DAVID WEBBER: Canceling student debt is a bad idea whose time has come | Local columnists
The cancellation of some university student loan debt eventually caught the attention of national policy makers, some citizens and the media.
Policymakers in Washington should have seen it coming — since about 2006. Without immediate relief, student borrowers’ debt burdens will restrict their housing, family and career choices.
About 45 million citizens have college loan debt totaling $1.6 trillion. That’s a lot of money, more than the GDP of Canada and more than the total of consumer and auto loans.
Loans are no longer just for college students. More than a third are borrowers aged 40 and over, including 5% of borrowers who are older adults.
About 8 million borrowers have defrauded on their loans, with estimates that a third of loans may have to be covered by the federal government at a cost of $500 billion, seven times what we spend on the food stamp program .
Reports, books and documentaries are full of personal sagas about debt-laden students. They resigned themselves to making the minimum monthly payment, leaving the principal intact or even increasing, and ending up dying in debt.
I personally know of several such cases that have caused me to reconsider whether we really should sit back and let college debt pile up.
I spoke with an MU grad from ten years ago to confirm that high student borrowing is common here.
She once had a great record in high school and was recruited by many schools before finally choosing MU.
Family dynamics precluded any family contributions, but her blended family income disqualified her for Pell Grants and other financial need scholarships.
She worked, often full-time, while in college and spent several months sleeping in her car at East Campus. Her grades plummeted, forcing her to change majors, resulting in her graduating in 4½ years instead of the 3½ years (due to PA and double credits) she took. was waiting.
She hasn’t missed a payment yet, but she usually pays the minimum. Yet, because of compound interest, she owes more now than ten years ago and doubts she will ever be able to repay it.
She is married, has one child, often works more than one job and rents a house. It didn’t go as she expected.
The higher education industrial complex is ripe for student exploitation and abuse. Parents, students, colleges and universities, state and federal governments, and financial institutions all have a personal interest in providing student loans. But no one has the responsibility to check and balance reckless and unsound lending practices.
The result is a pit of debt that many student borrowers have agreed never to repay.
President Joe Biden issued the executive order providing relief for up to 43 million borrowers and canceling the total loan balance of approximately 20 million others.
Biden is proposing that Pell Grant recipients be eligible for waiver up to $20,000 and non-Pell Grant recipients up to $10,000 if their income is less than $125,000.
In addition, a new income-based repayment plan would reduce monthly payment caps for undergraduate loans from 10% to 5% of the borrower’s discretionary income. Additionally, Biden is proposing to double the current maximum Pell Grant of $6,895 while making community colleges free.
To attend Mizzou, in-state students pay $12,396 tuition (for 14 hours) and out-of-state students pay $30,734 tuition plus an additional $11,000 for accommodation and meals.
Each university administers its own federal guaranteed loans, but students certainly shouldn’t borrow the full cost of their education. Some do.
The bedrock of college debt culture is our mainstream “buy now, pay later” perspective long promoted by Madison Avenue advertising.
Moreover, the American culture has formed a culture promoting higher education as the main path to success.
A dominant cultural norm is that “it’s better to go to university than not to go”, even if you have no particular aspirations. Prospective students have heard dozens of times from family and friends that “college has given me the best years of my life.”
Students and parents often suffer from the FOMA syndrome – fear of missing out. Parents don’t want their students to miss educational opportunities, so they don’t discourage additional borrowing.
Moreover, they are unable to truly recognize the skills of their children. Students, understandably, are more focused on “finding themselves” than on accurately projecting their earning potential.
In addition, 18 and 20 year olds, feeling invincible, generally do not understand the value of a dollar, so they are unlikely to exercise good judgment when making the decision to give up or leave. to borrow.
And the colleges? Well, they need students. And banks need borrowers.
The federal government got into the student loan business in the 1950s. The National Defense student loan program was a response to the Soviet Union’s launch of the Sputnik satellite which scared Americans into believing that we were “falling behind”.
What seemed like a good idea in the 1950s became a hydra-headed monster involving banks, colleges and universities, many lobbyists and government employees who provided protection for industry, for example l exclusion of student loans from bankruptcy settlements.
A third-party payer of student expenses, such as the federally funded Pell Grants, provides little incentive for higher education institutions, including for-profit ones, to cut costs.
Universities have added fine sports and information technology facilities, while student teaching is increasingly provided by graduate teaching assistants and “non-regular” professors.
Cultural change is long overdue. Let’s cut the bells and whistles of the college experience, cap college debt at a reasonable level, and encourage lower-cost alternatives.
Congress should establish higher education policies that prevent future generations of students from becoming lifelong debtors rather than lifelong learners. For the current 43 million college borrowers, Biden’s proposals seem reasonable.
Debt cancellation is a bad idea whose time has come.
David Webber joined MU’s political science department in 1986 and wrote his first column for the Missourian in 1994. He can be reached at [email protected]
David Webber joined MU’s political science department in 1986 and wrote his first column for the Missourian in 1994.
- LendingTree, Inc. to Launch First Quarter 2021 Outcomes on April 29, 2021 | state
- Money-strapped shoppers desire mortgages
- Autocheck Companions with Union of Vehicle Sellers to Present Reasonably priced Auto Loans to Customers
- Mortgage, automobile loans or bank cards: these are the payments folks paid first throughout the pandemic