The Case For H.R. 1330 – The Student Loan Fairness Act

The argument in favor of the Student Loan Fairness Act is not unlike those for the Wall Street and Auto Bailouts. If the government spends some money now, and invests in recent graduates who are struggling with student loans, it will pay off handsomely in the long term.  Right now student loan debt continues to grow despite the recession.  In fact, student loan debt recently passed credit card debt in terms of total debt owed by americans.

Be Sure to check out our previous posts:
The Case Against H.R. 1330 – The Student Loan Fairness Act
The Student Loan Fairness Act – What it is and what it means to you

student loans v. credit cards

For the first time ever student loan debt now exceeds credit card debt

Its no secret that the burden of Student Loans is starting to cripple a generation.  Borrowers who cannot keep up with their monthly payments increasingly face delinquencies.  Not only is their huge stress associated with student loan delinquencies, but it has a devastating effect on one’s credit.  People with delinquent or defaulted student loans are unable to purchase cars, get a mortgage, or even a credit card.  This lack of consumer power, hurts the economy.

The problem of student loan delinquency, continues to grow:

Student Loan Delinquencies

Not only would assisting young people dealing with student loans be a boon for the economy, but many of these students were arguably duped into signing up for student loans without ever fully understanding the consequences.  Given the emphasis american society places on a college education, for many students there was no meaningful choice as to whether or not they went to school and took out loans.  The escalation of college costs combined with the rise of the for profit university has created a billion dollar marketplace that preys upon unsuspecting 18 year olds.  The blame for fact that this problem got as out of hand as it did rests upon society as a whole.  Therefore, all taxpayers should bear some of the burden as part of the correction of these issues.

Those who say that HR 1330 is only a band aid that does not fix the problem miss the point. Do we need to find a way to make sure that this doesn’t happen to others? Absolutely. However, generation of recent grads are bleeding because of student loans. A band aid is just what they need. Not only will it help them out, as a country the United States will be better of because of it.

SPREAD THE WORD! Student loans are a huge problem for everyone and ignoring them won't make the problem go away.
  • Edna Ann Lindsay

    First, let me state that I am a financial aid administrator who has helped students secure the funding to pursue higher education for over 20 years. Second, I want to say that I have not read HR 1330. I plan to do so, because I am very much opposed to what I read above.

    IF the Student Loan Fairness Act includes any loan forgiveness then I will personally agree to that only if those who have ANY portion of their debt forgiven agree to: (1) Work for minimum wage for the remainder of their life, or (2) Agree to pay a surcharge in taxes to the US government of 20% for the remainder of their life. If they want relief from the debt, they should be willing to pay a similar penalty that an individual would have to pay if s/he took out a loan on a car and could not make the payments. Since an education cannot be re-possessed, the person being relieved of the debt should not be able to benefit monetarily from having that education.

    What do I say that? Because it is NOT, in my view, up to ALL taxpayers to bear the burden of this issue. Baby boomers are getting ready to retire. Congress is discussing applying a chained consumer price index to our social security benefits. We have paid into and EARNED these benefits. Many of our parents paid for our education or we paid for our own through great sacrifice.

    In my own case, I have bought cars that I could afford. I drove them to 100,000 or 150,000–until I could buy another one with cash. I have never paid interest on a credit card. I rented for most of my life. Why is it the responsibility of MY generation to pay because someone else did not read what they were signing and consider the costs involved of signing those documents?

    • The Sherpa

      Edna,

      Thank you for your insight. As a financial aid administrator, your perspective is really appreciated. I’m inclined to disagree with your opinion, but before I jump to any conclusions, I’d appreciate your thoughts on a couple questions.

      First, do you think students fully understand what they are signing when they get their student loans? I ask this because though I consider myself to be a fairly intelligent individual, when I was 18 I just assumed that when I finished school I would be able to afford to pay off my loans. While it has involved a great deal of sacrifice for me to successfully do so, I could understand how people find themselves post-graduation in a situation they cannot afford.

      Secondly, do you think that lenders (specifically the Private Loan lenders) take advantage of students? In my experience, which I will certainly admit is far more limited than yours, I’ve heard some pretty horrific stories. To the extent that these private lenders take advantage of students, I feel like there should be resources in place to help these individuals.

      Thanks again,

      The Sherpa

      • Edna Ann

        First, no I do not think that most students fully understand what they are signing; however, neither do I believe that anyone who signs a mortgage fully understands everything that s/he is signing. My point is that if I did not understand the terms of my mortgage when I signed it and cannot make the payments, it should not be up to YOU to bail me out.

