Default

Thanks to Abdul Kargbo for pointing to me to this segment from today's Democracy Now! broadcast focusing on Reverend Jesse Jackson's new campaign to reduce student loan interest rates and restore consumer protections. The broadcast also mentions a new documentary coming out: Default: The Student Loan Documentary that looks to be chock-full of scary facts about the debt levels students are facing and the debilitating consequences of loan defaults (see the trailer below).

As the Obama administration is proposing billions of dollars in stimulus funds to help homeowners and banks, it should consider the negative consequences for our economy of having millions of college-educated students who are scraping by because of student loan debt. If student loans are truly going to be a way to access a college education and a more prosperous adult life, the federal government needs to offer more flexible repayment options, caps on the amount of loans students are required to repay, more student rights to negotiate payment terms, and bankruptcy protections. Public policy can go a long way to making the student loan system a more humane, and more effective, way to get a college degree.

And improved student loan policy is a way the federal government can directly reduce the cost of college. A student paying off the maximum $31,000 in federal loans over 25 years spends an additional $33,000 for school at a 6.8% interest rate (the current rate for unsubsidized federal loans). Reducing the interest rate for all student loans to, say, 3% would mean the student pays an additional $13,000 - still a lot, but a big reduction in the total cost of college for that student.


DEFAULT - The Student Loan Documentary from Default on Vimeo.