Over break, President Barack Obama unveiled his strategy for addressing the student loan debt crisis: A Student Aid Bill of Rights.
Here’s how it works, via U.S. News and World Report:
In a series of executive actions, Obama (ordered) the Department of Education to create a centralized complaint system for student loan borrowers by July 2016 and provide “enhanced disclosures and stronger consumer protections” for borrowers paying back their loans, including when loans are transferred between servicers. Obama also (required) contracted loan servicers to apply extra payments first to loans with the highest interest rates rather than evenly across loans, which can result in borrowers paying more over time…
The administration’s Student Aid Bill of Rights states that:
- Every student deserves access to a quality, affordable education at a college that’s cutting costs and increasing learning.
- Every student should be able to access the resources needed to pay for college.
- Every borrower has the right to an affordable repayment plan.
- And every borrower has the right to quality customer service, reliable information, and fair treatment, even if they struggle to repay their loans.
Does it go far enough? Some critics say no.
The move was praised by some as a way to streamline the student loan process, but many critics, including some on the left, view it as doing little to address the real college cost problem: Rising tuition rates and declining state revenue. Take the National Journal, for instance:
If you can’t make a student’s loan balance smaller, figure out how she might not have to pay it at all. That’s the knock against President Obama’s many-pronged strategy for reducing student-debt burden on borrowers. Critics say his solutions don’t solve the underlying problem, which is that students are taking on too much debt in the first place. And the student-loan aid doesn’t address an even deeper problem, which is that college costs too much for what these students get, particularly when they don’t graduate.
These underlying problems really aren’t the administration’s fault, although it would be helpful for all policymakers to think about how to address them. While they are pondering those weighty questions, White House officials are simply using the executive tools at their disposal to ease a problem affecting 40 million Americans. We didn’t get to $1.2 trillion in student debt overnight, and we’re not going to get out of it quickly, either.
The White House’s new Student Aid Bill of Rights starts the process of expanding bankruptcy protections to student borrowers on the premises that these borrowers should:
(1) have access to all available resources to repay their loans, and
(2) have the right to an affordable repayment plan.
These are reasonable expectations, but they also carry overtones of bias toward the borrower. That’s not necessarily a bad thing. We encouraged them to take out loans for the education in the first place, so why shouldn’t we be helping them out on the other end? Thus far, the answer has been to offer borrowers mini-payments that drag on for decades and lead to eventual debt forgiveness. That could come at great cost to the government, but advocates of this approach would argue there is a good reason for it. It’s certainly not good for the U.S. economy to have 40 million residents holding debt balances that will never go away.
Republicans have accused Obama of simply borrowing time, not acknowledging the inevitable government payout that will come from the Education Department’s smorgasbord of student loan repayment options. This latest suggestion on bankruptcy will undoubtedly be another point against him.
New White House data shows Michigan students owe an average of $26,479.
Along with its executive actions, the White House released data on the number of borrowers in each state and the average student loan debt for each student.
Michigan ranks 17th out of the 50 states plus Washington, D.C., when it comes to average student loan debt at $26,479. The state’s 1.5 million borrowers owe the federal government a total of $40.1 billion.
D.C. ranks first with average student debt north of $40,000, while North Dakota is last with $18,863.
For previous coverage on student loans and college costs:
- Both parties deserve blame for massive cuts to Michigan higher education funding: The student loan debt crisis has been decades in the making. Perhaps the biggest reason for the rise in debt is declining state funding.
- The CMU Promise’s costly legacy: As state funding has declined, CMU’s tuition rates have increased drastically. Lansing is to blame, but it turns out poor administrative policies are also at fault.