In attempts to solve this problem, student loan forgiveness, government-subsidized loan interest rates and other actions have been proposed to lift the supposedly heavy burden from all these poor students’ shoulders.
As students, it is easy to get behind the idea of a more affordable education, but in reality, the Obama administration’s solution means taxpayers will now have to pay another $22.1 billion to subsidize “forgiven” student loans.
So we’re going to solve the problem of debt with other, different debt. That sounds promising.
How did the American people get stuck with this enormous tab? President Obama used executive action to expand the pay-as-you-earn program of student loan repayments.
This program allows students to pay no more than 10 percent of their discretionary income [gross income minus basic living expenses] toward their student loan debt. After 20 years, they will then have any remaining balance forgiven. If they choose to become public servants, this forgiveness comes after only 10 years. The policy applies to more people now than ever before.
That sounds great, right? After all, this plan makes sure that our imaginary student won’t ever go broke paying off their loans.
Here’s why this isn’t a sustainable policy. Let’s say that a person attends a school like ORU, and just suppose that they rack up about $100,000 in student loans. If after graduation, they work for one of the numerous “public service” jobs listed under this policy, and make about $40,000 a year, they will probably pay less than $200 per month, which will not even cover the interest on their loan.
If this person stays employed in public service for 10 years, their loan balance will be forgiven. The problem is that he actually owes more than the original $100,000 because their payments were so low. The interest literally outpaced their payments.
In fact, over 10 years, our imaginary student will have paid only slightly more than $22,000 to a government that gave them $100,000 to help pay for college.
What Obama and other proponents of these policies forget is that whenever the government spends money, they’re spending taxpayer money.
While some may see education as a right, I would submit that higher education is a great privilege. Requiring by law that tax dollars pay for others’ unpaid student loans is an immoral and fiscally unsustainable policy.
We must ask ourselves: should we really exchange one type of debt for another? Or will we, as students, lead the charge for personal responsibility in paying for our education?