PRESS ENTERPRISE Op-Ep by Tim Sheridan: Invest in our Country by Tackling Student Debt Problem – August 13, 2016
Americans owe nearly $1.3 trillion in student loan debt, spread among some 43 million borrowers, according to studentloanhero.com. If you tried to work out the average amount owed on your cellphone’s calculator, well, you couldn’t do it. There are too many zeros.
But here is something that we do know – the average college student will graduate with nearly $40,000 in student loan debt this year. Equally troubling, much of that debt is saddled with interest rates greater than 4 percent, with some rates as high as 8 percent.
It is important to note that this debt is not tied to the lifestyle that students led while they were in school. It is connected to the fact that over the last three decades, the cost of college has increased about tenfold. At the same time, median incomes in this country have remained relatively stagnant – adjusted for inflation, incomes have not risen in more than 30 years and, in fact, middle-class incomes have actually dropped over the last decade. All of this makes it nearly impossible for a family to send its children to college without incurring debilitating debt.
The student’s individual debt is not the only problem. This debt has affected everyone. Here’s why: When a student comes out of college with monthly payments that can take half their take-home pay, they simply cannot afford to fully participate in the economy. They cannot buy cars and they cannot buy houses, they cannot start new businesses.
When a recent college graduate cannot buy a new car, the salesman who does not get the commission cannot take his family to a restaurant. When the salesman does not go to the restaurant, the waiter does not get tipped, so he does not buy a new pair of jeans. Our economy works best when everyone can participate. When 40 million people cannot fully do so, it increases the ever-widening gap between the very wealthy and the ever-shrinking middle class in America.
We must find a way for students to graduate from college without incurring life-altering debt. Here are some solutions:
• Free two-year community colleges for every student: We should expand public education from K-12 to K-12 plus two years of community college by making two-year community colleges tuition-free.
• Low-cost four-year state universities for every student: Both the federal and state governments should focus on making four-year public colleges more affordable by investing the necessary resources to do so. Ultimately, making college more affordable is an investment in our country’s future. As markets across the world continue to expand, we need to make sure that our students can compete. They will not be able to do so if they cannot afford a college education.
• Loans and debt: We must also lower student loan interest rates, and provide a mechanism for those with higher rates to refinance their loans at a lower rate. In order to eliminate the extreme burden on the student after graduation, Congress should consider putting a cap on student loan repayments such that the repayment will not exceed a certain percentage of the graduate’s income.
Depending on the accounting method used, it is generally recognized that the federal government makes money on student loans. That is wrong. If Ford or GM can stay in business selling cars at zero percent or 0.9 percent interest rates, the federal government can finance the country’s future by providing student loans at similar rates.
The direction we take as a nation is dependent on the ability of our citizens to contribute to society. Making these changes will ensure that more students will attend college and obtain degrees. It will also ensure that graduates entering the workplace will be able to contribute to our economy without the extreme burden of high-cost debt weighing them down. Finally, it will enable new entrepreneurs to create more small businesses which will create thousands of jobs for others, increasing income, reducing unemployment rates and reducing costs to taxpayers. Simply put, reforming the student loan process will benefit the country as a whole.
Tim Sheridan is a Democratic candidate for California’s 42nd Congressional District. He lives in Lake Elsinore.