The Tribune Democrat, Johnstown, PA

Editorials

September 20, 2013

Zachary Hubbard | Student loans darken future for many Americans

JOHNSTOWN — After two years of college in Germany, I completed my undergraduate education at the University of Kentucky. There, I participated in Army ROTC, graduating as the top cadet in my class, and thereby guaranteeing myself a job in the Army. I reported for duty at the field artillery officer basic course in Fort Sill, Okla., three days after graduation. This turned into a 24-year career.

I began working in the information technology industry immediately after retiring from the service. Today, my wife and I enjoy many of the benefits that go hand-in-hand with two successful careers.

For the past year, I’ve volunteered as a part-time job coach for a local nonprofit organization. Lately, I’ve been coaching a handful of recent college graduates. I had a guaranteed job awaiting me after graduation. These grads aren’t as fortunate.

An April 2013 article in The Atlantic reported that 53 percent of recent college graduates are unemployed or underemployed. Consequently, rather than having college campuses full of students eager to graduate, many kids today dread the approach of graduation because of the dismal job market.

This sense of dread is magnified for those having significant student loan debt. For them, graduation means having to start paying back their loans. According to the Federal Reserve Bank of New York, student loan debt nearly quadrupled in the past decade, rising from nearly $250 billion dollars in 2003 to almost $1 trillion today.

One reason for this staggering increase is the availability of money for loans. Congress wrote the current laws to favor the lenders, so virtually all of the risk is on student and parent borrowers. This has opened the door to predatory lending practices by some financial institutions, particularly in the case of private student loans. Roughly 15 percent of all student loans are private loans.

With more money available, universities have felt free to raise tuition at rates far exceeding inflation. According to the National Center for Education Statistics, between academic years 2000–01 and 2010–11, prices for undergraduate tuition, room and board at public universities rose 42 percent.

A CNN Money article in May indicated college graduates in the Class of 2013 average slightly more than $35,000 in loans and other college-related debt.

Student debt includes federal loans, private loans and credit cards. For those experiencing financial difficulties, credit card debt is the easiest to manage. Federal loans are next, followed by private loans. Paying off private student loans can be extremely difficult.

Unlike credit card debt, federal and private student loans cannot be discharged through bankruptcy. Federally backed loans are somewhat easier to manage, because there are numerous options and payment plans for those having difficulty making their payments. This doesn’t mean a borrower won’t be paying off federal student loans until they are middle aged, but at least they have options, albeit expensive ones, to avoid defaulting on their loans.

Private student loans can spell trouble. Many students turn to these after they exhaust their federal loans. They tend to be larger than federal loans and come with broader terms and conditions. The devil is in the details – the fine print of each contract. These loans are often co-signed by a relative, usually one or both parents, placing them at equal risk with the student borrower.

Most private student loans cannot be consolidated and refinanced at lower rates after graduation. Many lending institutions are reticent to discuss alternative payment plans, preferring to have cosigners sell their homes or liquidate other collateral to pay off the debt when loan payments become delinquent.

There is a very dark side to America’s student loan debacle. In July 2012, Cryn Johannsen wrote an article titled, “The Ones We’ve Lost: Student Loan Debt Suicides.” Her article details multiple examples of students who chose to take their own lives rather than face a future living in subjugation to crushing debt. Johannsen is the founder and executive director of All Education Matters, an organization dedicated to educating the public and elected officials about the student loan debt crisis.

Opponents of reforming the laws governing student loans most often cite personal responsibility – the individuals who signs for a loan must be responsible for paying it back. We Americans need to ask ourselves if this marriage of education and finance will help secure our nation’s future.

Do we want our children facing a future tantamount to life in debtors prison? Do we want students making financial decisions that will affect them, in some cases, for the rest of their lives? Do we want future generations of young adults to be plagued by sleepless nights, fear, anxiety and panic attacks related to debt?

The Fairness to Struggling Students Act of 2013, Senate bill S-114, is currently stuck in committee. Similar legislation has been bouncing around the Congress since 2011. S-114 would change the law, making debt from private student loans dischargeable through bankruptcy.

While this legislation doesn’t apply to federal student loans, it’s a good step toward reforming student loan lending practices and helping to bring skyrocketing educational costs under control. I urge everyone to educate themselves on this legislation and take a stand for our children and grandchildren.

Zachary Hubbard, formerly of Johnstown, is a retired Army officer and freelance writer residing in the Greater Pittsburgh area.

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