Should the federal government bail out student loan holders?

Yes

1 of 8

by Mary P Ivy

• 

Write now Print Invite a writer™ Add to Favorites RSS Feed Contact this writer

It is beyond time for the federal government to help individuals over corporations! Yes, to federal help to those with student loans.

Before those on the opposite side of this issue become apoplectic, allow me to explain my idea of help. I am not advocating forgiveness of these loans but some kind of modification: extend time to begin paying, reduce interest and/or eliminate penalties, allow longer terms for repayments.

Make it illegal to attach a credit score to these loans; deduct from their future income tax at some point the amount owed. This isn't hard to figure out! Do something sensible, like we could have done with mortgages before that system collapsed. In fact, there seem to be many parallels. We can avoid making that mistake again and magnifying the fallout; we can this time do something decent and pragmatic.

Upholding some ridiculous rules in the light of the current unemployment rates will tend to cause these loans to default completely. (The images are still fresh in my mind of entire blocks or houses where folks just walked away when banks refused to adjust rates or payments. Everyone around suffered.)

I say better to get the money at some point in the future than never.

When things do pick up economically, these young people will greet the new and improved world with a wrecked credit score through no fault of their own. That doesn't do the rest of the economy any good; it could prolong the recession when a large part of the population cannot participate in the great American borrow-spend fest. Remember, these are mostly young people poised to enter their big spending years. Do we benefit by shutting them out?

A little enlightened self-interest from the rest of us might be wise. If this significant part of the population doesn't get some consideration, they will be further demoralized, and further penalized when they apply for a job or insurance. (That all-important credit score, remember.)

For the most part, these people did exactly what they had been told for years to do: invest in themselves. Sacrifice short-term for long-term gain. They were reminded ad nauseum that college graduates make over a lifetime at least one million dollars more than those without a degree. Yeah, yeah. Now we are going to say to them, "Oh, just kidding, sucker." Great way to train future citizens and build their trust in the system.

It is entirely likely that many of these students borrowed because those famous state-sponsored scholarship programs their parents invested in for years just evaporated. Poof! All gone, kid! After years of careful contributions disappeared, the folks couldn't help when tuition was due. Those famous home-equity loans to pay for college tuition didn't work out very well either as I recall.

These students had every reason to believe they would be able to repay their loans and must have been totally dismayed when everything fell apart just as they were ready to move into the workforce. Why on earth would we just leave them on the side of the road for the sake of some abstract notions of government and economics?

My approach here closely resembles the suggestion I sent my congresswoman last fall: do not send a big check to General Motors, et al. Instead, buy a new vehicle for every school district in the country. Local taxpayers would benefit, schools could certainly use newer, safer and more economical cars and GM could reduce its inventory. Heck buy two cars for every district. Everyone would benefit. How great would that be? And how rare!

Some creativity in approaching problems is surely more desirable and ultimately more successful than falling back on worn out whines and navel-gazing over the government's role.

If, at some point we don't start stressing the success of individuals over the success of big business and big political campaigns, we will certainly replace democracy with oligarchy. Only those with very large trust funds will consider college at all.

Here is a chance to do the right thing, discard the old slogans and traps and do a little creative thinking. I hope we have some well-educated and imaginative people around for the job.

Learn more about this author, Mary P Ivy.
Click here to send this author comments or questions.