Student Debt Crisis: A Chance to Make a Difference

Edie Irons
November 4, 2006

The latest news about the cost of college is hardly surprising: tuition is up and financial aid is falling short. Again. According to two new reports from the College Board, Trends in Student Aid 2006 and Trends in College Pricing 2006, tuition rose 35 percent in the past five years; federal Pell Grants fell by an average $120 per recipient since last year; and loans now account for more than half of all federal student aid.

As prices rise and grant aid falls, two-thirds of all undergraduate students are borrowing to fill the gap. Loans make college possible for millions of students, but as debt burdens rise, the cost of repaying student loans can actually jeopardize the bright future that higher education is supposed to provide. Let's face it, for most of us, the first job out of college isn't going to pay that well. But under current federal loan program rules, what you can afford has no impact on the size of your monthly loan payments -- and just a few late or missed payments can dump you into a financial hole that takes decades to climb out of. It doesn't have to be that way.

The Project on Student Debt has figured out a plan to strengthen the student loan safety net that the Department of Education can adopt without waiting for Congress to act. The Five-Point Plan for Fair Loan Payments would limit monthly payments to a reasonable percentage of income and keep interest from piling on forever.

Right now, when a borrower defers or misses payments, interest and late fees accumulate, and the debt balloons. The people who have the hardest time making their payments end up the worst off, sometimes owing several times what they originally borrowed. The Five-Point Plan would limit the growth in interest and fees, and cancel some outstanding debts for responsible borrowers after 20 years. It would also simplify the application process for "economic hardship" deferments, and make more struggling borrowers eligible for relief.

The federal government invests in student aid -- loans, grants, and work study -- because it is in our nation's best social and economic interests to have an educated citizenry and work force. But as students have to borrow more to get through school and a college degree no longer guarantees economic security or even a steady job, student loans can quickly become a heavy burden.

Consider the education major who can't afford to make monthly loan payments on a teacher's salary; the social worker who is paying off loans for both a master's and bachelor's degree on just $28,000 a year; the countless borrowers who can't save for a house or retirement -- even as they approach 40 -- because every extra dollar in their paycheck goes to student loan payments. In too many cases, graduates who want to give back to society are being pushed to the financial brink by loan debt that was supposed to open the doors of opportunity.

Luckily, students are catching on to this bait and switch, and they are joining forces with a broad array of allies -- including the lending industry -- to demand more fair and manageable student loans.

Nov. 9 is the deadline for "public comments" about what the Department of Education should address in an upcoming "negotiated rulemaking" process. Congress leaves it to the department and secretary of education to make the rules for how loan payments are set and who qualifies for relief, so now is the perfect time to demand that those rules be improved.

The next hearing is on Nov. 2 in Orlando, Fla., and the final one is on Nov. 8 in Washington, D.C. Anyone can go to a hearing and give the department an earful. You can also send them an email.

Department officials need to hear from students and recent graduates about why they need to fix the student loan safety net. Personal stories about our experiences with student loans, especially the repayment process, are absolutely essential to make the case for reform.

Tell the bureaucrats in Washington what it feels like to borrow tens of thousands of dollars for an uncertain future; to juggle a $400 monthly loan payment with rent, food and transportation costs; to stay in the wrong job because you need the salary to pay your loan; to rack up high-interest credit card debt because you have no financial cushion; to have a medical emergency or a period of unemployment drive you into a cycle of endless debt.

The student loan repayment system is broken, but we have a real and rare opportunity to fix it. Tell the department to make student loan repayment fair and manageable, so that policies help, rather than hurt, responsible borrowers.

Edie Irons is a program associate at the Project on Student Debt.





I like wiretap, even if I am almost 60! I came of age in the 60&;s, and it encourages me to see so many young people today waking up and getting involved, just as we did then.<br />
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But I decided after being downsized from a government job in the early 90&;s to go back to school. I finished my BA, and started on a Masters. By the time I was done, I owed almost $100K in student loans. And couldn&;t find a job! Unfortunately, if there is any group who has a harder time getting a good job than the very young, it is the over-50&;s. I worked retail, secretarial, etc., but never made enough to pay my loan. So I went into default.<br />
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I now have a half-time job as the executive director of a local non-profit, but my whole monthly check is less than the loan payment would be. My credit is shot, and will be forever. I only wanted to help people, and give back to the community, but like the article says, those jobs don&;t pay. <br />
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You can bet your sweet life I am going to make my comments on this to the Education people. NO one should be saddled with more than they can bear. We need publicly subsidized education like other first-world countries, but until such time as we can put our money into our own infrastructure instead of Iraq&;s, some of the relief possibly available to us would be most welcome.

