COLUMN: Plan to stay in school long? Vote for a Democrat
- Yes 67%
- No 33%
6 total votes.
If you are counting on student loans to finance your college education, you should pay close attention to what politicians are saying about the issue of the national student loan debt, which is now more than $1 trillion.
The collective student loan debt is now so large that it threatens to hobble the entire U.S. economy instead of just being a crushing burden to borrowers.
The decisions that are going to need to be made in the near future concerning how the debt will be managed by the government are momentous to everyone, but especially to those who have received or are counting on student loans.
“When there are Americans whose Social Security checks are being garnished to pay off their outstanding student loan debt, then it is clear that the United States has a problem,” Andrew Leonard wrote in Salon magazine.
The situation is a problem for the U.S. economy for a couple of very simple reasons. First, all that money that is outstanding in student loan debts is not available to the government to help balance the budget or help quell other problem areas. Second, when former students are shackled with huge student loan debts, they are not as able to pump money back into the economy by buying things like homes and cars.
On top of that, statistics show that about 30 percent of those who take out student loans never graduate and have little or nothing to show for the huge debt they have incurred. It’s hard to stimulate the economy when you’re broke.
Financial analyst and commentator Justice Litle contends that higher education institutions have created a big business.
He remarks: “Echoing subprime, the college bubble even has its own version of the 'principal-agent problem,' in which the financial interests of the college (which profits from the loan money) have no alignment with the students (who voluntarily drown themselves in debt).
"Soon these (literally) poor, debt-burdened waiters and waitresses of the future may realize they were snookered and wake up angry… not unlike the legions of starry-eyed home buyers who, caught up in the rush of the American dream, chained themselves to a grossly inflated asset at a price impossible to pay.”
According to Investopedia, the “principal-agent” problem is conflicts of interest and moral hazard issues that arise when a principal hires an agent to perform specific duties that are in the best interest of the principal but may be costly or not in the best interests of the agent.
This multi-layered problem — or crisis, as some call it — simply isn’t going to resolve itself. We have to depend on the wisdom of our national leaders to find viable solutions that don’t translate to less people being able to get a secondary education and thus less people being able to prosper and contribute to the overall economy.
I wish I wasn’t so cynical. However, having to depend on the federal government to find a solution on this feels quite a bit like how it felt as a kid trying to continue believing in Santa Claus in spite of the evidence.
In the main, there are two competing philosophies about the government’s role in helping citizens finance their education and also how to handle the debt burden associated with doing so. These are linked to the basic ideological positions of the two mainstream political parties.
Underlying the Republican plan is the basic idea that the government should not be in the loan business at all and that it should be limited in every way to a size easily drowned in a bathtub. They believe the key to strengthening both the economy and the country is squelching government and its spending and allowing competition, self-reliance and “free market principles” to balance things out.
For instance, the Republicans opposed closing corporate tax loopholes and rescinding tax breaks for wealthy individuals to prevent student loan interest rates from doubling recently. They proposed preventing the rate hikes by cutting other non-essential or “lower-priority” spending for things like health, education and income support programs.
They, of course, did not even consider making any cuts to military or defense spending, which not only had dominated our national budget in the past but also will dominate it in 2013. It also accounts for more than half the government’s discretionary spending and approaches the military spending of the rest of the world combined.
On June 27, Congress reached a compromise with the passage of House Resolution 4348, or the Moving Ahead for Progress in the 21st Century (MAP-21) Act. The act prevents student loan interest rates from going up for one year. Washington is busy touting this awesome bipartisan achievement, but it is a temporary fix at best. The underlying problem and the Republican approach to it are both intact.
The Democrats have portrayed themselves as the defenders of students and the middle class. I don’t exactly buy into that meme. For one thing, the Democrats have been timid about confronting the sacred cow of “defense” spending, too. Democrats seem to know that any affront to the military-industrial-complex will be spun as an insult to military people, an endangerment of the “American way of life” and another step away from American exceptionalism toward socialism, as well as cost desperately needed political capital.
Thus, they are ultimately as deeply imbedded in the present attitudes on military spending as their counterparts, even if some of them have misgivings about it.
Democrats do seem to understand that one of the best ways to help businesses and the economy is to provide potential employers with well-educated workers who are not in debt up to their eyeballs right after they graduate.
I agree with what Justin Draeger, president of the National Association of Student Financial Aid Administrators said in an email to Inside Higher Ed: “It’s troubling that anyone would think our long-term path to prosperity includes cuts to education spending. We share the collective goal of keeping college costs down, but using cuts to financial aid as a strategy to constrain costs will ultimately backfire and make college more expensive for needy students and families.”
I am an independent when it comes to voting, but I understand that my future and my ability to contribute to our society and economy hinges on the ability to finish my education.
I need student loans to accomplish that goal; I don't need those loans to crush me with debt for the rest of my life.
So, I intend to vote for as many Democrats as possible in November, including the sitting president. If you are dependent on student loans or other forms of financial aid to complete your education, I highly recommend doing the same.
Scott Starr is a Native American studies senior.