Times are hard out there. We are in a time of economic crisis, a time of austerity, a time the where poor are getting poorer and the rich are getting richer at a faster pace than any other time in recent U.S. history. During all of this, the situation has greatly affected college students, who are taking on crushing debt just to further their education. Student debt in the United States is now over $1 trillion. How did we get this far, and is there a way out? First, let’s look at a little history.

The situation involving student loans began in 1964 when Lyndon B. Johnson established a task force to examine the role of federal government in student aid, headed by John W. Gardener. The task force firmly believed that cost shouldn’t be a barrier in attaining a college education; and to this end they concerned themselves with how a lack of funds contributed to students being unable to attend college. This eventually led Johnson to sign the Higher Education Opportunity Act of 1965 into law. Since then, what began as the provisioning of opportunity for young people seeking post-secondary education has now grown into burden that may well be setting graduates up for financial failure.

Many college graduates candidly state that student loan debt is like constantly carrying a brick-filled backpack that you can’t ever let go. It’s always there. You may get rid of a few bricks along the way, but there’s always going to be more. Most don’t see their student loans going away anytime soon. A young couple here in Maine (who prefer to not be named) owes more than $94,000 in student loans. Instead of owning a home, they live in a 350-square-foot studio apartment. They were on food stamps for a time after one of them received their master’s degree in sociology. It’s a painful reality: Wtudent loans put millions of Americans in a very precarious situation. If they get laid off, become sick, or have a crisis that leads to time off from work, any of these things can lead to complete financial ruin.

Congress’ Joint Economic Committee reports that two-thirds of recent college graduates have student loans, with an average balance of more than $30,000. The average debt for recent graduates is a full 60 percent of their annual income. Maine ranks sixth in a Top 10 ranking of states with the worst debt-to earnings ratio among college graduates with a ratio of 74 percent. Seventy-one percent of Maine graduates have debt, and 14.5 percent of borrowers are at least 90 days delinquent on their student loans. This rise in the amount of student loans could harm the overall U.S. economy because individuals who shoulder heavier debts typically delay purchasing a home, a car and saving for retirement. Roughly two-thirds of U.S. students who take out loans to finance their college education can end up in a situation that puts many underwater. This scenario takes not only a financial toll on graduates, but also a psychological one.

I recently viewed a short film called “The Red,” which was produced by SALT, a free resource created by the nonprofit American Student Assistance. This is a film in the tradition John Carpenter’s “The Thing,” where a faceless, inescapable force devoured everything in its path. But the film’s main attraction was nothing as tame as a ghost, alien, or a biological weapon run rampant. Instead, “The Red” ups the ante by giving us the ultimate monster – the student debt crisis.

According to the Federal Reserve, the number of student loan borrowers who are delinquent (one stage short of defaulting) is now greater than 18 percent. Out of that percentage of delinquent borrowers, those who have entered repayment are 31 percent. That tallies up to 6.2 billion on the verge of defaulting. With these statistics, it’s clear that hasn’t been easy for borrowers to keep up with loans at a 3.4 percent interest rate. Recently, Congress passed a measure to double the interest rate to 6.8 percent, which now adds an average of $1,000 in debt per year of schooling.

Maine lawmakers are taking aim at this, making the student debt crisis a little easier, and U.S. Sen. Elizabeth Warren, D-Mass., has proposed stop-gap measures to solve the problem. Warren wants to drop new borrower interest rates down to 0.75 percent for one year. That’s the same interest rate that federal banks get on short-term loans. She thinks it’s curious how we treat our businesses better than our individuals. But her efforts have thus far not unraveled the juggernaut of mounting student debt.

Einstein once famously said that we cannot solve a problem at the same level of thinking that created the problem. Clearly, some bold proposals and better efforts to ease the burdens of student loan debt are desperately needed before students default on the American Dream.

Dr. Daniel Parenteau is a freelance writer residing in Biddeford. He is a business analyst and strategic consultant. His column appears every other week and covers a wide variety of topical issues at issue in the region. Find his blog at www.danielparenteau.com.


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