The Problem With College Debt Is We Never Fix The Causes |

President Joe Biden has wisely resisted pressure to grant a blanket graduate college debt forgiveness of up to $50,000 per borrower. Instead, the president chose more targeted — and fair — approaches.

These have notably allowed debtors to stop repaying their loans during the pandemic without owing any additional interest on the loan; debt cancellation for severely disabled graduates and those taken in by for-profit schools that made false promises or closed before they could complete their studies; and making fixes to the ailing scheme under which students were supposed to get debt relief if they joined the civil service.

The public service debt relief program has been mired in inexplicable delays and checks have been held due to poor communication between loan servicers and lenders. Under the Biden administration, more than 110,000 graduates of this program have now received an average of $60,000 each in loan forgiveness, and potentially hundreds of thousands more will now benefit as well.

But another form of student debt relief is set to end in August – the pandemic-era payment moratorium. As a result, Biden faces renewed pressure to cancel a $1 trillion loan of up to $50,000 per borrower, which would wipe out two-thirds of the nation’s college debt. He has indicated that he is more inclined to forgive $10,000 of debt, which would cost less than half and affect the most students per dollar.

There’s no doubt that student debt has put many Americans in debt – around $43 million. Not all are able to meet their obligations, and not all debt is for federally guaranteed loans. But economists have shown that the added financial strain is preventing many borrowers from buying homes and cars and starting families – a ripple effect on the nation’s economy and social structure. Total debt soared, nearly doubling in the decade 2011-2021.

No matter what course Biden takes at this point, however, what’s missing is a plan to permanently reduce student debt through grassroots college reform. After all, today’s college graduates might be relieved, but what about next year’s graduates and those of the years and decades to come?

Free college modeled on the systems of other nations is not the answer. German public universities, for example, are free but minimalist; few are admitted; students generally live at home and move around, classes are large, and student activities and services are rare. And, like Germany, governments in other countries are willing to foot the tuition bill.

Still, the United States and its colleges could learn lessons from other countries about cutting costs. Team sports, most of which are heavily subsidized in schools here, play a much smaller role in other countries. The number of administrators is much lower; Inflated administrative costs are the main driver behind soaring college prices in this country. The Department of Education should warn colleges that they must reduce these costs to continue receiving federal aid.

Another solution is to give secondary school graduates the possibility of following qualifying training without having to obtain a diploma. The United States and its employers have overemphasized four-year college degrees to earn a good living rather than the skills needed to do the job. It is time that American high school students had access to paid apprenticeships similar to those offered in countries like Switzerland to students who are not bound to college. It’s not just for work in the trades; students can enter white-collar professional careers in management, banking, programming, customer service, and many other fields through these apprenticeships.

The federal government should also provide incentives for frugal behavior to students who attend public rather than private institutions and begin their college careers at community colleges, as well as those who work for a few years and save money for help defray the costs. costs. For example, these students should be first in line for debt relief in the future.

This nation should subsidize no or very little interest on student loans – again, prioritizing public institutions or students who have found other ways to reduce their college expenses. Interest rates on student loans are already lower than most consumer loans, but not by much. Because these are usually long-term loans, the interest rate is particularly burdensome over time. It should suffice for students to repay the amount they borrowed, plus a limited amount in interest. Better than widespread default.

He is a rare student who enters university with no intention of repaying his loans. But this nation — and in particular its acceptance of heavy borrowing as a natural part of getting a higher education — has normalized an unsustainable level of debt for many young Americans. People who declare bankruptcy must take courses to learn how to better manage their money and avoid ending up in the same situation. Is America ready to learn its lesson on college funding?

The above editorial was published by the Los Angeles Times on May 27. His opinions are his own.

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