The Chicago Tribune reported yesterday that Senator Dick Durbin of Illinois has been holding hearings on the Fairness for Struggling Students Act, which would allow student loan debt from private lenders to be forgiven during bankruptcy proceedings.
It's not hard to get why this legislation is a good idea -- in the past month alone, three separate studies have demonstrated the incredible strain that student loan debt is placing on the economy. The CFPB noted just two weeks ago that total student loan debt has officially passed the $1 trillion mark, far surpassing credit card and auto loan debt, among others.
This burden has gotten so onerous that, according to another report, it is likely placing a damper on the entire post-recession recovery, particularly the housing market. And, unsurprisingly, as total student loan debt continues to grow and the economy remains sluggish, delinquency has risen significantly: A New York Fed report from March revealed that nearly 30 percent of student loan borrowers have past-due balances of 30 days or more.
So what's the hold-up on Durbin's debt relief legislation? For starters, many folks on the right are sounding the same old tired alarm about individual responsibility and moral hazard. Cato scholar Neal McClusky, for example, worries that,
Students might be more apt to take such loans [i.e. private loans] if they think that they will be able to unload their debt without repaying it.
These kinds of comments drive me crazy, mostly because they completely gloss over the question of why students are increasingly forced to taking on piling amounts of debt in the first place.
The real reason why student debt has skyrocketed with rising college enrollment is because society has increasingly failed to have the backs of today's generation of students. A report by Demos released last week reveals that state funding for public higher education has dropped a full 26 percent per full-time equivalent over the past 20 years.
A college degree is more important than it has ever been, and the record number of students pursuing higher education today simply demonstrates the hard work and responsibility that young Americans exhibit despite the falloff of government support.
In reality, the Fairness for Struggling Students Act doesn't go far enough -- it should apply not only to private student loans but to government student loans as well. Rather than waiting for months of more studies revealing how the problem of student debt is just getting worse, we should cut to the chase and pass this bill right now.