        Secondly, I most definitely believe that private lenders take advantage of students. Banks also take advantage of customers when they process checks before deposits and run the largest checks through first. Again, as a consumer, it is up to ME to ask questions about those practices. If I don’t like what a bank is doing, I can find a credit union that does not attempt to “create” bad check charges. If they all do that, then it is up to me to watch my account like a hawk or pay the consequences for not doing so. The answer is not to shift that burden to the rest of the citizens; that is called irresponsibility–or at least that is what it was called when I grew up and it will always be irresponsibility to me. The day that one is successful for shifting irresponsibility to others is the day that American will cease to be.

        • The Sherpa

          I’ve always viewed America as the land of opportunity, where you can live a good life with hard work and determination. However, the lending practices of many private lenders and the confusion associated with student loans is making the American dream nearly impossible for many recent grads. They find themselves unable to pay their loans, their credit is destroyed, getting a job becomes more difficult, and buying a house becomes an impossibility.

          I think your examples of a mortgage and a bank are excellent. However, a key difference between those forms of debt and student loans is that bankruptcy can clear those debts while it is an impossibility for student loans. Our countries financial policy is that if you get into trouble with a house you cannot afford or credit card bills that you can’t pay back; you can get a fresh start with bankruptcy. However, if you try to better yourself by going to college and it doesn’t work out; you are stuck. Doesn’t that appear to be a major inequality?

          • Edna Ann

            I see no inequality. Under any bankruptcy, the debt is passed to the entire population. Statistically, those with higher education will earn more over a lifetime than those with just a high school education. Yet, under a bankruptcy, the educated would be able to pass their debt to the poor and to those who have been responsible in managing their money. I see an inequality in this.

  • a college grad with immense debt

    My comment is mostly in response to Edna, but also to add my experience to this discussion. I would like to point out that the amount that students are expected to pay for tuition has risen exponentially, even in the last ten years, for both public and private universities. Private schools are still a much higher cost, but the public university that I attended raised its tuition every year that I attended, and in the eight years since I graduated, the tuition rate has doubled. Many students in the middle class, whose parents could not afford to save for college (because we lived paycheck to paycheck in a family of 5), did not qualify for full financial aid or even enough federal loans to make college an option without private loans.

    I did everything in my power to avoid debt in college. I had a partial scholarship, took extra units to graduate in three years, and after finding the on-campus housing far too costly after one year, commuted 80 miles each way from my parents’ home to save on rent. I still graduated with 35,000 dollars in debt. I also graduated on the brink of the economic recession, and when there were very few jobs for new college graduates. The popular line of thought, and which I was told by numerous sources, both in education and in my personal life, was to get a Masters Degree in order to become competitive in the job market, which I did, but at a private university. I regret this now with my whole being because 150,000 later (plus the 35,000 in Undergraduate Loans), I have an immense financial burden every month. The federal government has worked with me on a reasonable plan, but the private lenders that I had to take additional loans out with to attend my graduate program are immovable in their policies. My co-signers, my parents, are in bankruptcy because of the housing market crisis, and so I have no assistance in making these hefty payments. I therefore have not purchased a new car (I drive a car with over 250,000 miles on it– the same I’ve had since high school), rent an apartment that I share with a roommate, and cannot buy a home in the near future (if ever). Most of my income goes to paying my loans, and not into the economy by way of consumer goods.

    So yes, I agree, that I took on these loans and they are my responsibility, but Edna, the housing crash was not my doing. That was your generation’s doing. And that led to a loss of jobs and a bad economy that I graduated into. My country bailed out the banks, not their students, and while that needed to happen, there needs to be some revision in the education system. Schools continue to raise tuition because the private and federal loan companies are giving money to students to attend these over-priced schools. If the loan money was not easily available to me, I would never have been able to attend graduate school. Instead, I now have no way of paying into a retirement plan, have gotten rid of the health insurance that I paid for because I don’t have enough money after paying my loans for that expense, and continue to live on the verge of overdraft because of this education that I would GLADLY have repossessed if they would take it back. I HAVE worked for minimum wage after graduating college and know plenty of baristas, bartenders, waiters, etc who have college degrees. We are very aware of our situation, and I want the entire system — from the people who “help” students get this financial aid, to the schools that charge 40K per year, to the private loan companies who have immovable policies on how to pay loans back even though they tell you when you sign that forebearance is an option in times of hardship (of which, nothing ever qualifies — unemployment, illness, death in the family — I had them all at various times, and none of them led to even a brief respite). I am living this Edna, and as much as I want our baby boomers taken care of in their old age (which I completely understand), I also want our future generation to be able to keep our auto industry, housing markets, travel industries, and general economy afloat. With the loans I have now, I will not be able to contribute to that future.

