Congress passed omnibus legislation June 29 that freezes student loan rates, which were due to double. If the legislation hadn’t passed, 7.4 million U.S. student borrowers would have taken on an additional $1,000 in debt for each year of college, according to The Detroit News. With the freeze in place, it would behoove lawmakers to consider the next vital steps needed to prevent the student loan crisis from becoming the next financial bubble that drags the U.S. economy once more into the depths of hell.
Student loans: Much work to be done
Michigan Rep. Gary Peters (D-Bloomfield Township) noted that while the student loan rate freeze is “a step in the right direction,” there is still much work left to be done. Freezing subsidized Stafford rates through July 2013 is only a temporary victory for students struggling under the burden of debt. According to Finaid.org, college tuition continues to rise at an average rate of 8 percent per year, and many institutions of higher education are upping rates much more for the 2012-2013 school year.
In a financial landscape where graduates struggle to find jobs in their chosen fields and must settle for minimum or near-minimum wage, something has to give. Many believe that that something must be additional legislation. What follows are some suggestions as to what can be done.
Making the financial aid process more transparent for potential college students and their families will be a key step in alleviating the student loan crisis. Total cost of attendance for one year, estimated monthly payments and loan default rates are all sobering statistics that anyone seeking a student loan should understand. If a student already knows which major field they plan to pursue, average projected salary should be compared with average student loan debt load to see whether their chose field is practical from a financial standpoint. Perhaps the best advice that could be gleaned from the financial eye-opening that would accompany full transparency is to become a Renaissance man or woman later in life. Focus on a field that takes care of the bills first.
Controlling runaway education costs
Capping student loan rates is a start, but even that won’t help Americans win the race against the student loan crisis if tuition continues to skyrocket at a pace directly related to the grandness of college administrators’ vacations and retirement plans. In January, President Obama introduced a plan that would limit federal funding to a college if the institution failed to keep tuition costs under control. Unfortunately, this plan hasn’t gotten off the runway. However, now that rates are frozen on Stafford loans, controlling tuition costs can now have its time in the media spotlight.
Respite for illegal students
The thought of this rankles for many, but the truth is that many U.S. colleges have large populations of undocumented students. In April, Colorado passed a bill to provide tuition discounts for such generally underprivileged students, provided they are able to present an affidavit stating that they will apply for legal status as soon as they become eligible. Other states are currently considering similar legislation.