Much has been written about the massive US $ 1.7 trillion student debt, but comprehensive solutions have been MIA. Many debt cancellation proposals don’t make sense because they mainly help the wealthier borrowers. They also do not address how some educational institutions recklessly exploit loans as a source of funding.
A disproportionate share of debt is held by affluent households who can afford to repay it. Professionals — such as doctors and lawyers — often have large debts due to the costs of their studies — but many also have an adequate income to pay these debts.
It’s time to stop the political pimping embodied in the indiscriminate forgiveness of student loan debt, whether debtors earn $ 50,000 or $ 500,000 a year.
And what about borrowers who have worked hard to pay off their debts or who borrowed from other sources (family, credit cards, etc.)? They are ignored by offers of forgiveness. Here are the policies that could actually help solve the problem for good.
# 1 “If you find yourself in a hole, stop digging.” An immediate goal should be to reduce the reliance of students on loans. If future borrowing decreases, it will help stop the problem from growing.
# 2 Educational institutions need to be much more active in helping applicants and enrolled students take advantage of available scholarships and other financial aid opportunities. A comprehensive effort to educate and help every eligible student for various forms of aid — starting with educating high school students — could provide millions of additional dollars while reducing the debt burden.
# 3 Before anyone is allowed to borrow, institutions should be tasked with explaining the financial ramifications of potential debt. Savvy borrowers may decide to reduce their borrowing and create competition among schools by considering less expensive educational alternatives.
# 4 Make schools responsible for providing prospective students with detailed information on what they can expect to earn, depending on the specific program a student is considering. When applicants have this information, some of which will be quite daunting, they can make different choices. This requirement will help solve the problems created by academic institutions that encourage students to take out loans for degrees with long-term face financial value.
# 5 When academic institutions need to demonstrate their success rates in producing graduates able to pay off their student loans, more stringent measures need to be set which, if not followed, will result in a probation program being put on probation. federal loans. If a school’s performance does not improve, it could be suspended or even excluded from these programs. This would help solve “problem institutions” that exploit loan possibilities for worthless degrees and certifications.
# 6 Address the serious problem of students who do not complete their studies but are struggling with loans they cannot repay without the desired degrees or certifications. Programs should be created to help them find jobs as well as pathways to obtain their diplomas or certifications.
# 7 Make the credit transfer process from community colleges to four-year institutions as easy as possible, with pre-approval of credit transfers replacing what can be a complicated bureaucratic approval process. Starting at a community college has already found favor with many, but its vast potential remains untapped. Students who transfer after two or three years can often save 50% or more of their college fees while still finishing with a degree from a four-year institution.
# 8 Allow borrowers to refinance their loans at any time to reduce unreasonable locked-in interest rates which can be quadrupled from market rates. Create more refinancing opportunities at nominal interest rates.
# 9 Allow student loans to be discharged in bankruptcy like normal debt. Since individuals and businesses can usually write off almost anything, it is unfair to make student loans nearly bankruptcy free.
# 10 Dramatically expand remission programs so that graduates can use their loans in a wider variety of jobs in the service of the public interest. These opportunities must be plentiful and easily accessible to serve communities that otherwise can only offer low-paying jobs or those located in difficult locations. Institutions and lenders should have a greater responsibility to inform borrowers of their options.
# 11 Extend existing income-based forgiveness programs. Make them more accessible and permanently remove the taxation of canceled balances. Better educate borrowers about income-tested repayment options and simplify them to make them easier to access.
With these changes, a path could be mapped to reduce the burden of student loan debt on those who can least afford it while making schools more efficient by becoming less dependent on loan money.
Aaron Harber is the host of “The Aaron Harber Show” (HarberTV.com/Info + [email protected]). He is a former director of Princeton University, served as Chairman of the Board of the Attorney General’s Collection Agency in the Colorado Department of Law, and was the founder of the Colorado Accounting Department.