Editorial: Student loans shouldn’t be a debt sentence

By The Herald Editorial Board

We’re just weeks away from “Pomp and Circumstance” for high school graduates, and for many the months between then and the start of college will go by quickly.

But more than fleeting attention should be paid by high school graduates and their parents regarding student loans and the task ahead in paying off student loan debt after college.

A post-secondary education, whether that produces a vocational certificate or a degree following two, four or more years of college, remains a young adult’s best opportunity for employment. And the job prospects for those with at least some college are improving.

Since the end of the Great Recession, employment numbers for college graduates have risen. Last year’s class of college graduates had better prospects for employment than any class since 2009, according to a report by the Economic Policy Institute last spring. The unemployment rate was 5.6 percent for young college graduates, compared to an unemployment rate of 17.9 for those with only a high school diploma.

College is worth the effort, but for some it may not be worth the debt many are having to saddle themselves with to get a degree.

Last week, the Trump administration did not make student loan debt any less of a financial burden for students and their families.

The White House revoked an earlier decision by the Obama administration regarding one federal student loan program, the Federal Family Education Loan Program, which could affect nearly 7 million people with $162 billion in student loans held by loan servicing agencies, The Washington Post reported last week.

Under the reversal by President Trump, the Department of Education is telling loan servicers with the FFEL program that they can again begin charging fees up to 16 percent of the principal and accrued interest on defaulted debt, even if the borrower has entered into the government’s loan rehabilitation program within 60 days of default.

That decision came just days after a new report by the Consumer Federation of America showed the number of students defaulting on loans continues to increase.

At least 42.4 million American owe at least $1.3 trillion in student debt, according to Department of Education data, the Associated Press reported last week. The Federal Reserve puts the number at $1.4 trillion when private loans are included.

Of those numbers, 4.2 million are in default, meaning they haven’t made a payment in 270 days; 1 in 4 of the 42.4 million are behind by at least one payment.

The average college graduate has more than $30,000 in student loan debt. For many that debt climbs into six figures.

Beyond the burden placed on young families by student debt alone, default results in graver circumstances. Wages can be garnished. Credit scores are damaged, and, as can now follow from the Trump administration decision, fees, penalties and the interest on them will mount.

Unlike the bankruptcy protection that Donald Trump’s businesses enjoyed when Trump casinos failed, student loans cannot be discharged through bankruptcy.

Since the 1980s, Congress has passed bankruptcy and other laws regarding student loans that have disadvantaged students and benefited an industry that collects $2 billion in commissions annually. The government, itself, will see a 20 percent return on the loans it made in 2013, according to a report published last year by Consumer Reports.

At the same time, students and graduates have been squeezed by an increase in the cost of higher education and a loss of job opportunities during and after the Great Recession.

Federal Education officials said the Obama “guidance” on the FFEL program was revoked because it had been issued without an opportunity for public comment.

Secretary of Education Betsy DeVos should undertake that public comment process and give full consideration to reinstating the previous administration’s policy for those in repayment plans.

And those companies collecting student loans on behalf of the government should be required to do more to work with student borrowers on realistic repayment programs.

Already, Washington state Attorney General Bob Ferguson has joined with the federal Consumer Financial Protection Bureau and the Illinois attorney general to sue Navient, formerly known as Sallie Mae, for misconduct related to student loan servicing and other violations.

Of the four major loan servicers, Navient, according to the CFA, has the lowest percentage of borrowers enrolled in repayment, deferment and forbearance programs.

Students and families have a responsibility not to take on more debt they they can handle in the years following college. And, certainly, students should be expected to pay back their loans.

But we rely on students to earn those degrees to spur growth in our economy and build our communities, state and nation.

At the same time, we shouldn’t expect them to prop up what amounts to an industry of glorified collection agencies.

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