Student debt is crippling a generation, and threatening to cause long-term damage to the economy.
Policies that cut down on the overwhelming loan payments required of recent college graduates will help lift that burden.
But a better tack is to avoid high debt levels altogether, by slowing the rapidly rising cost of higher education and making sure students have the information they need to make the right decisions about where to go to school and what to study while there.
The total amount of U.S. student loan debt now totals $1.2 trillion, according to the Federal Reserve Bank of New York, up from $300 billion just a decade ago. The average 2014 college graduate left school with $33,000 in debt, twice the amount of 20 years ago.
Maine, according to the Project on Student Debt, has the seventh-highest student debt average and the ninth-highest rate of debt.
For those who started repaying student loans in 2010 — a class that took on record debt and then graduated into a barren job market — 15 percent fell into default.
Even those who can make the payments have felt the impact of the debt load, which has slowed entrepreneurship, dropped the rate of first-time home ownership, and cut career choices.
It’s hard to start a business, qualify for a mortgage or take a lower-paying job in an industry you love if you have tens of thousands of dollars in debt hanging over your head. And if those barriers persist, they will slow the economic recovery and have negative impacts on the graduates throughout their careers and into retirement.
In response, President Barack Obama earlier this month expanded the Pay As You Earn program, which caps repayments on Federal Direct Loans at 10 percent of the borrower’s income.
That came after Republicans blocked a plan by Massachusetts Sen. Elizabeth Warren, a Democrat, to lower interest rates on student loans through refinancing — paid for by an increase in taxes on the wealthy.
Both initiatives offer relief, but only for the symptoms of high debt, not the causes.
The cost of higher education increased an astonishing 1,120 percent in the last 35 years, four times faster than the Consumer Price Index.
Colleges and universities raised costs to pay for the kinds of amenities that attract students. Students, supported by the availability of federal loans, which make up all but $170 billion of the $1.2 trillion in student debt, were more than willing to pay the price.
So until the cost of education is addressed, helping borrowers with their payments is only a Band-Aid. Obama has made some progress in this area, but more is needed.
Policymakers also have to address the people most affected by the student loan crisis — those who took out the highest amounts of debt, usually for graduate school, and those who took on debt but never received a degree.
Without a degree, or with an expensive degree in an weak field, many of these borrowers couldn’t meet their obligations.
That’s why it’s important that students know exactly what they are getting into when they go to college. They need to be in the right program, and fully understand the implications of taking out a loan.
Maine took a step in the right direction this year by passing the Know Before You Go Act, from Rep. Seth Berry, D-Bowdoinham. It establishes a commission to accumulate and share with students data about higher education, such as program completion, loan defaults, costs and employment and earnings.
No longer can students go to college simply because it’s the next step after high school. They need to have a plan, and a good idea of what college will mean for them four years in the future.
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