Beginning next month, hundreds of thousands of recent college graduates will begin paying their dues, literally. More specifically, they will start repaying their student loan debt as their six-month grace period following their May graduations ends. On Nov. 9, 125,000 students will begin repayments, followed by another 125,000 the following week, and so on; their average debt will be around $30,000, according to Sen. Elizabeth Warren, D-Mass.
“November is debt month” for college graduates, says Warren, who co-chaired a forum earlier this week with Senator Amy Klobuchar, D-Minn. The forum also included several other Democratic senators plus a trio of recent graduates who are deeply in debt. Its purpose: to “underscore the depth and scope of the [student debt] problem and the need for action,” said Klobuchar.
Collectively, more than 40 million students owe about $1.3 trillion in debt. They face decades of debt payments, and their numbers are expected to grow. Nearly 70% of students borrow to pay for college.
Government’s Role in the Student Loan Crisis
Among the key messages of the forum was the role that government plays, being part of the student debt problem as well as potentially part of the solution.
Consider this: Between 2007 and 2012, the federal government made about $66 billion in profit on student loans, according to Warren. “This is obscene,” said Warren. “The federal government should be helping students get an education, not be making a profit off of their backs.”
In addition, the federal government’s Perkins Loan Program, which provided low-interest loans to about 500,000 especially needy students per year, expired at the end of September because funding wasn’t renewed by Congress.
State governments, meanwhile, slashed funding for public educational institutions. A generation ago states covered $3 of every $4 spent, said Warren; today the ratio is $1 of $4, said Warren.
Another black mark on the government is the way it is “feeding the beast,” said Sen. Richard Durbin (D-Ill. He explained that even though students at for-profit colleges account for only 10% of all college students, they account for 20% of federal student aid and 40% of student loan defaults.
“Many of these schools are starting to fail,” said Durbin. And when they do, taxpayers will be footing the bill, he said. When the for-profit Corinthian College company went under, the Department of Education erased the federal debt of its students, creating a liability of as much as $3.5 billion for taxpayers, said Durbin. Those losses, in turn, will affect the availability of student loans for other people, said Rohit Chopra, senior fellow at the Center for American Progress and former student loan ombudsman for the federal Consumer Financial Protection Bureau.
Even nonprofit colleges fail to provide accountability for the $140 billion that their students borrow from the federal government, said Sen. Chris Murphy, D-Conn.
How Government Can Help Solve the Student Loan Crisis