End Student Debt!
The Nation -- The Editors
May 2, 2012 - This article appeared in the May 21, 2012
edition of The Nation.
The student loan crisis finally reached center stage in
Washington after the House GOP budget called for letting
interest rates double on government-subsidized loans (and
for deep cuts in Pell grants and other student support). If
it passes, students who borrow the maximum will end up
paying as much as $1,000 a year in added interest. President
Obama sensibly called for extending the lower rate, stumping
at colleges and on talk-shows to enlist students and others
in the cause.
Republican leaders quickly realized the perils of angering
young voters. In another flip-flop, Mitt Romney decided to
support extending the lower rate, while the House GOP passed
an extension but taunted the president by stipulating that
it be paid for with money taken from the preventive health
fund created by the Affordable Care Act. Senate Democrats
propose paying for it by closing a loophole that doctors,
lawyers and small businesses use to avoid payroll taxes.
Ignored in the standoff is that even at the lower rates,
more and more students can't afford the college education or
advanced training everyone but Rick Santorum believes they
need. Since 1982 the cost of living has doubled and
healthcare costs have tripled; college tuition and fees have
exploded more than four times. All this comes amid
revelations about the hundreds of billions in loans-at
below-market rates- ladled out to the banks by the Federal
Reserve and Treasury during the financial crisis.
The student loan crisis has had two effects. The United
States, once the leader in the percentage of college
graduates age 25 to 34, has dropped to sixteenth among
thirty-six developed nations, with more and more students
dropping out because they can't afford the rising costs. The
second effect is ruinous debt: the average indebted college
graduate is $25,000 in hock. Total student debt exceeds $1
trillion-now greater than credit card debt. And student debt
is inescapable. Bankruptcy rarely extinguishes it; even
Social Security payments can be garnished in case of
These debts weigh down the entire economy. Many students are
forced to move back in with their parents after graduation,
which depresses the housing market. Public interest work is
less affordable; as Pam Brown of the Occupy Student Debt
Campaign puts it, "The debt makes us very individual; we
can't afford to help someone else." Now more than half of
college graduates under 25 can't find full-time work, and
wages for recent graduates are lower than they were in 2000.
Not surprisingly, delinquencies-and the fines and penalties
that follow- are rising.
It is long past time for reform. Representative Hansen
Clarke introduced a bill that would forgive up to $45,520 in
student debt after a borrower makes ten years of payments at
10 percent of income. The Occupy Student Debt Campaign is
calling for a write-off of existing debt as well as free
public higher education. Students in California are pushing
an initiative that would make four years of state university
free for all full-time, in-state students who maintain at
least a 2.7 GPA or do seventy hours of community service a
year. Lost tuition would be paid for with a modest surtax on
those earning more than $250,000.
Making public college (or advanced training) free for those
who merit it isn't a radical idea. For many years the United
States led the world in free K-12 education. The GI Bill
paid for college or advanced training for a generation of
vets after World War II, which gave us the best-educated
citizenry in the world and broadened the middle class. As
recently as 1980, Pell grants covered 69 percent of public
college costs; now they cover less than 35 percent.
We can easily afford the estimated $30 billion annual cost
of free college education; a financial-transactions tax
would raise many times that sum, and it would inhibit
destabilizing speculation on Wall Street. We would reap the
benefits of a better-educated citizenry, and young people
could be more entrepreneurial and more public-spirited.
But Washington is too paralyzed by the elite fixation on
austerity and too polarized by partisan divides to consider
anything this bold. The Occupy Student Debt Campaign is
right: reform will come only from outside the Beltway, when
students, parents and those who understand how student debt
weighs down our economy come together to demand it.
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