College Loans the Next “Debt Bomb”

According to a report last month from the Federal Reserve Bank of New York, student debt is now at $870 billion, topping the total owed by Americans on credit cards ($693 billion) and even cars ($730 billion). Right now, 27 percent of borrowers are in default. The nation’s bankruptcy attorneys have warned that unpaid student loans could provide the next “debt bomb” in the American economy.

Even those who are managing to make their payments are carrying a heavy burden, one that is causing many of them to put off taking the life steps that many people their age usually do. So they are spending less money on things like getting married, buying homes, having kids. Which means the economy isn’t growing the way it needs to, and that is a problem for everyone.

And right now, seven million students are facing a doubling of the interest they pay on subsidized Stafford loans. A law passed in Congress five years ago had reduced the interest rates from 6.8 percent to 3.4 percent, but it is set to sunset July 1, meaning an increase of average debt by $2,800. Democrats have introduced bills in both houses of Congress to extend the lower rates. Student groups, organized by the federation of State Public Interest Research Groups (uspirg.org) delivered 130,000 letters supporting the legislation to Capitol Hill last week. Conservatives oppose the law, saying it will increase the deficit, but but this is an investment worth making.

Higher education is a multifaceted problem that needs a multi-faceted solution: for starters, lowering tuition, raising financial aid, and getting Wall Street out of the student-loan business. Another is helping more students graduate in a reasonable amount of time. Making college affordable is not just for snobs or even just for students. It’s in all our interest.

Source: Daily News –
DN Editorial: College loans the next “debt bomb”