What to do about student loan debt?

by Rebecca Lehmann on November 15, 2011

In a recent series of opinion articles on The New York Times website, various thinkers ponder the wisdom and efficacy of the changes to student loan debt repayment proposed by Obama: that borrowers be able to consolidate loans at a slightly lower rate, that Income Based Repayment plans be made more accessible, and that loan forgiveness under such plans be moved down from 25 years to 20 years.

Many of the writers offer the opinion that this is either a step in the wrong direction, or that this is a small step in the right direction, but not a large enough step. The writers bring up some good points. Would making student loan debt more forgivable lead to reckless borrowing, or to the notion that some people are getting something for nothing while others work hard to pay their way through school ? The fact remains, however, that student loan debt is paralyzing the youngest generation of college graduates.

What is the solution to this problem? Many comment threads on the articles cite that personal responsibility is key, and that students should not take out loans they can’t pay for. This attitude, however, only enforces the class striation of our country. Under this model, only those who can afford education because they have affluent parents will have the opportunities to pursue a college, or a professional degree. As class becomes more and more reified in our country, it seems that access to education, the key to class mobility, should be broadened, not truncated.

Perhaps the authors of these op-ed pages, many of whom went to college in an era when state funding for public schools covered a majority of college tuition, should consider ways in which Millennial Generation students are trapped in a bind between expensive tuition, and lack of opportunities without a college diploma.

My personal opinion is that college funding should be merit based. Perhaps by rewarding our brightest students with increased scholarship money from the federal government, we could offer opportunity to all Americans, regardless of their parents’ income bracket, and simultaneously encourage academic achievement to make our nation more competitive globally.

K. Reuxa November 15, 2011 at 8:18 pm

As a father of two Millennials one of whom owes over $20k in college debt and another who will start college in the Fall: personal responsibility has to be factored in. My wife and I finished our education as working adults (I received a Masters while she went back and obtained a BA at the end of this past decade). We paid our way through little at a time. Our household income at the time was less than 60k. Our oldest is having a hard time finding a decent job–but that is the way of it. We help as we can but we are not in the best of positions either. That does not change the facts: if you borrow money, you pay it back even if it means you delay gratification and notch your belt tighter. The real culprit are universities who spend far too much money on areas peripheral to their primary job: teaching–and then charge students out the nose. We may have a tough time of it–but debts when incurred will be paid by this family.

Rebecca Lehmann November 22, 2011 at 2:14 pm

It sounds like you were in an unusual position: going to college yourself at the same time as your adult children. Yes, life is hard for everyone. But I wonder if it might not be a bit easier if state and federal governments went back to funding public universities and technical colleges at the percentages they used to? I finished my undergraduate degree at a public university in 2003. In the years it took me to complete the degree (4 years), tuition nearly doubled. Since then, it has doubled again. That is a ridiculous rate of inflation, but it is mostly due to the fact that the state government has slashed funding for the university system. What are universities supposed to do when that happens? Surely professors shouldn’t be expected to work at drastically reduced rates, and the power has to stay on. The cost gets passed on to somebody, and in this case, it’s the student and family.

Pete November 16, 2011 at 12:35 pm

I think debt forgiveness fosters irresponsible behavior, but at the same time burdening young workers with high monthly payments is counterproductive. Instead, monthly payments should be capped at a fixed percentage of the borrower’s income, which would be easily confirmed through IRS tax records.

Rebecca Lehmann November 22, 2011 at 2:17 pm

I understand your concern about irresponsible behavior. The current IBR repayment program does cap monthly loan payments according to income, and I think that’s a step in the right direction. However, I also think that getting a handle on the variable interest rates of student loans, and locking in lower student loan rates for everyone (current rate is 6.8%, which is three points higher than many mortgages being written today; why is that?) would help.

Jak November 20, 2011 at 1:43 am

That’s such bullshit, pete. Credit cards are dischargable in bankruptcy, does that mean nobody ever pays their credit card bills? Tuition fees are sky high and the job market is really horrible, especially for graduates who are young and green. Don’t get me wrong, everyone who needs a job needs to do their best to get one but this generation is DOA and many young people will face an inevitable life of debt, misery and poverty. Honestly, I’d tell grads to off themselves if they cannot find a job. My cousin did and it devastated my aunt but at least now his suffering is over.

Rebecca Lehmann November 22, 2011 at 2:18 pm

Hi Jak,
I agree, student loan debt should be dischargable in bankruptcy. Then people who are in desperate situations could consider making the difficult decision to enter into bankruptcy, with all its repercussions. If Donald Trump can do it again and again, why can’t an overburdened young adult also have this option?

I’m sorry to hear about your cousin.

Thinking November 22, 2011 at 2:04 pm

I see young families with single income $40,000 after taxes who decide to have three kids. Did the parents ever stop to think how they plan to fund for their kid’s education? Nope. Its automatically assumed that their will be student loans. It takes $400,000 to feed and educate a child from 0-20 age. With no savings and huge credit card debts, parents are helpless themselves. The kid gets into college program, gets car loans, changes degree couple times, gets student loans and finally graduates after 6 six years (on avergae students take 6 years to graduate from a 4 year program) with a major in pyschcology or sociology and still hope to compete with other job applicants who have core majors and degrees in science, math, engineering……isn’t something wrong fundamentally? if you make stupid choices, you have to pay for it.

Rebecca Lehmann November 22, 2011 at 2:23 pm

While I can appreciate the sentiment that people should be responsible for their actions, I’m concerned that you’re trying to hold the child responsible for the mistakes of their parents. Children who are born into poverty or low-income situations (Is $40,000 with three children low-income? I imagine many Americans would fit that description), have no control over that fact of their lives. They should have equal access to higher education, and I think increasing grants for students from low-income families would go a long way towards achieving that goal. Many students would benefit from thinking harder over their choice of major in college, but plenty of psychology or sociology students get careers after graduation, in, for instance, social work, or counseling.

Thinking November 22, 2011 at 3:18 pm

A family earning $40,000 after taxes don’t fall into low income category. Lets get that fact clear. If parents choose(operative word) to spread $40,000 over 3 kids instead of 1, yes the children will suffer from that choice. Parent’s choices are refected in their kids life, good and bad. Really, its not rocket science, just do the math before you have more kids. I disagree with having grants for low-income families, all education grants should be merit driven. While I agree that sociology & Psychology grads earn a living. That degree’s earning potential does not equal the amount a student has to rake up in debt. By no means am I saying don’t graduate with psych etc degrees. But students should know the earning potential of their degree before they take up huge loans.

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