The greatest threat facing the U.S. economy isn’t peak oil, the Eurozone crisis or competition with China; outstanding student debt is already beginning to cripple spending and has the potential to create multiple lost generations.
With outstanding debt rising with each class of graduates entering a brutal job market, tuition rates continuing to rise and the interest rate of many federal loans set to double in July, the situation seems likely to get much worse, quickly.
U.S. Representative Hansen Clarke, a Democrat representing Michigan’s 13th District, has proposed legislation to give students and graduates some hope of paying off their education-related debt. His bill, The Student Loan Forgiveness Act of 2012, both acknowledges the precarious state of student debt in America and proposes a tempting and dangerous solution.
Clarke’s proposed legislation comes with an important grounding in fact, and it’s encouraging to see that some in government are beginning to take note of a clearly impending crisis. As the bill notes, “Total outstanding student loan debt officially surpassed total credit card debt in the U.S. in 2010, and is on track to exceed $1,000,000,000,000 during 2012.”
Hopefully that row of 12 zeroes is enough to get the attention of the many older Americans who dismiss student debt as a petty problem for spoiled suburban kids. A large part of Clarke’s proposed solution is the “10/10 Loan Repayment Plan,” whereby 10 percent of debtors’ income would be automatically withdrawn to go toward repayment of federal loans for 10 years, at which point the remaining balance would be forgiven.
Loan forgiveness is tempting. American students now graduate with an average of more than $25,000 in debt, with that figure rising yearly. This Editorial Board alone, consisting of hardworking students, many benefiting from scholarships and grants, who attend a moderately priced state university, owes more than $120,000 between its six members and would certainly benefit from the more secure future offered by the 10/10 Plan.
But simply forgiving loans would have no effect on the universities who continue to raise tuition. Clarke’s bill would do nothing about the sad reality that any money taken in by Central Michigan University has been spent, not always for the benefit of students or faculty.
The problem lies in the fact that many public universities view themselves more as businesses than as institutes of learning. And universities as a business want to make a campus that is flashy, which will make more students want to come and spend their money.
This should be clear: Any type of education should never, ever be viewed as a business.
Because when it is, the focus changes from producing productive leaders of society to acquiring money.
The worst part of this mess is that even if the government was to reinvest in education and double the funding to state universities, it would be hard to imagine that those in charge would be fiscally responsible and begin to take that burden off students.
The operating budget for CMU for the 2000-01 academic year was $244 million. The operating budget for CMU for the 2010-11 academic year was $417 million.
Tuition for CMU during 2000-01 was $108.15 per credit hour. For the 2010-11 year, credit hours cost $346.
If those numbers don’t put in perspective the problems this nation will face in the future with student debt, then nothing will.
We’ve relied on administrators and lawmakers to make changes, and instead, they’ve footed the bill to the next generation — it’s a bill that may leave future generations broke, even if they’re prohibited from filing bankruptcy.