Jim Lardner is the communications director at Americans for Financial Reform, a coalition of more than 250 civil rights, consumer, labor, business, investor and other groups working for a strong, stable and ethical financial system.
In the anything-goes financial world of the early 21st century, student lenders, like mortgage lenders, convinced millions of Americans to take on heavier and costlier debt than they could handle or understand. Now the scary consequences are coming back to haunt us as an economy and a society.
Student-loan debt has doubled since 2007. At an estimated $1.1 trillion, it’s the nation’s second biggest form of household indebtedness, after mortgages. One in five families have such loans, with an average balance of $26,682 at last count. Many owe far more than that – more, in some cases, than they can imagine ever being able to repay.
The cold statistical facts can be found in recent reports from, among other sources, the Pew Research Center and the Federal Reserve Bank of New York. For a glimpse of the human consequences, though, you can’t beat the more than 28,000 statements that went up on the Consumer Financial Protection Bureau website last week. Here’s just a sample:
I graduated 6 years ago and have been making monthly payments ever since, but my balance never, ever seems to go down…
Between my federal student loans and alternative loans I am projected to pay 79% of my gross monthly income, starting next month…
When I first went to the Financial Aid department they told me that I could take out Federal Loans but that it would be a lot easier, with less hoops to jump through, if I took out private loans…
Sallie Mae attached a $4000 PENALTY to one of our loans -- But I have no idea which loan is what--or what loan is whose…
I am 70 years of age and must keep working in order to afford to continue to pay for my student loan…
I was young and I had NO idea…
The Bureau did the country a large service when it asked for this input in February. Thanks are also due Public Citizen, U.S. PIRG and Young Invincibles, among other groups, for their role in spreading the word and gathering a body of testimony that puts flesh and blood on a number of disturbing trends:
- Five or 10 or more years after college, student-loan debt is causing young adults to avoid buying cars and homes.
- Student loans go a long way toward explaining why, between 2007 and 2010, the number of 18-to-34-year-olds living with their parents increased by roughly two million.
- They have led many young workers not to contribute to 401(k) plans, even at the sacrifice of matching money from employers.
- They are making it hard for many graduates to pursue careers such as teaching that don’t generate enough income to repay debt.
- They’re discouraging people from starting businesses and other forms of risk-taking.
“Are these the shadows of the things that Will be, or are they shadows of things that May be, only?” Ebenezer Scrooge inquired of the Ghost of Christmas Future. The question might also be asked about where the United States is going with its current system of financing higher education.
The Consumer Protection Bureau sought policy ideas for current as well as future student-loan debt. Its report groups the responses under several broad headings, including a “Road to Recovery” for people trapped in unmanageable private student-loan debt, and a “Refi Relief” program that would allow borrowers who have dutifully made payments to refinance at rates that reflect current interest levels and their own improved creditworthiness.
But it will take action by many arms of government – Congress, state legislatures, and the Departments of Education and Labor, along with the Bureau itself – to turn the nation away from what Kevin Carey of the New America Foundation describes as “a big social experiment that we’ve accidentally decided to engage in” – the experiment of sending a generation of young people “out into their professional lives with a negative net worth. Not starting at zero, but starting at a minus that is often measured in the tens of thousands of dollars.”
And any meaningful policy response will require continued organizing and action on the ground. The good news is that the organizing has begun, and that a huge national problem is on the way to getting the attention it deserves.
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