Tweaking Amy Klobuchar’s Student Loan Proposal
Senator Klobuchar gave an honest and realistic response to a question on free college at the New Hampshire town hall. Free college for all is unaffordable and would end up burdening the nation with higher debt or taxes.
Senator Klobuchar proposes additional assistance for students at two-year colleges and for additional Pell grants and loans. These proposals are not likely to substantially reduce the trend growth of student debt or the number of overextended student borrowers.
- The percent of borrowers leaving school with more than $50,000 in student debt rose from 2 percent in 1992 to 17 percent in 2014.[1]
- The number of Americans over age 60 with a student debt rose from 700,000 in 2005 to 2,800,0000 in 2015. The average amount of student debt held by borrowers over age 60 rose from $12,100 to $23,500 in the same period.[2]
Two-year colleges are a good and less expensive option for many students. However, student debt is skyrocketing for students at four year schools. Many students who start a four-year college drop out or transfer after the first or second year. These students often have substantial repayment problems. The most effective way to reduce this problem is increased assistance for first-year students. The increase in first-year assistance will also reduce total debt for students who complete their degree.
Many overextended students are counting on Income Contingent loans, which have substantial problems. Alternative ways to assist overextended borrowers need to be considered including:
- Interest rate reductions on student loans after 15 years of payments
- Limits on increased student loan interest rates when general interest rates rise.
- Limits to the liability of parents on PLUS loans and cosigned private student loans and other alterations to the PLUS loan program.
- Provision of priority to student debt over consumer loans in chapter 13 bankruptcy
- Allowing discharge of private student loans in bankruptcy
- Revisions to the Public Service Loan Program
I recognize that many people who have repaid their loans and many taxpayers oppose debt relief to overextended student borrowers. However, some people get substantially overextended and need assistance. The debt relief proposals presented here attempt to establish a balance between assisting overextended borrowers and protecting the interests of taxpayers.
Kudos to Senator Klobuchar for recognizing the obvious fact that free-college is unsustainable. She need to develop a more extensive set of policies to mitigate student debt problems.
One place to find these policies is my book Defying Magnets: Centrist Policies in a Polarized World. This book proposes centrist solutions to student debt, health care and retirement income.
Defying Magnets: Centrist Policies in a Polarized World
Book is free for Kindle unlimited users.
The book is free on promotion days. The second promotion day is February 20, 2019. Day after this post is published.
Please consider reviewing the book for Amazon and Kindle.
[1] Source: https://www.brookings.edu/wp-content/uploads/2018/02/es_20180216_looneylargebalances.pdf
[2] Source: https://www.documentcloud.org/documents/3319386-201701-Cfpb-OA-Student-Loan-Snapshot.html