One of the sorriest American myths these days is that getting into enormous debt will secure a better financial future for today’s students.
Not only is debt a manacle for future generations, it’s not good for the country at large — a $4 trillion burden on future earnings and wealth.
When politicians make a stink about student loan rates, they’re smelling a rotten fish, but not the most obvious one. They should be berating colleges and our own broken higher education-funding system for not providing more grants — and less loans.
A recent report by Robert Hiltonsmith at the progressive think tank Demos shows just how damaging these massive student-loan debts can be. [...]
Hiltonsmith’s conclusion is that the U.S. needs to allow students to refinance their existing debt at lower rates. Why not? Banks can borrow from the Fed for almost nothing now. And if a student isn’t able to find a job that will provide income to pay off the college loan — or faces some unforeseen financial difficulty — they should be able to discharge the debt in bankruptcy court (you can’t do that now). That would not only give the most indebted graduates a failsafe position, but chasten colleges that load up their students with debt.
“Student debt’s financial impact won’t just be felt by the nearly 39 million Americans who currently have student loans,“ Hiltonsmith writes, “The drag of student loans on indebted households’ purchasing power and ability to save will slow already-sluggish growth for the entire U.S. economy. If we wish to avoid this fate, we need to take immediate action to both reduce the burden of existing student debt and prevent future debt from piling up even higher.”
What can we do now? There are some immediate steps that can be taken, in addition to Hiltonsmith’s recommendations.
Read the full report: At What Cost? How Student Debt Reduces Lifetime Wealth
