By ZACHARY OLSAVICKY
Opinion Editor
Embarking on a college experience brings into focus for young people the many activities they may take for granted. Laundry, meals, transportation, scheduling—while these tasks may be taken care of for young people in high school, the burden of responsibility falls on them during college.
Tying these facets together is cost: what can a student do to afford this opportunity? Tuition costs continue to rise at colleges and universities across the country, putting the pinch on students and their families. For those students lucky enough to come from privileged backgrounds, their parents can cover the cost of attending school. But for students without access to the Mom and Dad Scholarship Fund, loans are increasingly the only way to afford college. And increasingly, even this outlet is being put out of reach for students most in need.
Data from the Federal Reserve Bank of New York (FRBNY) shows that student loans trail only mortgages in terms of outstanding debt. The amount of student debt nearly tripled in the past decade, with the number of borrowers and the average balance per person both increasing 70 percent between 2004 and 2012. Outstanding student loan debt topped one trillion dollars in 2012 and has only increased since.
Starting with an outstanding balance of $0, first-year students may not place much significance on student loans. But these loans do have a significant impact on students’ futures: they impact a student’s financial flexibility after graduating college, the spending habits of their families, or even whether or not they can afford to go on spring break. If a student develops an interest in graduate school at the end of their junior year, they may have that goal stifled by a load of student debt. These loans have an impact on the economy at large, too: young professionals may not be able to afford a mortgage, and the housing industry suffers as a result.
Like most issues this complex, Congress has turned an eye to it; like most issues this complex, Congress has not made significant accomplishments on the issue. At the end of June, subsidized Stafford Loan interest rates are set to double from 3.4 percent to 6.8 percent. The problem is clear: forcing students to pay higher interest rates only stifles their economic muscle when graduating. Legislation is in place to keep interest rates current, a repeat of events in last year’s Congress. That congress extended rates for one year; legislation proposed by this congress is set to extend rates by only two years.
Although much of congress is dragging its heels on the issue, one representative proposed an idea that makes sense for students. Elizabeth Warren, the senior senator from Massachusetts, introduced a bill designed to match student interest rates with the interest rates on short-term loans given to banks. Called the Bank on Student Loan Fairness Act, the bill would offer loans at a 0.75 percent interest rate for the upcoming fiscal year.
The bill doesn’t come without concerns: the short-term loans referenced by Warren’s bill go to low-risk banking institutions with enough assets to make a default or delinquency unlikely. For student loans, FRBNY estimates that roughly 17 percent of borrowers are 90+ days delinquent, an increase from under 10 percent in 2004. The loans to banks are also short-term, while student loans can take years—if not decades—to pay off.
Those concerns should be assuaged, however, by looking at current rates of return on loans. The Congressional Budget Office estimates that the federal government will earn a $51 billion profit from loans in this fiscal year. From a purely economic standpoint, it seems clear that the federal government can afford Senator Warren’s standard; profit would not be lost in the short-term, as thousands of students with outstanding debt would continue to pay at the higher rates. From a moral standpoint, however, the need for change becomes obvious: profiting on the backs of young, low- or zero-income individuals is a backwards-thinking policy and threatens to further entrench wealth gaps that plague American society.
Although this sounds like a hot-button issue for news outlets and students alike, little attention is paid to this problem. Students tend not to discuss politically-charged issues, opting for lighter fare of conversation. While this may seem pleasant in the short-term, it undermines the chance for change. When talking with Scott Lemieux, a professor of political science at Saint Rose, he mentioned that issues like health care and social security command the floor in Congress because they are well-represented by lobbyists. For students, who have little power and less inclination to lobby politicians, loan debt and other pressing issues are turned into bargaining chips. But students have historically been a driving force of political change: one of the driving forces behind SNCC, the Student Nonviolent Coordinating Committee, was responsible for organizing many protests and marches, including the March on Washington where Dr. Martin Luther King, Jr. delivered his “I Have a Dream” speech. Their accomplishments serve as a testament to the potential of motivated young people.
So for college students—first-year students especially—the stakes are clear: student loan rates threaten the futures of young professionals and the economy at large. As students in one of the most politically potent American cities, the opportunity is ripe for action and organizing around issues that affect young people. It takes many skills—intellect, compassion, persuasion, and courage among them—and with any hope, the incoming class will have more than its fair share of students willing to take action.
