By:  Arit Essien*

Move over buying a house or a new car.  The privilege of pursuing a higher education has now become one of the largest investments in a person’s lifetime.

While the advantages of higher education are well-noted, the looming student debt following college has become increasingly problematic, particularly for millennials eager to set foot towards pursuing the American dream of homeownership after school.

The statistics are worrisome.  Between 2002 and 2012, the National Center for Education Statistics reported a 40 percent increase in public school tuition, and a 28 percent increase at private schools—a rate four times faster than inflation.  In 2013, Forbes calculated outstanding student loan debt in the United States to be in excess of $1.2 trillion, which exceeds total credit card debt in the nation.  According to the New York Federal Reserve Bank, 37 percent of the 43 million people currently repaying these loans have experienced delinquency or default at some point. For millennials, this can translate into offset or delay of critical life events such as purchasing a home, marriage or the decision to have children. 

In the realm of financial obligations, student loans are in a league of their own.  Unlike traditional debt, student loans cannot be discharged in bankruptcy, due in part to the bankruptcy reform bill of 2005.  Prior to passage of the bill, only federal student loans were exempted from discharge.  Additionally, for private loan recipients, options such as deferment, forbearance or income-based repayment are less frequently available.  Private loans traditionally also cannot be discharged upon death, so virtually there is no escape from repayment. 

Though hope of student loan reform may seem elusive, several proposals offer promise.  One proposed solution is to link state and federal aid to accountability metrics such as student graduation rates.  This could motivate schools receiving loan fees, despite the subsequent fate of their student, to play a greater role in the accountability of both the amount of money that students borrow and in ensuring that the overall benefits derived from the education is commensurate. Private loans however, which offer greater risks for borrowers, are overlooked in this approach.  

At-Large Councilmember David Grosso encourages student loan reform initiatives that will help borrowers and millennials keep money in their pockets for important life events and obligation. According to Grosso, “If borrowers have to expend a large portion of their income on student loan payment, it can be economically disadvantageous.  When former students default on their obligations, the burdens then shifts to taxpayers. We have to explore creative solutions that will afford lenders timely repayment, without stealing the American Dream from those who worked so hard to obtain it by pursuing their education.”


What are your solutions for improving the student loan structure?
Twitter: @cmdgrosso

*This post is part of an ongoing series of posts by Councilmember Grosso’s staff to support professional development. All posts are approved and endorsed by Councilmember Grosso.