AUGUSTA – For the past couple of weeks, the news has been filled with headlines about the “doubling of student loan interest rates” set to take place on July 1 unless Congress and the president act.

Although it is true that the interest rate on some federal student loans will return to 6.8 percent from the current 3.4 percent interest rate, this needs to be put in perspective.

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Jacob Lowry, a student at USM, wears a badge declaring how much he owes in student loans at a protest last month in Portland. 2012 File Photo/Shawn Patrick Ouellette

This day of reckoning has been coming since federal legislation enacted in 2007 created a gradual decrease in the interest rate on subsidized Stafford loans from the then current rate of 6.8 percent to this year’s rate of 3.4 percent.

This means that those students eligible for subsidized Stafford loans (about 30 percent of all federal student loans issued for the 2011-2012 academic year) received a 3.4 percent interest rate for one year. If that student is a senior who took a Stafford loan each year, they have borrowed at 6 percent, 5.6 percent, 4.5 percent and 3.4 percent over those four years.

While the increase in interest rates has a real impact on student loan borrowers facing a difficult job market, narrowly focusing on this issue detracts from the larger and more important question: How do we develop the work force we need to move Maine’s economy forward without saddling Maine students and families with an unmanageable debt load?

Like many difficult questions, there is no easy answer to this question, but addressing three core matters will move Maine in the right direction.

• First, students and families need to be realistic about the costs of their college education and make choices accordingly.

I regularly speak to families who are concerned about their ability to pay for their child’s education at the child’s dream school that they fell in love with on a college tour. Parents often understand that their child’s anticipated career may not provide sufficient income to repay the substantial debt they will as a family incur to send their child to that school. Sometimes it is a parent’s job to explain economic reality to their children.

My very supportive parents advised me early in my college search that they would help me afford attendance at the state university. If I wanted to go the school of my dreams, they informed me that they would help me all they could, but that their financial limit would have to be the cost of my home-state university.

My public university education has served me well, and I still enjoy an excellent relationship with my parents.

Parents need to help their children be smart consumers by understanding in advance the potential consequences of undertaking a college education that is accompanied by unaffordable debt.

If, as a parent, you want to be able to send your child to their dream school, no matter what the cost, start saving now. Every dollar you have saved is a dollar you won’t have to borrow.

The Finance Authority of Maine, through the NextGen College Investing Plan, provides matches for many account contributions, making it easier to invest in your child’s future.

• Second, institutions of higher education have to provide a reasonable return for the time and dollar investments made by students.

The data is clear that, over a lifetime, individuals with degrees enjoy higher earning and lower unemployment. However, the return on investment has been decreasing recently.

When the cost of higher education goes up in an economy that is experiencing little growth, the return on that college investment decreases.

It is encouraging to see that leaders in higher education, including the University of Maine System’s new chancellor, James Page, are aware that they need to review the delivery of higher education and find a way to deliver a quality education at a reasonable cost.

And Gov. Paul LePage has spoken repeatedly about the need to better align Maine’s education system with the work force needs of today’s employers and employees.

Students and families need to ensure that colleges continue to move in that direction by making smart, informed decisions on where they are willing to spent their higher education dollars.

• Third, it is the responsibility of government to ensure that public resources for higher education are spent wisely.

Maintaining a strong public higher education system helps provide for Maine’s needs, encourages students to aspire to higher education and helps meet the innovation and work force needs of Maine businesses.

Elizabeth L. Bordowitz is the chief executive officer of the Finance Authority of Maine.

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