The mounting student debt crisis could cause serious economic damage to the United States. Rising college costs and declining financial aid at both state and federal levels have significantly contributed to the problem. A good deal of responsibility, however, belongs to the financial institutions that service federal student loans, according to a new report.
The Great Debate
President Barack Obama’s recent speeches at the LBJ Presidential Library and National Action Network marking the 50th anniversary of the War on Poverty and the Civil Rights Act had a serious omission. While acknowledging “our work is unfinished,” Obama failed to mention this nation’s worst social trend: the stunning increase of children and youth living in poverty.
Any examination of postsecondary education begins with the students. What careers do they seek? What kind of education and skills will enable them to pursue their dreams? How do we design and deliver education in a way that meets them where they are in their personal lives and careers? While students determine their own futures, institutions have a responsibility to deliver education in the most effective, efficient way possible — especially considering the federal government’s investment in making college available to all Americans. Today that investment is over $175 billion, including student loans, grants and tax benefits.
On the first day of the Association of Private Sector Colleges and Universities annual convention, a storm worked its way towards the convention center. More than a thousand people milled inside Rosen Shingle Creek, one of the golf resort/convention centers that are endemic to central Florida. The attendees had come for the annual congress of for-profit colleges, hosted by the sector’s trade association and central lobbyist. Its theme: “Opportunity for all.”
A month has passed since Congress allowed interest rates on federal student loans to double for some borrowers, increasing the cost of their college educations by as much as $4,500. While the debate continues to focus on the interest rate for future borrowers, it is ignoring the larger problem with student debt: the more than $1 trillion that had already been borrowed before the interest rate debate. This existing debt will continue to drag down borrowers’ financial security, which in turn drags down the entire economy. By how much? Demos, the public policy group where I work, has just released a study that estimates the economic impact of the existing student debt burden, and finds that it may cost the country more than $4 trillion in lost economic activity.
As national attention focuses on the devastation inflicted on Atlantic states by megastorm Sandy, polls show the same basic electoral reality that has prevailed throughout the presidential campaign: Without a strong turnout among young voters, President Barack Obama loses on Nov. 6.