America is long overdue for a solution to the student loan crisis, which has placed a crushing financial burden on countless millions of young adults.
It’s lovely and heartwarming to hear about individual acts of philanthropy like billionaire Robert F. Smith’s offer to pay off all the tuition expenses of Morehouse College’s class of 2019, at an estimated cost of $34 million. But the dimensions of the problem are far greater than even a truckload of billionaires can solve.
More than 44 million student loan borrowers collectively owe more than $1.5 trillion, an average of more than $37,000 apiece. That exceeds the total for credit cards or auto loans and is second only to mortgage borrowing. An article in the Harvard Business Review cites economists who project the number will soar to $2 trillion by 2021, and continue to grow at a galloping annual rate of 7%.
I’ll talk about systemic changes in a minute. But in the short term: If you or somebody you care about is struggling with student loan debt — or worried about avoiding a debt trap — one good place to look for advice and assistance is an all-day conference happening this Saturday called Finish Free! sponsored by Emmanuel Baptist Church in Brooklyn (free and open to the public; tickets available on Eventbrite.)
Rev. Anthony Trufant of Emmanuel decided to hold the conference after hearing from young members of his congregation whose financial struggles could be traced back to student loans. He says that the twofold problem for families usually involves taking on too much debt upfront, and getting hammered on the back end with monthly payments.
“Let’s say they have a bachelor’s degree in marketing for a company where they may be making $50,000. After you add the student loan plus housing — not talking about anything else — it doesn’t leave them with very much,” Trufant told me. “We’re not even going to talk about the prospect of purchasing a co-op or a condo or a house. They’re carrying too much debt.”
A lot of students miscalculate their ability to repay their loans. A survey by LendEDU, a financial products company, found that new graduates, on average, estimate they’ll make $60,000 upon leaving college, but end up making less than $49,000 in their first few years.
Solutions at the national level have to include immediate relief for students struggling under too much debt. Sen. Bernie Sanders, a presidential candidate, has promised to impose a special tax on Wall Street financial transactions to raise the $2 trillion needed to eliminate all student debt.
Sanders’ rival, Sen. Elizabeth Warren, has a similar plan that would tax wealthy families and corporations to raise $2.75 trillion and pay down student debt using a sliding scale according to a family’s income.
Sanders and Warren deserve credit for recognizing the dimensions of the crisis, but individual states are launching some promising experiments, too. New Mexico recently floated a plan to make all 29 of its two-year and four-year public colleges free for residents without regard to income. It’s one of 17 states offer some version of free tuition or debt relief.
All well and good. But the core problem has to include a harsh look at the bloated salaries of sports coaches and administrators at many universities, which drives the cost of college through the roof. Federal grant funding should be denied to schools whose administrative costs keep rising faster than inflation.
We also have to repeal a horrendous federal law, dating back to the 1990s, that makes it nearly impossible to discharge students loans even when a person files bankruptcy. Without the threat of having to write off loans, banks and other lenders have gleefully piled debt on students upfront and sicced collectors after them on the back end.
One way or another, we owe it to the nation’s young people to offer them something better than a financial treadmill that ends in disaster.
Louis is political anchor of NY1 News.