When you graduate college, you’re overwhelmed by emotions. You’re proud, relieved, excited, terrified … and probably gradually getting crushed by the weight of student loan debt.
Members of the Class of 2011 carried an average debt of $26,600 when they received their diplomas, and according to Sen. Elizabeth Warren (D-Mass.), there are more than 40 million people still dealing college debt. Unless you’re a member of Congress or Warren Buffett, that’s a serious amount of cash.
It’s hard not to understand that logic that because things cost money, so does education. But that’s not necessarily the case outside of the United States. There are a number of countries around the world — from Denmark to Italy to Iran and a host of others — that offer free post-secondary education.
OK, it’s not free, per se, because nothing is free. The taxpayers pay for that “free” education. I get it. But here in America — you know, America, land of $17 trillion of debt on its own — our government springs for almost everything but education. That is, unless you count federally subsidized loan programs. We’re pretty good at that. The non-partisan Congressional Budget Office reports the federal government stands to profit $127 billion off of student loans over the next decade.
A government crippled by massive debt is seeking to profit from those perhaps most vulnerable. You would expect that common sense would teach us that our youngest — those who will contribute to our economy very productively for the next 40 to 50 years— should be encouraged to spend their money on things that will bolster the economy, not faceless entities that could exist just fine without those payments.
And while the government would almost definitely be OK without those profits, recent graduates are being delayed from taking part in the basic components of adulthood that have such a positive effect on the economy. For instance, first home time buyers — which have always bolstered the housing market — are no nowhere to be found, and it’s starting to hurt the housing recovery. Student loans are also forcing recent graduates to delay getting married and having children.
After all of this, is Washington finally starting to get the picture? Warren recently introduced legislation that would give graduates some loan relief by allowing them to refinance their interest rate in the same way mortgages and business debts can be refinanced.
“It’s regarded as a smart move for any consumer or business,” she said on Tuesday. “But student borrowers are prohibited from doing that under most programs. This bill says we’re going to change that and let them refinance that down to current low rates.”
Warren, who has also spoken out on Wall Street reform, wealth inequality and renewable energy, seems well-poised to be the voice for this movement. It seems might be on the verge of seeing someone in Congress who really has the public’s best interest at heart.
While it is certainly true that students who agree to take on loans should be forced to pay them back, the price of financing education has spiraled out of control. Creditors should not be allowed to employ shady tactics on 18-year-olds with little financial literacy who have been conditioned from an early age to feel that college is vital to success. Warren’s bill would allow students to get themselves out of debt without taking the unfair step of allowing loan forgiveness..
Whether you like Warren or hate her is beside the point. Warren’s bill will allow those with student loans to save substantially and pump their savings back into the economy. What’s more, the bill would prevent students from defaulting on their loans as frequently as they do now. While student loan default statistics have been troubling for quite a while, they have been on the rise in recent years.
If student loans continue on this path, they are likely to be the next bubble on the horizon. The results could be devastating. And while this issue is incredibly complex, something needs to be done and it appears Warren is already leading that charge.