Student loan debt forgiveness critical to economy

Here’s the bad news: The average student who graduated from college in 2010 has accumulated $25,000 in student debt. And that number increases with age as interest adds up. The Los Angeles Times recently reported that students (and their parents) are borrowing more each year to keep up with the rising cost of college and the reduced amount of aid available.

And then student graduates into one of the dimmest job markets in recent memory.

Enter the Student Loan Forgiveness Act of 2012, House Resolution 4170, sponsored by Rep. Hansen Clarke (D-Michigan). This bill would make a number of changes to the student-loan process, the first—and most far-reaching—a “10/10 Loan Repayment Plan.” What it means for the average graduate is that once you’ve paid 10 percent of your discretionary income every month for 10 years, the loan can be forgiven.

This provision alone would make a huge difference for those college graduates who are burdened by student-loan debt, but also working in a low-paying field—many social workers, health-care workers, and even some teachers—as well as those people who ran into severe difficulties (like health issues) after graduating and are unable to work.

But the forgiveness provision is not the only good thing about this act. It also caps the interest rate for federally subsidized student loans at 3.4 percent. That’s a big deal; the interest rate for Stafford loans is set to rise to 6.8 percent on July 1, while many borrowers are still struggling with the recession’s consequences.

Another big plus are the changes to the Public Service Loan Forgiveness program, which will reduce from 10 to five years the length that graduates in some low-paying public-service jobs (special-education teachers and public-health workers, for example) will have to pay before loan forgiveness kicks in.

Finally, if enacted as proposed, this law would allow those who have also made private-education loans with banks or other for-profit lenders to refinance the loans through the federal student-loan system.

Don’t think of this as a handout. It’s an investment. Right now, recent college graduates are having the worst time of all in the job market—mostly because those of us who are older are staying put, thanks to the economic insecurity we’re all experiencing. This delayed beginning of their careers, coupled with the heavy burden of debt accrued for their educations, is putting an entire generation at economic risk.

It’s not a risk our country can afford.

We’re talking about our best hope for a decent future when we refer to our college students and our recent college graduates. We need these well-educated young people to build the foundation for a strong economy, and that’s a tough job under the best of circumstances. With debt in the mid-five figures, it’s next to impossible.

We urge our readers to call or email their Congressional representatives with strong support for the Student Loan Forgiveness Act of 2012. If we have hope for the future, we need to support the people who will build it.