More grants, tighter qualifications necessary
College has become an integral part of the American experience. There are all kinds of post-secondary institutions that focus on helping high school graduates attain skills and preparation necessary to enter the job market. Public universities, technical schools, and private universities share a common goal of educating a workforce. They also share another extremely important feature: They cost money.
Tuitions across the board have been trending upward, and a lot of students in the U.S. need help covering the costs. This is where student loans are extremely helpful — they allow students to borrow against their future earnings in order to finance their education. The problem is that Americans are struggling to pay these loans back.
In the most recent quarterly report, the U.S. reduced its overall household debt, but student loan debt increased by $42 billion to reach almost $1 trillion. That is a staggering number, and it’s made even more troubling by the fact that one out of ten borrowers is more 90 days behind on their payments. As more students go to college, less sustainable debt is being created. This is creating a student loan bubble that, like all bubbles, will eventually burst, leaving millions of talented young Americans with no money to borrow for school.
The Obama administration has taken steps to address the student debt crisis by increasing the amount of money given in need-based Pell Grants and allowing the federal government to loan directly to students. But more must be done to prevent a smaller version of the housing market collapse.
It is difficult to strengthen the vetting process for loans without disqualifying deserving underprivileged students, but it can be done. Loans should be made proportional to future earning potential, but still sufficient to cover expenses. Students without credit shouldn’t be excluded from loans, but they should be made better aware of the realities of paying back however much money they get. Also loans shouldn’t be wasted on students who are not going to graduate. Students with low GPAs should have their loans put on hold until they can get their grades up, just like a scholarship.
I believe President Obama really does want to see a more educated and competitive America. During his time in office, his priority has been to make college or comparable training a reality for all Americans through the actions I previously mentioned, along with legislation like the DREAM Act. But it must be done in a sustainable way that will not lead to another economic crisis. Smarter lending practices that don’t exclude those without credit, but don’t give freely to those who will not use the funds, are necessary.