EDITORIAL: An escape from the dungeon known as college debt
U.S. Sen. Claire McCaskill, D-Mo., could not have been more accurate when recently she said the government is “profiteering” off young people with high interest rates on student loans.
What President Barack Obama touted three years ago as a way to fix the student loan debt crisis turned out to be only a temporary solution.
His plan pegged interest rates to Treasury Department rates, capping them at 3.86 percent for 2014. Obama previously had pushed through a plan that mostly eliminated private banks and lenders from the federal student-loan business — an effort that Republicans had tried but failed to block.
While both moves stemmed the march toward higher loan interest rates, they did not fix the problem. College loan rates are forecast to be over 7 percent by 2018.
To that end, McCaskill is backing legislation by Sen. Elizabeth Warren, D-Mass., that would allow eligible student borrowers to refinance their loan debt at lower interest rates, among other sweeping changes.
Students and college graduates are putting their lives on hold because of debt. It is affecting their health and well-being.
Some students are dropping out. Borrowers delay buying homes, getting married, starting families and saving for retirement because of their debt.
They are even choosing career fields apart from their degree specialties simply because they see them as providing a better way to keep up with loan payments.
A generation that should represent America’s investment in the future is, instead, drowning in present-day debt. The staggering totals — more than $1.2 trillion in outstanding student loans, and an estimated 40 million borrowers with an average balance of $29,000 — make it clear that some form of relief is required.
The federal government backs $864 billion of the total debt and generates revenue off loan interest. That’s why McCaskill accuses the government of profiteering off the debt, and is looking to put an end to it.
More than 500,000 Missouri students would benefit if borrowers were allowed to refinance student loan debt at lower interest rates, McCaskill says.
Lower rates are already available to new federal student loan applicants. So why not make those same rates available to previous borrowers as well?
The Institute for College Access and Success says 59 percent of Missouri graduates from four-year public or private nonprofit institutions have an average debt of $25,844.
Congress must agree to let borrowers refinance loans so they can get out of the debt dungeon and start contributing to society.
There’s no question that college education ultimately yields better career options and higher salaries. But if students can see only a massive wave of debt in their future, and no help on the horizon, who could blame them for deciding to opt out altogether?