Student loan debt topped $1 trillion for the first time late last year — more than credit card or auto loan debt. Buried in that alarming statistic are countless heartbreaking stories of students who never will break free of their debt.
Congress cannot let this go on. An army of young Americans shackled with loans they can never repay could be ruinous for the economy.
The federal government started its student loans in 1965, opening college doors to young people who would pay back the loans when they got the job. Later, the federal government added a provision that the loans could not be discharged in bankruptcy. That put a stop to the practice of declaring bankruptcy after graduating from, say, medical school and leaving the government holding a big IOU.
But in 2005, the prohibition on discharging student debt through bankruptcy was extended to private loans. Some for-profit schools found they could make big profits by encouraging students — wooed with promises of high-paying jobs — to borrow huge amounts.
The schools get the money upfront, and their bottom lines are unaffected if students don’t graduate or don’t get jobs in their fields. Ninety-five percent of the for-profit school revenue comes from the federal government. Accrediting agencies — funded by the schools they oversee — provide scant protection. It’s a system that’s ripe for abuse.
The weight of all that debt may be affecting the overall economy, as cash-strapped young people put off getting married and buying big-ticket items such as cars and houses.
President Barack Obama is pushing proposals to make repayment easier. Sen. Dick Durbin, D-Ill., is promoting legislation that would remove the protection against bankruptcy for private loans.
Those efforts sound wise to us. Being financially destroyed at a young age is one lesson young people don’t need to learn first-hand.
Chicago Sun-Times (April 19)