Editorial: Senate can help with college debt relief
A college degree is supposed to be a springboard to one’s future.
Studies show that those who have earned, say, a bachelor’s degree, will earn hundreds of thousands of dollars more over a 40-year employment career than a person with just a high school diploma.
Unfortunately, many recent graduates are saddled with loans that prove a real drag on income, especially for a newly minted graduate just getting started.
Don’t think it’s a problem? Well, consider this: outstanding student loans now total more than $1.2 trillion. To put it in perspective, that amount is higher than the debt level of the nation’s credit card holders. In fact, seven out of 10 2012 college graduates owe close to $30,000 on average.
And it’s the federal government that holds the bulk of that amount, roughly $1 trillion.
It’s not just a problem for the graduates, either. Since so much of their pay check goes to loans and other bills they face, they don’t have money to spend elsewhere, be it on housing, vehicles and other goods that are critical elements in getting the nation’s economy moving.
The real catch here for young people is that unlike other debts — where they could take advantage of interest-rate drops to refinance and get a more favorable rate — they’re stuck with the original percentage.
Although Congress has — grudgingly — made some changes for future students, it hasn’t done much for those with existing loans. Many graduates, therefore, are faced with paying back their loans plus 7 percent interest.
Today, though, Congress has an opportunity to ease this burden. The Senate is expected to take up “The “Bank on Students Emergency Loan Refinancing Act,” legislation that was in large part crafted by Massachusetts Sen. Elizabeth Warren. Under this bill, those with federal student loans would be able to refinance at a rate of 3.68 percent, which is the same rate Congress set last year for new student loans.
That seems like a reasonable and fair approach. But there is, of course, a hitch. You see, the loan program is a revenue maker for the government. It’s estimated that the federal government will make $66 billion on these loans for the six-year period between 2006 and 2012. To help make up that money, Warren wants those Americans earning more than $1 million a year to see a tax increase through what’s known as the “Buffet rule.”
This approach is unlikely to garner support from Senate Republicans and that could stop this sensible approach to student loan debt.
That would be too bad. We urge the Senate to use this legislation as a chance for compromise and pass a measure that provides student loan debt relief.