The financial tidal wave of 2008 left millions of American homeowners "underwater," owing more on their homes than their properties are worth.
This has decimated consumer demand and destroyed countless dreams.
Yet homeowners are not the only group of Americans who find themselves "underwater." After decades of skyrocketing tuition and stagnant wages, American students and graduates now often owe significantly more on their student loans than their degrees are -- in dollar terms -- worth.
This week, President Obama took a decisive stand for students, fighting to prevent a three-point hike in interest rates on federally-subsidized Stafford loans. Over the past several months, he has also proposed an accelerated income-based repayment program and new incentives for states to contain costs. These are steps in the right direction. But we need more decisive action to get America's "underwater" students and graduates back on dry land.
The ever-growing cost of getting a degree is at the heart of the problem. Public institutions, where a majority of students are educated, have steadily increased tuition as public financing has declined. Amidst unprecedented state budget cutting, average public tuition increased by an astounding 8.3 percent in 2010 alone.
With many of their parents facing pay cuts or unemployment, students have had to take out more and more loans to cope with these quickly rising costs. The average borrower graduating from a public or private institution owed an unprecedented $25,250 according to recent figures. Americans' outstanding student loan debt obligations now exceed $1 trillion.
The problem is not just the immensity of the debt. It's the scarcity of opportunity for borrowers.
While the unemployment rate for new college graduates stood at 9.1 percent in late 2011, a recent Rutgers University study found that only 53 percent of a random sample of recent graduates of U.S. four-year universities were holding full-time jobs. Even fewer were making use of their university-level skills.
That explains why delinquency and default rates for student loans are rising sharply -- even with income-based repayment programs in place. Students who studied hard, played by the rules, and are now desperate to find work are being denied basic opportunities and are, accordingly, falling behind on payments. They are finding that their degrees, like homes at the height of the real estate bubble, were vastly mispriced assets that are now hard to finance. Yet, unlike the debt from a home bought in the boom years, it is impossible to walk away from the debt incurred by getting a degree. A student borrower cannot discharge or even refinance their debts in bankruptcy, regardless of how desperate his or her situation becomes. And, if a student borrower does default, he or she will face perpetually rising interest rates and compounding fees with no hope of escape. Mike Konczal, a prominent blogger, has rightly called this "modern-day indentured servitude."
We must set these students free.
This month in the U.S. House, I have proposed H.R. 4170 -- The Student Loan Forgiveness Act of 2012 -- which would eliminate many of the awful consequences of educational indebtedness. In doing so, it would give Americans greater purchasing power, helping to jumpstart our economy and create jobs.
The bill provides full loan forgiveness for current borrowers who have paid the equivalent of 10 percent of their discretionary income for 10 years or who are able to do so over the coming years. It moreover caps interest rates on federal student loans at 3.4 percent and enables existing borrowers to break free from crushing fees by converting many private loans into federal loans.
Crucially, Americans who are behind on their payments due to a setback such as unemployment or illness would be eligible to enroll in the new program. The bill seeks to ensure that no one would be consigned to "indentured servitude" because of a stroke of bad luck.
To control costs and create prudent incentives for both students and institutions going forward, the bill allows future enrollees in the program to receive forgiveness up to a limit of $45,520 after paying up to 10 percent of discretionary income for 10 years. Under the bill, both current and future borrowers could still opt for the benefits of the existing income-based repayment program as an alternative.
If you support this solution, please join the movement by signing your name at hr4170.com. Also, please consider asking your Representative in Congress to sign on as a co-sponsor.
For at least a century, this country has run on an implied social contract that says "if you study hard and work hard, you'll have a steady middle-class income and a stable career."
Let's reinstate that contract and put student borrowers back on higher ground.
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The most qualified and hardworking students generally pay nothing to go to college; the highest-achieving graduate students make money while in graduate school. Everyone else is taking a huge chance if they aren't working to that standard.
Young people putting themselves deeply in debt is not something most of us will get behind, with some possible exceptions related to starting a business. Otherwise, people ought to pursue degrees at a rate they can afford, rather than rushing to finish on a "traditional" schedule and borrowing heavily to do so. Alternatively, they can put money into other investments at the point they realize that higher education may be a money-losing prospect.
The points are these:
1. People borrowed money to go to college
2. People are not making enough from the degrees they earned to pay what they borrowed
3. People want debt forgiveness because they insist they were guaranteed higher income
4. No such guarantee was ever issued
No one is entitled to college or to financial returns on a college degree. These are voluntary investments with a risk of failure, like virtually any other. Students whose academic performance does not yield rewards sufficient to make it a safe(r) investment can and should invest elsewhere.
Throughout the entirety of my high school life I was told that college loans are a good debt. I was also told that upon exiting I would probably have to pay 200-300 dollars a month during the life of my loan. I say all this to point to the fact that financial literacy was lacking in my education.
Fast forward to present day and I now have a good job (far removed from my degree), and am paying almost 900 dollars a month (double payments on one of my loans) to try and pay them off. I am cutting every conceivable corner and trying to make this debt go away. I'm not complaining as this is just a part of my reality. That said, I am hesitant to start a family, buy a house, or make any other significant financial investment because student loans are the focus for pretty much the next 10+ years.
So while I am not asking for a handout, I do see where student loan debt does hamper one's contribution to the economy. Either way the debt will be paid with or without me strongly contributing to "the economy."
The system was broken as soon as congress signed the above into law. A persons basic need for survival will always outweigh any law of any society, people risk death to feed their family, you think they are going to be worried about paying back a debt.
With labor costs being the greatest overhead costs a corporation can have, and with this being an employer’s market, with Americans taking any job possible, government needs to start regulating salaries. Corporations are taken advantage of skilled labor by hiring them as unskilled labor but them making them due skilled tasks without the pay deserved. The economy has gone from local to national to global for all people in a matter of a few years. I get corporations want to save money, but not paying what the job should be paid at makes it impossible for people to pay back debt and basic needs.
She has to claim total disability or die in order for her loans to be forgiven. Right now she is trying to go back to work but her cardiologist will only allow her to work 12 hours a week. Her condition is chronic and she may never be able to work full time. Deferring the loans are not the answer. It's a shame that someone with an unexpected illness or even a terminal illness cannot get their loans forgiven but yet if she works in certain areas for a certain number of years she can get them forgiven.
Where's the fairness in this scenario?
While you are considering student loan forgiveness, please do not forget that there are many, many older people approaching retirement who are STILL paying on their student loans (therefore, probably will not be able to retire). A caveat about what is to follow: I will acknowledge that early on, when I had to, I took all the deferments I could get.
I started paying on my (consolidated) student loans in 1991. I've been paying since then, and (according to Sallie Mae), still owe more than $21,000 of my original $25,000 loan(s). AND my consolidated loan rate is 11 percent!
Whatever you can do for us would be most appreciated.
She also supports many other measures to restore the prosperity of the 99%
www.jillstein.org
I found myself agreeing wholeheartedly with nearly everything she said. She had very good ideas, and she expressed them well. If the Presidential election were up to me alone, I would pick her for the Oval Office without hesitation.