It’s simply wrong and a major threat to our economy to weigh down young college graduates with so much loan debt that they can’t make ends meet.”
The crisis of student debt is a long term threat to our economy as much as the housing crisis is in the short-term. More and more young graduates are being burdened with school debt. To make matters worse, the earning of college graduates has dropped substantially as a result of the economic crisis. Today, the average college graduate with a bachelor’s degree makes a starting salary of about $40,000 a year. The average student debt for that graduate is about $30,000 a year plus interest.
The Crisis is Worse the More Education You Have
Ironically, the more education you have the worse the debt crisis affects you. The best example of this phenomenon is perhaps primary care or emergency room physicians. These are the doctors that provide critical care for the majority of working and middle class families. They are not in a position to earn the salary of specialty physicians, yet the same amount of schooling is required -usually twelve years including a residency. On average, medical school debt is between $200,000-$300,000. The average starting salary for a primary care doctor is only $80,000-100,000. After six years of practice that salary climbs to about $190,000 a year. This is still a lot of money to most of us, but when you factor in $300,000 in debt, in addition to owning a home, or saving for your kids college education, staying afloat can be a challenge.
A One Time Student Debt Bailout
While the federal government carries the majority of student debt, the state of California does offer student loans. I believe we should offer a onetime forgiveness of student loans. This is not a give away but smart economics. Firstly, this bail out would pale in comparison of what was done for the banks. Secondly, it would serve as an instant stimulus to the economy. The fact is that the money now being used to pay student debt would now be shifted into consumer spending or savings.
Then Restructure The Way We Deal With Student Loans
We should allow graduates to consolidate their student debt into either home or small business loans without penalty. We should consider a pay down program for student debts based on service incentives. For instance, give educators who choose to work in low performing public schools a reduction in student loans based on their years of service. Finally, we need to remove abuse from the student loan system. Today, many private schools are acting as their own lender and making a bigger profit in servicing student debt than proving schooling. Many of those type of providers offer low-residency programs that are conducted online. This helps those private schools to reduce costs but does nothing for consumers of educational programs much less people who are taking loans to pay for the programs. We need to regulate this practice.