Due to an error on my part, the links to "send an email" and "tell the bureaucrats" go to the wrong page. <br />
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To tell the Department of Ed to fix the broken student loan repayment rules, click <a href="">here.</a> The Department is not used to being lobbied, so your message really will make a difference.<br />
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Thanks for reading!

Thanks for your patience. Kristina, WireTap.

I&;m sorry, and I know I&;ll end up getting hate mail for this, but it&;s true that going to college no longer means having a good job. Today if you look at the Forbes top 10- most are college dropouts, or went to low cost state schools. Today I take classes with people that never show up, or sleep when they do. Maybe instead of complaining about the amount of debt people can&;t afford when they leave college, they should just not go. Find other avenues to sucess. <br />
I&;m not saying that if you can&;t afford college you shouldn&;t go. I&;m saying that if you are going to go to school and sign up as "undeclared" and not get above a 3.0 GPA, or be actively invovled even if it&;s just in simple classroom activities, than college is not for you. Leave it to the people that will work hard, and actually use their degree for something. Leave the student aid to those that can&;t afford school but will actually do something if they go. <br />
I understand why our government is cutting budgets, and I would too if I walked into the classrooms today. Many students want an easy out, and I&;m upset that the same people who only sign up for the minimum units, who block their classes around keg parties and frat events, who don&;t bother to do the reading, or even show up to class, are the same ones asking for a handout. Asking for someone to come in and pay their bills. <br />
It&;s a waste of youth. It&;s a waste of talent. School is not for everyone, and I don&;t want to waste my money on the people who aren&;t even going to try. <br />
I think we need stop telling every high school student that going to college is the only answer, then maybe gov&;t aid will actually do a lot more good than be such a burden. <br />
Just because you don&;t go to college does not mean the best you&;ll ever be in head fry cook. <br />
So let&;s stop sending to college the people who have no reason being there. <br />
Let them work hard in an avenue that will cater to their abilities better than classes and midterms do.

I agree with you whole heartedly. College is for too many people a waste of time, effort and money that could have been invested in what they really wanted. People go to college becasue it&;s a social requirement now-a-days, and that&;s wrong. It&;s wrong that the student is going for that reason, and its wrong that society has that view in the first place. There is too much to do in this world that doesn&;t require a college degree. <br />
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Right now there is a major shortage of skilled trade workers in the country. Electricians, Plumbers, and mechanics are making more money and living better quality lives than many of those with college degrees. Why? Because there will always be a demand for them, and they&;re not burdened with debt. But society today views them as untouchables, because they&;re &;uneducated&;.

What people want is something for nothing. The first poster wants a $100,000 education and believes government (i.e. everyone else) should pay for it. Unless you are getting an medical degree, MBA, law, or some other professional degree, you really should not being spending six figures for your education. If you do, then you better figure out out to repay the loan. At least spend a few hours to plan out a roadmap of what kind of job at what salary you will need to pay the loan back. I think that&;s the fundamental problem, people don&;t bother to plan things out. They just assume things will work themselves out. The poster took the easy way, just default on it. Who pays? Everyone else in the form of higher taxes and higher interest rates. Yea the 60&;s generation had all the answers.

My law school loan has grown by nearly 40% in capitalized interest. I have a decent job (not in law), have a wife, kids, house, pay child support and no hope of actually paying back the loan as it is. I even went through a Chapter 13 hoping I could get my loan discharged that way. Without relief, I will likely default, and that shouldn&;t happen. I would like to pay what I can, but there are no provisions in the rules for that. If the government wants to subsidize higher education in this country, they need to find another way to do it. Borrowers shouldn&;t be set up to fail.

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I now have a half-time job as the executive director of a local non-profit, but my whole monthly check is less than the loan payment would be. My credit is shot, and will be forever. I only wanted to help people, and give back to the community, but like the article says, those jobs don&;t pay.<br />
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