At more than $1 trillion, total student loan debt in the United States recently surpassed total credit card debt, according to the Consumer Financial Protection Bureau (CFPB). Combined with credit debt and local, state and federal government debt, Americans today face a seemingly insurmountable task in obtaining an education at a reasonable cost.
In this time of uncertainty and recession, it is time to reevaluate our public education system and the financial options available to students. The impact of the student loan debt crisis does not only hinder college graduates — it damages the economy as a whole.
In California, we once had a policy called the Master Plan that kept the cost of attending UC affordable. Far from keeping to the plan, fees have risen astronomically in recent years.
To pursue students who have defaulted on $67 billion’s worth in college loans, the Department of Education has hired 23 private collection agencies. Many graduates cannot afford to make large payments every month and ultimately stop paying altogether.
The federal government offers three lending programs:
1. Stafford loans, subsidized and unsubsidized rates
2. Parent loans for undergraduates, PLUS loans for graduate students
3. Need-based Perkins, set to expire this year
These loans provide advantages over private loans and credit cards because they offer fixed interest rates and deferments on repayment, among other consumer protections. However, students do not have the option to declare bankruptcy on federal loans. Payment plans are generally inflexible once one is out of school and unemployment is still a large problem.
By launching its “Know Before You Owe” student loan project on April 11, the CFPB has made strides toward educating families about college costs. A new government website allows prospective college students to compare costs of various undergraduate and community colleges.
However, more drastic changes must be considered to alleviate the burden many graduates must shoulder. The editorial board of UC Riverside’s student newspaper, The Highlander, released a proposal in January 2012, the UC Student Investment Proposal. Also referred to as Fix UC, the proposal allows students to attend a UC at no upfront cost and requires them to pay the university 5 percent of their annual income for 20 years after graduation.
This type of radical change in the way students pay for a public education could mean a more stable way of generating revenue for the UC and an accessible payment plan for California public college students. A similar proposal has been made to address CSU budget problems.
On July 1, 2009, the College Cost Reduction and Access Act of 2007 was enacted. Its income-based repayment plan allowed graduate debt for the class of 2012 and beyond to be forgiven after 25 years of payments capped at 10 percent of one’s annual income.
President Obama proposed a change in his 2010 State of the Union address — which Congress quickly passed — that lowered the length of payments to 20 years and reduced payments to 10 percent. This type of alternative policy is a step in the right direction.
Australian universities use a system similar to the Fix UC proposal. In Finland, there are no tuition fees for university students.
The student debt crisis is out of control, and a return to the essence of the UC’s tuition policy laid out in the Master Plan is key to a viable solution.
More info about Fix UC program: