5 ways to fix America’s crippling student debt problem

Student Debt Tears

Photo via COD Newsroom/Flickr (CC BY 2.0)

We need to ensure that students have access to debt-free higher education.

Back in 2011, Occupy Wall Street swept America due in large part to its members’ savvy use of social media (one professor of journalism even referred to the movement as a “hashtag revolt”). While no catchy Twitter slogan has yet been created for the student loan reform movement, the Internet is warming up to the cause in a similar fashion.

“The federal student loan system has become predatory due to the Congressional removal of standard consumer protections and congressionally sanctioned collection powers that are stronger than those for all other loan instruments in our nation’s history,” argues StudentLoanJustice.org, a popular site founded by activist Alan Collinge (who OnlineCollege.org determined was the third most powerful leader of the student loan reform movement, following only President Obama and one of his advisers). 

The Progressive Change Campaign Committee (PCCC) has also rallied behind the banner of reform, tapping into its grassroots base to try to pressure likely Democratic presidential nominee Hillary Clinton into supporting debt-free public college. Former members of Occupy Wall Street banded together to create a similarly populist offshoot, OccupyColleges, while more radical online campaigns have encouraged students to refuse to pay back their loans as an act of protest.

If nothing else, more reform is long overdue. More than 40 million Americans now have student debt—roughly one out of eight people in this country—which has resulted in a cumulative student debt of $1.2 trillion nationwide, surpassing credit card and auto loan debt totals. That constitutes an 84 percent jump since the start of the Great Recession, with the average student debt falling just shy of $30,000 per individual. “Student debt loads are a problem and a serious one,” explains John T. Harvey of Forbes. “Not only do they create a significant drag on short-term economic activity, but they will stunt our long-term growth as well.”

Dale Stephens, the founder of UnCollege.org, argues that students can “hack their education” simply by dropping out of the collegiate system. However, at a time when college degrees are absolutely essential for socioeconomic mobility in this country, it is downright elitist to argue that the solution is for people without the means to simply skip out on college. What policies, then, exist to solve this problem?

1) The Emergency Loan Refinancing Act

We can start with the measures recently proposed by Sen. Elizabeth Warren (D-Mass.) and Rep. Joe Courtney (D-Conn.). “The legislation would allow those with outstanding student loan debt to refinance at the interest rates that were approved last year for new borrowers,” as a press release on Senator Warren’s website put it. “A previous version of the bill was voted on in the 113th Congress, and every Senate Democrat and three Senate Republicans voted to move the bill forward, falling just short of breaking a Republican filibuster.” 

While this would certainly alleviate the woes of students currently enrolled in college, the Warren-Courtney proposal would only make a dent in the larger crisis. Fortunately, there are other alternatives that exist as well.

2) The Restore Fairness in Student Lending Act

In 2005, Rep. Steve Cohen (D-Tenn.) introduced a bill that would eliminate the “undue hardship” requirement that currently forbids borrowers from dismissing student loans when they fall into bankruptcy. Before this standard was passed into law in 1998, borrowers could eliminate all of their student loans if they had been in repayment for at least seven years. 

By removing this protection, the Republican-controlled Congress guaranteed that creditors could hold college graduates in debt for as long as they pleased, which goes a long way toward explaining the situation today.

3) The Student Loan Forgiveness Act

Another option was put forth by Rep. Hansen Clarke (D-Mich.): the Student Loan Forgiveness Act. While the only borrowers eligible for loan-forgiveness programs today are those who are currently up-to-date on their payments, the Student Loan Forgiveness Act would forgive federal student loans after 10 years of repayments (five years for those in public service careers). 

In addition, Clarke’s bill would keep all federal student loan rates indefinitely at 3.4 percent and prohibit forcing borrowers to pay more than 10 percent of their discretionary income.

4) Increasing Pell Grants

We could also increase Pell Grants. As a report by the Progressive Change Campaign Committee and think tank Demos explains, Pell Grants—a federal form of financial aid that doesn’t have to be paid back and are typically awarded to families that make less than $40,000 a year—have shrunk considerably over the years. Pell Grants have dwindled from a maximum of 76 percent for public universities and 35 percent for private colleges from 1979 to 1980 to 30 percent for public universities and 14 percent for private colleges from 2014 to 2015. 

This has made it exponentially more difficult for working class Americans to afford college education without accumulating considerable debt. Increasing the maximum amount of Pell Grant coverage to pre-1980 levels would do a great deal to close that income gap.

5) President Obama’s recent proposals

The final two solutions come courtesy of President Obama’s most recent State of the Union address. Although millions of American families saw their incomes stagnate or decline over the past half decade, the average college tuition rate has increased by 33 percent. This is blatant price gouging, which is why Obama suggested cutting back federal aid and other financial perks to universities that refuse to control tuition increases. 

More ambitiously, Obama also suggested that Americans strive to provide free community college for students who maintain a C+ average, are enrolled in school at least half-time, and are working consistently toward obtaining their degrees. Although community college tuition rates are much lower than those of other universities, students at these schools are the most likely to default on their loans, which adds a special urgency to easing their hardships.

When all is said and done, the student loan crisis is more than a mere financial issue. It’s also a profoundly moral one, as it’s becoming excruciatingly difficult for Americans born outside of the upper class to have a realistic chance of meaningful socioeconomic mobility without having a college degree. 

By requiring lower income and middle class families to acquire massive piles of debt in order to obtain their degrees, the current post-secondary education system has constructed very real limitations on the opportunities available to the working class. This, in turn, poses a grave threat to the American dream, which makes it all the more worth safeguarding.

As it turns out, policies exist that could make this possible. It’s time we start pursuing them.

Photo via COD Newsroom/Flickr (CC BY 2.0)

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