We are just a few weeks away from a doubling of interest rates on subsidized student loans from 3.4% up to 6.8%. These loans are mostly used by families with college students who are making $50,000 per year or less in income – those who can clearly not afford to pony up $15,000-$20,000 per year in tuition costs. Even at the lower 3.4% rates that have been in play for the past many years, the government is still slated to rake in $51 billion this year in profit on student loans.
But as we wrote yesterday nearly one-third of all loans that are in repayment status (i.e. not deferred because debtor is in school or active-duty military service) are 90 days or more delinquent. With this many borrowers in obviously dire financial straits – millions in fact – it seems that those billions in profits would be better reinvested in alleviating some of the financial pressure from student loan overload on the hardest-hit borrowers.
If the current student loan interest rate doubles to 6.8% it will certainly cause similar problems down the road for new borrowers, but the bulk of the trillion dollar student loan bubble is not in new loans but in existing loans that are oppressing the personal finances of those aged 30 and up – even those in retirement. Hundreds of thousands of America’s seniors lose a portion of their Social Security check each month to student loan garnishment. For far too many people, student loans are quite literally following people to the grave.
There are many ways the government could reinvest the many billions in profits they make each year back into helping those trapped with no way out. Expanding forgiveness programs, raising the income threshold for income-based repayment, shortening the forgiveness window down to 15 years for those with lower incomes and immediately halting garnishment for retirees whose only source of income is Social Security would all be a great start.
When Congress and President Obama talk about access to education and affordability, they are mostly speaking of current and prospective college students. They seem to be missing the mark and are not considering the far greater number of borrowers that make up the bulk of the student loan crisis. Something should be done for those who are hopelessly mired in student loan debt and desperate for a solution.
It’s also important to know that there are some “student loan profit deniers” that insist the government is making far less profit on student loans. But even they admit that there are still billions of dollars in profit – even if they disagree on how many billions there are – and that money could be put to work to address the student loan bubble before it bursts!
If you owe student loans – no matter how much or who to – try Tuition.io’s free student loan tool to view and track all of your debt in one easy interface so you can defeat your debt once and for all! And if you’re considering pursuing more education after your Bachelor’s, why not try non-traditional means such as DVD training if you’re an artist or take advantage of free training through your work rather than piling on more school expense.
Please also enjoy our recent blogs on student loan debt: