collectively owed by more than 39 million Americans—nearly 60 percent of which, by the way, is owed by people over the age of 30, demonstrating beyond doubt that the issue of student debt is not just a young person’s problem—it’s everyone’s problem.
When the housing market crashed, you didn’t need to own a home to be affected by damage it did to the economy. The same can be said for student debt. The effects of this massive drag on the economy can be felt down the line—from auto manufacturers and dealers, to homebuilders and realtors. If you own a small business, your bottom line is affected by the fact that 39 million Americans simply do not have the disposable income necessary to purchase goods or services. And the problem is only getting worse.
While it’s important to stand in solidarity with current and future students to ensure that we never reach the $2 trillion mark, there is so much more that is needed to be done to address the existing $1.1 trillion that has already been accrued. There’s no shortage of good ideas, but there is a serious dearth of political will to lend a helping hand to the millions of Americans who did absolutely nothing wrong, other than seek to better themselves and to better contribute to society by seeking out a higher education.
First and foremost, basic consumer protections, such as bankruptcy rights and statutes of limitations on the collections of student debt must be restored. There is no justifiable reason why student loans should be treated unlike any other type of debt in America. Next, we must provide a right to borrowers to refinance their loans to take advantage of historically low interest rates—a move that would undoubtedly spur economic growth by putting more money into the hands of people who will spend it on ailing sectors of the economy.
Finally, we must invest in our own people by implementing a fair and equitable loan forgiveness program, such as the one my organization, StudentDebtCrisis.org, helped craft and which was introduced in the House of Representatives by Representative Karen Bass (D-CA)—HR 1330, The Student Loan Fairness Act, which would allow borrowers to pay 10 percent of their discretionary income for a period of ten years, after which the remaining amount would be forgiven.
This would be a meaningful, fair and sensible step to help millions of people, both young and old, get back on firm financial footing. Contact your elected reps and implore them to co-sponsor and vote “yes” on the Student Loan Fairness Act of 2013.