Can Congress Rescue Students from Drowning in Debt?

C/o Shutterstock
C/o Shutterstock

C/o Shutterstock

Late last summer, President Obama signed the Bipartisan Student Loan Certainty Act of 2013 (“the Act”) into law in hopes of rectifying the severe student debt problem.  Congress enacted the law after student loan interest rates doubled on July 1, 2013, leading to an educational student debt crisis.  The Act aims to prevent the already overwhelming student loan debt from rising by lowering interest rates on undergraduate and graduate student loans. After a month of arguing over the proposed legislation, Congress, acting in rare bipartisan fashion, compromised and passed the bill at the end of July.  As President Obama signed the bill into law, Congress applauded.  The clapping of both parties revealed that Congress felt satisfied with their ability to work together to pass the Act. Should Congress really have celebrated its passage?  Is Congress’ job regarding the student debt crisis complete?  Absolutely not.

Even with the Act in place, student debt will remain a critical problem that lawmakers will need to address again.  One single law cannot and will not solve all of the American educational debt problems.  First, this new law does not help out individuals who have already paid high interest rates on their student loans or who have already defaulted.  Student debt exceeded 1.1 trillion dollars before the President even signed the bill, a sum that exceeds the $798 billion of credit card debt currently outstanding in the United States.  The amount of debt severely impacts many Americans, as individuals must postpone investing into other areas of their lives such as houses and cars, to name a few.  Although the Act aims to decrease the rate of debt that individuals will possess in the future, it does not eliminate the tremendous amount of debt that already exists.  In addition, unlike other types of debt, “there is almost no way out of student loans if you can’t repay.”

The new legislation lowers student debts to some extent, but the interest rates are still significantly high.  Also, under the Act “federal loan rates could dramatically rise” when the economy improves.  With loans increasing, the brief period of low rates will be of little comfort.  Hence, the new law does not completely cure the student debt problem.

So what are some potential solutions for dealing with the problems not addressed by the Act?

The Department of Education recently announced that it would start to contact individuals who are struggling to pay back their student debt and educate them about various options available to assist in paying it back.  The announcement reflects the government’s concern that thirty-five percent of student borrowers under the age of thirty have defaulted on payments.  The Public Service Loan Forgiveness Program is one such program, which forgives education debt for individuals who work in public service for ten years. The government’s effort to educate people about student loan debt will hopefully assist individuals in making loan payments successfully without defaulting.  However, the government should also attempt to inform individuals of the options available to them when they first borrow the money, rather than waiting until students face trouble after graduation.  Moreover, these instructions need to be clear throughout the process.  For example, instead of “[having] to be a genius to figure out what to do,” borrowers should know exactly how to join government or private programs that will assist in paying back debt.  The programs available to student borrowers cannot play their intended role of assisting individuals with paying their debt if people do not understand how to participate in the programs.

The current loan repayment programs can still be problematic, however, as not everyone has the ability to join the programs, and even those who do may face financial hardships that render the programs impractical.  For example, the Public Service Loan Forgiveness Program requires individuals to live ten years on a low salary while still paying a certain amount of their student loans—not an easy task with the expensive costs of living.

The government must do more than simply notify individuals of programs available to pay back debt.  Some proponents suggest that future students should go to community colleges in order to avoid the high cost of higher education with no guarantee of securing a job upon graduation.  It is not fair for future students to lose the opportunity of attending a four-year institution simply because of tuition rates.  Universities should take responsibility for the rising cost of education and make efforts to lower tuition.  With tuition costs lower, students will have fewer loans to request and consequently less debt upon graduation.

Although the Act is a step in the right direction, now is not the time for the government to stop working to find solutions.  Student debt still remains a significant problem for present, former and future students.  Even President Obama admitted, “It’s all a good start—but it isn’t enough.”  Members of Congress echoed the President by acknowledging the national problem of student debt.  Unfortunately, Congress’ well documented inability to work together, which has even resulted in a federal government shutdown, does not indicate that Congress will be able to cooperate in passing additional student loan legislation.  Next, Congress will review the Higher Education Act in 2014. This Act determines federal student aid and provides an opportunity for legislators to re-visit and reform student loan laws.  Let’s hope Congress takes advantage of the opportunity.