    • Edna Ann

      I would like to state some little known facts in response to what you have written and ask you some questions related to those facts. First, you appear to blame the tuition increases all on the schools. Did you know that state legislatures have drastically reduced the financial support given to her public institutions of higher learning? Ten years ago, 75% of my school’s budget was state-funded. Now it is around 33%. With a funding decrease of this size, WHO do you think is going to pay the cost of running the college or university? Tuition is going to have to increase if taxpayer dollars are not supporting the college or university.

      Second, you imply that those who help people obtain financial aid caused the problem. Did you know that schools cannot tell a student that they will not certify a loan? A financial aid administrator can show a student literature (which has been available for years) showing the national average salary for his/her major, as well as the anticipated loan payment for his/her debt level; however, if that student still wants that loan, there is nothing that the administrator can do to stop the student until the yearly or aggregate debt limit is reached. In the state that I grew up in, the majority of the community colleges refused to do loans. They did not ask to participate in the loan programs on their Program Participation Agreement with the federal government. It did not cost that much to attend those colleges and the dropout rate was high. Do you know what the result was? The state legislature got involved and stopped the colleges, who were attempting to look after the students, and made them certify loans. Now, given these constraints that I have described, what would YOU do if you were in the financial aid profession and knew beyond a shadow of a doubt that someone was borrowing more than s/he should?

      Third, you state that the housing crisis was the doing of the Baby Boomer generation. That is a matter of opinion. I state this, because I believe two other factors caused it: (1) The federal government made banks lend to people who the banks KNEW were not credit worthy and did not have a 20% down payment, and (2) People themselves became “entitled” and bought more than they could afford. Most people in my generation were required to put 20% down to buy a house and most of us knew better to buy more than we could afford, because we were reared by parents who were brought up in the depression. Of course, there are exceptions; I am making a general observation. And regarding the jobs, don’t you think that NAFTA had more to do with the loss of jobs than the housing crisis? Look at all the textile plants that have closed!

      I sympathize with your situation and I am sincere in saying that. I also sympathize with those who will be called upon to pay the loan debt, should these loans either be forgiven or discharged in bankruptcy.

      • a college grad with immense debt

        Edna, I agree with everything you said. I think the system in general needs a massive overhaul, and I know that at each level, the people involved are doing their jobs and doing what they can with the resources available. I am honestly not sure if H.R. 1330 is the right action to tackle this. I have read arguments both for and against, but I do know that it opens up the conversation and hopefully will get the ball rolling on finding what DOES rectify this growing problem.

        I absolutely have a problem with the fact that I know MANY people in their 40s to 60s who bought houses outside of their means, or refinanced the credit cards based on the equity in their homes, or went on vacations on credit and then are able to dismiss their lavish lifestyles in bankruptcy when I simply tried to better my future by studying hard and getting an education that would hopefully benefit me. Now, I can’t even qualify for a credit card (not that I’d want one as I am now weary of any debt at all), but my debt to income ratio is so high, that I can’t get a mortgage, a car loan, etc. I was not irresponsible except that I believed in the the education system, the government and the job market upon graduating at 25. Now, at 29, I have put off having children, live a very modest life, and work hard to make ends meet. Yes, there are far bigger issues at play than simply blaming one portion of the education or government sectors, and quite frankly, blame isn’t going to fix the problem. But I do genuinely believe that the entire system– from the guidance counselors telling students to go to private schools when they can’t afford to, to the private and federal lending programs, to government funding of colleges, to the entire FOR-profit private institution sector all need to be looked into. I do think that we are going to have a far larger economic meltdown on our hands in the coming years if we don’t find a way to ameliorate this debt problem. I would gladly work with lenders to make reasonable payments, but they are unwilling. There is no wiggle room. And if by some miracle, I come into some money by way of a great job, an inheritance, etc, the first thing I will do is pay these loans off. I wish I could just do that. It’s not about not wanting to pay for what we bought, it’s just that the price of what we bought is so inflated compared to what many of us have gotten in return, that the system is broken. We agree in many ways, Edna. There needs to be a solution, and I wish more people would talk about what that could be so that we can move in a positive direction.

  • http://www.independence.edu/ Independence

    I agree that the system needs to be changed. College is so expensive that it’s almost impossible to get a degree without going into debt despite how hard we try.

    • http://studentloansherpa.com The Sherpa

      College without going into debt has become more and more difficult with each year. At this point, the goal is almost to minimize the debt and make it as painless as possible. Improving this situation would make a huge difference in the lives of many.