September 10, 2013
Student debt has skyrocketed over the past decade, quadrupling from just $240 billion in 2003 to more than $1 trillion today.To make matters worse, broad cuts in higher education funding are expected to leave an estimated 70,000 students who can least afford it and who are vying for financial aid with little to no chance of starting or staying in school. That’s because federal work-study students and students depending on government grants will take the biggest hit.
In a recent article in Forbes Magazine, “How To Make College Affordable: Four Ways To Stem Toxic Student Debt”, John F. Wasik, personal finance columnist , says grants and work-study programs are two of four ways to loose the burden of existing student debt on students and their families and prevent future debt from piling up even higher:
“There needs to be a priority in finding — and rewarding — colleges that award grants over channeling students into loans. These are typically the colleges with the best endowments. If you’re like me, a parent on the cusp of vetting colleges, look for schools that offer a higher percentage of “merit-based” aid to students.”
“Seek out colleges that promote work-study programs. I worked my way through college while holding two part-time jobs. Most colleges have some kind of work-study option. They should be expanded and pay more.”
“Find more paid internships. These programs are notorious for making students work like dogs without any pay. Paid internships should be on the top of your list. Tell your congressman we need a federal program to support them either through tax credits or direct subsidies.”
“Community Colleges are still your best educational value. Most four-year colleges require basic courses that can be taken at community colleges at a fraction of the cost. If a student does well in them at the local level, they can transfer to a university to finish their B.A. and cut the cost of a degree almost in half. Remember that there’s no room-and-board and minimal transportation cost at a community college, so the savings are significant.”
“At the very least”, Wasik concludes” there should be some rigorous “truth in lending” rules before student loans are granted. How much will the debt impair their ability to achieve a middle-class lifestyle? What will they likely be earning given their intended degree? All of this needs to be put on the table long before the loan documents are signed.”
Wasik agrees with Robert Hiltonsmith of the progressive think tank Demos, that the U.S. needs to allow students to refinance their existing debt at lower rates.
“Why not? Banks can borrow from the Fed for almost nothing now. And if a student isn’t able to find a job that will provide income to pay off the college loan — or faces some unforeseen financial difficulty — they should be able to discharge the debt in bankruptcy court (you can’t do that now). That would not only give the most indebted graduates a fail-safe position, but chasten colleges that load up their students with debt.”