I was almost amused to read the news today (link below) concerning student loans. Apparently, rates are scheduled to double to 6.8% this summer and the President wants to cap student loan rates at 3.4% for another year. Congress wants to make a cap permanent. College students are threatening to descend on DC if action is not taken. And so it goes.
Here’s the shame of it all: high rates, of course, make college less affordable. But you know what really makes college unaffordable: the ridiculous amounts colleges charge to attend these institutions. The sad fact is that the availability of student loans and the large amounts that can be borrowed have given all colleges license to send tuition skyrocketing. Is it just a coincidence that the costs of tuition have blown up as larger and larger educational loans have become available? No, colleges increase tuition because they know the money is there for students to borrow so the students can pay it.
We work with clients facing a mountain of student loan debt all the time. It’s not the interest that’s killing them, it’s the principal. We work hard to negotiate large reductions in their principal balances so they can start living their lives. This needs to be available on a large scale.
Instead of interest rates (deck chairs on the Titanic), these politicians need to be talking about a process to compromise public student loan debt. After a certain period of time and under the right circumstances, students need to be able to get balance relief in the same way businesses who borrow money from the Small Business Administration can workout an offer in compromise with the SBA that allows them to avoid bankruptcy and pay less than is owed depending on their personal financial circumstances.
I am not going to hold my breath waiting.
Kevin Fallon McCarthy
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