Student Loan Program in Need of Major Overhaul

by Dick Baynton

Funding of the education loan landscape changed in March of 2010 when President Obama signed the bill that overhauled the ‘Student Loan Program.’ The legislation placed the government in charge of student loans, essentially taking student loans out of the hands of banks and other institutional lenders like Sallie Mae (The Student Loan Marketing Association, now a private company).

Congress reduced the interest rate for college loans to 3.4% in 2007, but to make the law appear more pragmatic, the rate would double to 6.8% on July 1, 2012. Now, with the economy still trying to climb out of the tank, the President has urged congress to keep the student loan rate at 3.4%.

Will this galvanize Obama votes by students with loans? Probably. But wait; former Governor Romney has agreed that the 3.4% rate should be continued as well! Hooray! But maybe not Hooray because that isn’t so great for taxpayers, however as a one-year rate freeze will cost taxpayers a cool $6 Billion.

But $6 Billion is merely a drop in the bucket when considering that total student loan debt now exceeds $1,000,000,000,000. That’s right, twelve zeros with the name TRILLION.

 It is important to remember that the original and other amended legislation regarding student loans is complicated and confusing. For example, there are provisions that if you enter public service for 10 years, much of your student loan can be forgiven. After 25 years (probably soon to be 20 years), your unpaid student loan will be absolved.

So, these provisions will allow present and future parents to pay for the educations of both their own children and one or more underpaid, overworked college grad that sadly couldn’t manage their assets.

It is time the Student Loan Program underwent a thorough review by a mix of private and government experts. First of all, are some students ‘gaming’ the system? In its quest to cover all bases, government regulations often provide gaps that encourage or at least allow misuse and fraud. Are there loans to students that are not competent to succeed at the college level? Are some loans provided on the basis of political friendship (quid pro quo)?

Could colleges and universities achieve some reductions in costs? Are leaders in higher education able to cut costs? Are some college staff doing virtually useless research? Is the system of tenure abused and expensive? Are buildings, classrooms and labs multi-purpose or single use? Are we building for luxury or utility?

Do ALL students that want to attend college expect to go directly from their high school to a four-year institution? Could some students put off college and find a job and save money for college? In many cases, a graduating senior could work and attend their community college for a year or two and build up both savings and transfer credits.

While many willing and able candidates for college are worthy, industry and construction  and a host of other trades and occupations needs men and women as well. Those who visualize success in college should consider taking courses that are more likely to provide jobs upon graduation rather than esoteric courses of study that are interesting but have an aimless path to employment.

In a Rutgers University study, just 49% of students graduating from 2009 to 2011 found a full-time job within a year of graduation. Two thirds of all students graduated with loans totaling more than $25,000.

Government needs to return to some of the principles that made our country great; self-determination, self control and self-confidence. Student loans have become a debacle and will continue to unnecessarily contribute to the national debt now at more than $50,000 per US citizen.

While special consideration should to be extended in some cases, it is time men and women students be treated as adults with the firm expectation that borrowed money will be paid back to lenders with interest. The USA offers opportunity, not cradle-to-grave insulation from all the hazards of life.