Catholic News Service
WASHINGTON — Congressional lawmakers seem to agree on two things: College student loan debt is out of control and something should be done about it.
Where they disagree is how to solve the problem. Currently they are looking at one piece of this puzzle: how to keep a lower interest rate on federally subsidized undergraduate student loans for low- and middle-income students which is set to double to 6.8 percent this June.
Isaiah Toney, a senior at George Washington University in Washington, said he is “extraordinarily happy” this issue is being raised, but he thinks the discussion has been too narrow.
“The big fight has been over possible increase in interest rates for Stafford loans, which is very important, but there is also the huge issue of private loans which have interest rates at 10 percent or more,” he told Catholic News Service May 2 in between exams.
When Toney graduates this summer, he will owe $85,000 in student loans, a staggering amount that has made him rethink the type of job he wants.
Instead of a career in public service, he now realizes, in the midst of an already intense job search, that he couldn’t live on that salary while paying off his college loans.
He’s hardly alone. Today’s college graduates are often underemployed just to pay off debts. Some default on their loans, which could prevent them from future borrowing or make it difficult to get a job.
The crisis has even had an impact on vocations.
A study this year by the Center for Applied Research in the Apostolate at Georgetown University found that 69 percent of religious orders “turned away at least one person because of student loans” and many religious communities have had to ask young people to delay their applications because of unpaid student loans.
Charles Flynn, president of the College of Mount St. Vincent in Riverdale, N.Y., said the high cost of a college education is part of the bigger issue of “how we as a nation will ensure that higher education is available for students of every background.”
“There is a common good here. We as society will thrive when students receive a college education,” he said.
This ideal currently seems unattainable, especially when, as he put it, “graduates have to pay twice what I do on my mortgage” on their monthly loan payments.
“There is a lot at stake here,” he said pointing out that student debt is a significant burden for students who want to attend graduate school and is also a major factor in students even finishing their degrees.
Flynn said Mount St. Vincent makes financial aid a top priority and has significantly increased its financial aid packages to students since he became president 12 years ago.
He thinks Congress should particularly look at loans they are providing to for-profit colleges that have high student loan default rates, saying the government should “use its resources more wisely.”
Patricia McGuire, president of Trinity Washington University in Washington, told CNS that the university’s financial aid counseling staff has grown in recent years not only to advise students in the initial enrollment process but throughout their college years and in searching for a job after graduation.
“Part of our responsibility from day one is to make sure students understand that loans are borrowed money that must be paid back. Students should not borrow more than they think they can handle,” she said.
If Congress extends the lower interest rates on the federally subsidized Stafford loans for one year it will save more than 7 million students $1,000 each on their total loan payments. The extension comes with a $6 billion price tag, which is keeping it at a standstill.
On April 27, the House approved extending these lower interest rates but the White House has promised to veto this measure because its funding would be taken from a preventive care program in the new health care law.
The Senate plan, unveiled April 25 and not up for vote until mid May, also looks to lower the loans’ interest rates and find funding by imposing new payroll taxes on high-earning owners of private corporations.
Congress is also considering a Student Loan Forgiveness Act introduced by U.S. Rep. Hansen Clarke, D- Mich., which would forgive the loan debt of those who have paid 10 percent of their discretionary income toward their loans for 10 years. At the same time, the House Budget Committee is looking to cut funding and eligibility for Pell grants — need-based grants for undergraduate students that do not have to be repaid.
President Barack Obama touted the need for lower interest rates on student loans in visits to colleges in late April. The presumptive Republican nominee for president, Mitt Romney, similarly endorsed this idea.
Two years ago, student loan debt in the United States exceeded total outstanding credit card debt. Currently, the average balance college graduates owe on student loans is $25,000, according to the Project on Student Debt, a nonprofit group based in Oakland, Calif.
Trinity’s McGuire said that despite news highlighting the high cost of a college education and the current poor job market, the two do not go hand in hand.
“The fact that college graduates are unemployed is not because education is deficient but because the economic recovery is slow,” she said, adding that a college graduate will make at least twice as much as a high school graduate over his or her lifetime.
“Even if it’s tough, if your skill sets stay current and you go after the right jobs, you will be employed. You will be able to pay your loans,” she advises today’s students.
