THE US Senate held a vote recently to bring up legislation allowing student debt holders to refinance old loans at lower, current interest rates.
For members of the college and high school classes of 2014, and for past graduates, this effort to tackle the student debt issue is sorely needed. For whether their degrees are in math, science, history or English, our graduates are coming out of college schooled in something else entirely: the crushing weight of student loan debt.
With outstanding student debt now topping US$1.2 trillion, 40 million Americans are facing the consequences of our failing national commitment to higher education. This situation poses a threat to America’s economic vitality and its promise of opportunity.
The Federal Reserve reports that growing student loan debt is holding borrowers back from buying homes. This is bad news for an economy still trying to get its mojo back since the Great Recession.
And student loans have turned into a big business for the US Department of Education, which reportedly made a profit of US$41.3 billion from federal student loans last year. If the agency were a corporation, it would be one of the most profitable in the world.
It’s time to address the student debt crisis and the toll it’s taking on the economy. Allowing refinancing will save borrowers thousands of dollars in interest payments. That will free up disposable income, boost consumer spending, and strengthen the economy.
However, to fix the overall student debt picture, we need to think even bigger — big enough to put “free college” back on the national agenda. Does free college sound like magical thinking? It’s more like a walk down memory lane.
Fifty years ago in California, tuition-free college wasn’t pie in the sky, it was state policy. In 1964, a world-class education in the public University of California system came with free tuition and fees totaling just US$220 for the year.
At the 1964 minimum wage of US$1.25 an hour, you could earn US$220 in four and a half weeks of full-time work. That means a University of California student 50 years ago could earn enough to pay for a year’s college costs by flipping burgers for a month in the summer.
Today, even at in-state rates, with tuition and fees averaging US$8,893 for the 2013-2014 school year, it would take seven months of full-time work at the US$7.25 federal minimum wage to make that much.
Since 1964 a massive public disinvestment from higher education has shifted the costs of college onto students and families. Private interests have filled the void, transforming college finance into a vehicle for financial industry profits. Wall Street has turned our college students into a new cash cow.
Let’s make college in America what it should be: a free, shared vehicle for building an educated people, not another costly way for special interests to take us for a ride.
Hall is executive director of the Alliance for a Just Society, a national research, policy, and organizing network that advances state and national campaigns for economic and social equity. Copyright: American Forum.