This week we take a look at the next looming financial disaster (after the mortgage crisis gets sufficiently agonized over) - the burden of student debt. That's the straightforward title of contributor Mary Ellen Bell's investigation of the topic. It's a pretty simple situation: College education has become priced beyond the means of most individuals without resorting to financial aid, and that aid, in the form of student loans, leaves graduates in financial holes of varying depth.
The rules concerning student debt have changed significantly over the years. At one time the federal government, believing an educated citizenry was a desirable outcome, made it possible to get loans under favorable terms. They were administered under the National Defense Education Act, passed after the big Sputnik scare in the late '50s. Alarmed that we were falling behind our Soviet rivals in the development of new technologies, the nation's leaders wanted to make higher education as attainable as possible.
The interest rate was 3%. You had 10 years to pay the loans back. And if you entered some sort of national service, such as the armed forces or the Peace Corps, the term loan was suspended for the duration and no interest accrued. This was in the '60s. Somewhere along the line the rules began to change, beginning with the wholesale transfer of the student loan business to private-sector banks. Gone were the low rates and accommodating terms. The national interest was replaced by the profit factor.
Keep this in mind when you read Bell's story and ponder the higher-than-market interest rates and the current no-bankruptcy provisions attached to student loans. Ask yourself if our society currently values an educated citizenry as it once did. Wonder what the future portends - indeed, what the viability of middle-class life will be if current conditions persist. Go ahead, bum yourself out.
