If we needed an example of America’s misplaced priorities, we can look back at our government’s $700 billion bailout of the same financial institutions whose reckless and often illegal practices drove the country into the great recession.
Bailout supporters, who included the CEOs of our biggest banks, hedge funds and brokerage houses, said the cash infusions were absolutely necessary to stabilize the economy and prevent further damage. So Washington listened.
The arguments may — or may not — have been valid, but a similar case is being made about solving the student loan crisis. But this time, Washington is sticking its finger in its ears.
Consider this: The future of an entire generation is in danger. Our students and young graduates are in a precarious state. They want to acquire the knowledge and skills they need to climb the ladder to find their places in a highly technical and competitive worldwide economy, but the costs are pulling them down.
Today, Americans entering the job market are saddled with $1.2 trillion in outstanding student loan debt. It is not uncommon for a student to emerge after graduation with a personal debt of one to two hundred thousand dollars.
Because of these debts, more than 40 million Americans are not buying houses or cars, starting businesses or raising families. Seven million Americans are in default on their student loans.
Some political leaders are paying attention to this crisis and suggesting solutions. In his latest State of the union address, President Barack Obama proposed making America’s community colleges free to students pursuing a degree.
Meanwhile, democrats in Congress have introduced the Student Loan Fairness Act, which would establish a new “10-10” standard for student loan repayment. In this plan, an individual would be required to make 10 years of payments at 10 percent of his or her discretionary income, after which the remaining federal student loan debt would be forgiven. The legislation also would cap federal interest rates for student loans at 3.4 percent.
Unfortunately, with an antagonistic group controlling both houses of Congress, such ideas are considered “dead on arrival.” This is a shame.
Now we are starting to hear about additional effects of the student debt crisis, and this time people with money are sharing the pain.
In May, the Federal Reserve Bank of New York reported only 37 percent of borrowers are current and reducing their balances. As a result, investors in the $170 billion bond market tied to government-guaranteed loans are being warned it will take longer than they expected to get their money back.
Doing nothing will not solve the problem. The situation will only get worse until Congress begins to understand the importance of affordable education in a modern democracy.
If this amounts to a “bailout” for our young people, so be it.