Sending college students into the world each spring lugging student loan payments that will burden them for years is not good for them or the country. This has been a signature issue for US Senator Elizabeth Warren, a Massachusetts Democrat, and a cause that should be taken up throughout the nation.
Senator Warren made the argument Saturday before an audience at the Suffolk University Law School that because student debt burden is a drag on the economy it is far more than just a student issue. The student loan ombudsman for the Consumer Financial Protection Bureau (CFPB) told The Boston Globe that first-time auto loans and home ownership are continuing to decline, which will put the brakes on any economic recovery if this continues with each graduating class.
Last summer, Ms. Warren voted against a bill lowering interest rates on new subsidized federal loans to students, complaining that there was no provision preventing those interest rates from rising, thus enabling the government to profit from borrowers. The bill did constitute progress, as Ms. Warren acknowledges, but if interest rates are not capped in some fashion government will indeed be guilty of profiteering. The claim made by Senator Warren’s detractors that high interest rates are the product of high default rates is a classic chicken and egg argument, but logically, if interest rates and debts are lower there will be fewer defaults.
The senator also calls for the reinstatement of bankruptcy protection for student borrowers, which never should have been removed when corporations can take advantage of this protection, and penalties for colleges whose students default on their loans in large numbers, which will force them to share responsibility for this serious dilemma. Many colleges counter that they provide scholarships and loans to combat tuition costs and poor students often attend for free. However, when the CFPB reports that US college graduates owe a total of $1.2 trillion and the average debt for a 2012 graduate with a bachelor’s degree is $29,400, that says that colleges aren’t doing enough to combat tuitions that are indefensibly high. They and government must do more about a situation that doesn’t just impact students.