Like the little girl in the old jingle, when student loans are good they are very, very good, and when they are bad they are horrid. President Obama and his new Consumer Financial Protection Bureau are trying to do something about it.
At best, they make it possible for students to attend college without having to pay up front the constantly rising tuition and fees and living expenses.
At worst, the loans can hang like a millstone for many years, whether or not the borrower can get and keep a job and make enough to keep up regular payments. A default can mean a poor credit rating that could block buying a car or a house.
Americans now owe more on student loans than on credit cards, reports the Federal Reserve Bank of New York. It puts the total student-loan debt at $550 billion. The FinAid.org website puts the total even higher, at $830 billion, with the average 2011 graduate owing $27,204. The nonprofit Project on Student Debt says the average debt of 2009 Maine graduates was $39,237.
Outrage over this debt load has led to an online petition asking the president to forgive the student loans altogether. Signon.org, an offshoot of Moveon.org, already claims more than 600,000 signatures. Some signers pledge to stop all payments on their loan debts when one million have signed. Total forgiveness is unlikely, if only because federal aid money could be better spent elsewhere.
Mr. Obama, by executive action, has ordered programs to lower monthly loan payments for some students graduating next year and later. Details are complex. Help and explanations can be found at studentaid.ed.gov and at IBRinfo.org, a website by the nonprofit Income-Based Repayment that explains the federal program in plain English.
Even simpler help in wading through the complexity of student loans is available through the Consumer Financial Protection Bureau. A visit to consumerfinance.gov/the-bureau, will lead borrowers and their families, also in plain English, through its various helpful divisions — including student loans.
The bureau is the agency that was created by an act of Congress but has been fought ever since by bank organizations and congressional Republicans. They have refused to vote to confirm a director unless the agency is crippled and stripped of its independence. In spite of this opposition, the bureau is up and running under senior leaders appointed by the Treasury Department without any requirement for confirmation by Congress.
Raj Date, special adviser to the Secretary of the Treasury for the new bureau, has described the bureau’s one-page “financial aid shopping sheet.” It is a model disclosure form that colleges and universities can use to make costs and risks of student loans clear upfront before students enroll. The bureau also has created an online tool to provide borrowers with their repayment options.
For students and their families, this is a way to “know before you owe,” as the bureau and Mr. Date put it.