The Kids Arent Alright: The Policymaking of Student Loan Policy
President Obama signing the new student loan legislation in . Some analysts view the new law as too much government intervention. Others view it as necessary to keep higher education within reach of all students. Either way, the legislation is a natural progression of the importance the federal government historically has assigned to higher education and the role Washington should play in making sure its citizens can achieve it.
As the 2010-2011 school year begins, a growing number of college students will turn to college loans to pay for their education, and as the cost of college continues to rise in the midst of the Great Recession, the size of those loans is getting bigger. When the class of 2014 graduates, they will be $22,000 in debt on average. As student loans grow in both size and importance, the American public shows greater interest in their management and government policies toward them. This month, economic historian Lawrence Bowdish investigates the history of student loans, and how the arguments around government intervention often miss the point. Readers may also be interested in these recent Origins articles on Updating ‘No Child Left Behind’ and the Collapse of the Mortgage and Credit Markets.
In , a college friend posted on his Facebook status “My student loans are due…what should I do?” While we went to a public college with low in-state tuition, three years of out-of-state graduate education was expensive, and student loans were his only option to fund it. The bill came to about $40,000.
His status update elicited dozens of replies. A few of his friends suggested ways to take care of the problem, including loan consolidation, new government repayment options, paying them off with other credit lines or just ignoring them. More interestingly, most of his friends used the opportunity to bemoan their own student loan woes, with debts as much as $100,000.
Obviously, student loan problems are not limited to my friends. Around 18 million people were enrolled in two- and four-year degree and non-degree granting institutions in 2008. Therefore, around 10 million people took out student loans last year, which is almost 3% of the American population. This does not include all the former students who were still paying off loans that are years old.
On , with legislation that was included in the health care reform bill, President Barack Obama signed new legislation that overhauled the student loan industry in the United States.
According to most estimates, around 60% of all students took out a student loan, averaging over $5,000 a year
The FDLP plans to reduce some of the costs of student loans largely by cutting the private banking industry out. The Congressional Budget Office expects the government to payday loan Texas Texline save around $60 billion in 10 years. The Obama administration then plans to use those savings to expand access to Pell Grants, lower the cost of loans, and pay down the federal deficit.
Largely eliminating the older Federal Family Education Loan Program (FFEL) that offered private student loans with a federal government guarantee, the 2010 Student Loan Bill empowers the Federal Direct Loan Program (FDLP) to make almost all federally backed student loans directly to the student, or parent, borrower
This legislation has provoked plenty of discussion. The political right in the United States is unsupportive of a perceived expansion of federal power. They argue that government control will only perpetuate spiraling college costs.
Many on the left argue that making education more accessible to students is paramount. They point to the cost saving measures of the FDLP, especially when compared to the money funneled to private banks through FFEL, as evidence that school will be more affordable to all, at least in the short run.
