Student loan debt debate

By Sam Lucero | The Compass | May 20, 2015

How to cut costs of education?

Last week I had the opportunity to celebrate my son’s graduation in North Carolina. As his diploma day approached, the reality of finding a job began to sink in for Dominic. Earning a master’s degree in global health from Duke University did not guarantee a high-paying job. It did guarantee a large student loan debt.

(Joe Heller | For The Compass)
(Joe Heller | For The Compass)

One of the first job offers Dominic received was a research position in Bolivia and Peru overseen by a professor from Baltimore’s Johns Hopkins University. While the work was exactly what my son wanted, the salary was not enough to make monthly student loan payments, which begin later this year.

Dominic is one of more than 40 million Americans who have student loan debt. According to the Consumer Financial Protection Bureau, the average student loan debt among people with bachelor’s degrees is $29,384. The amount is even higher for graduate students.

Outstanding student loan debt increased from $1.2 trillion in 2014 to $1.3 trillion this year. A study by the Manhattan Institute for Policy Research showed that, since 2004, student loan debt has increased by 325 percent while all other types of non-housing debt decreased by five percent. As student loan debt increases, so have loan defaults. An estimated 8 million student loan borrowers are in default of loans totaling $110 billion.

Student loan debt should not only be a concern for high school and college graduates and their parents, it should also be an issue of importance for the church. Students facing heavy loan debt have to make choices: Postponing marriage and starting a family — and compromising church teaching by living together.

What can be done to help ease the sting of student loan debt? The reason students take out loans is to pay tuition, which has skyrocketed. According to a New York Times report last month, college tuition at public universities has nearly quadrupled over the past 35 years. A May 13 report issued by The Center on Budget Policy Priorities cited state funding cuts for higher education since 2008 as one reason for tuition increases.

The center’s report said that in Wisconsin, the average tuition costs increased 19.9 percent ($1,457) from 2008 to 2015 and that state spending per student dropped 16.5 percent.

Increasing public funding of universities is one way to lower tuition and ease student loan debt. Another solution is to soften the debt burden. One suggestion is to allow students to refinance federal and private loans at a lower rate. Options for loan consolidation are available for some federal loans (go to student loans.gov for details), but do come with penalties.

In March, Sen. Elizabeth Warren (D-Conn.) proposed an amendment to a senate budget resolution that would lower student loan interest rates. “The federal loans produce obscene profits for the federal government and the biggest banks on the private side,” Sen. Warren told the Boston Globe March 18. The amendment sought to allow undergraduates to refinance loans at a 3.9 interest rate. “Millions of borrowers are still stuck paying interest rates at 6 percent, 8 percent, 10 percent and even higher,” she said.

The amendment, which would have required the wealthy to pay at least a 30 percent federal tax rate, was rejected by a 46-53 vote.

There are no easy answers for lowering the cost of a college education, which is becoming financially prohibitive for low- and middle-income American youth. Freezing tuition and cutting loan interest rates would go a long way in helping tomorrow’s college students and today’s graduates.

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