A new fact of life is most college students will graduate with a huge loan debt. For some, that will mean college could take as long to pay off as a home.
Student debt is the only kind of household debt that rose through the recession and is now more than credit card or auto loan debt. Recent reports show that seven out of 10 Ohioans who graduated in 2012 had at least $29,000 in student loan debt. The state has the ninth-highest student debt in the country.
The problem may get even worse. Both the number of borrowers and amount borrowed ballooned by 70 percent from 2004 to 2012. Of the nearly 20 million Americans who attend college each year, about 12 million borrow to do so.
Something must be done to slow the troubling trend before more young adults are saddled with debt just as they’re beginning their careers.
Fortunately, efforts are underway to help parents and their children make more informed decisions when financing a college education.
President Barack Obama has proposed the most sweeping changes to the federal student aid program in decades. His plan would link federal money to new college ratings and reward schools if they help low-income students, keep costs low, and have large numbers of students earn degrees.
Congress is also starting to get involved.
Ohio Sen. Sherrod Brown is pushing two ideas. One, the Know Before You Owe Act, would require colleges to inform borrowers of any available federal student aid before issuing certification for a private loan.
It would require lenders to clearly state the difference between students’ financial assistance and their college costs.
Lenders would also have to send loan statements to borrowers every three months and submit an annual report to the Consumer Financial Protection Bureau.
Brown, in a recent column, said two-thirds of student loan borrowers don’t know the difference between safer, affordable federal student loans and private student loans, which carry more risk and have higher interest rates.
Private loans often have variable interest rates which can rise at any time and are ineligible for federal forgiveness, cancellation or income-based repayment programs.
Brown is also sponsoring the Refinancing Education Funding to Invest for the Future Act, which would help graduates with existing private student loan debt.
Because private loans offer fewer payment options than federal ones, many graduates find themselves overwhelmed by their monthly payments. The bill addresses that problem by authorizing the Treasury Department to give banks incentives to refinance private student loans. Lowering the interest rates on private student loans would make students’ payments more affordable at no cost to taxpayers.
Everyone, not just students, is affected by the growing student loan debt, now said to be in excess of $1 trillion. If a graduate has a high monthly loan payment, it can mean they’re not able to buy a house or a car, or to start a business or a family, or even save for retirement. Going to grad school may never happen.
Brown’s proposals have gotten the discussion going on the student debt issue. Now Congress must find ways to ease the burden.
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