Solutions, Sort of

So maybe there’s a crisis in student loans. Is there a way to fix it? Perhaps. According to an article by Sandra Block and Christine Dugas in USA Today, there are five possible solutions to the higher education cost problem.

As they explain, one option is to allow impoverished people to discharge student loan debt in bankruptcy. Under current rules, people are essentially stuck paying student loans not matter what happens to their finances.

Another option is just to forgive student loan debt. As Block and Dugas write “Rep. Hansen Clarke, D-Mich., has introduced the Student Loan Forgiveness Act, which would forgive federal student loans after 10 years of income-based repayments. Borrowers who work in public-service jobs would be eligible in five years.” It’s not really clear how Congress would pay for this policy.

Another possibility is to increase Pell grants, the federal money available for poor Americans to attend college. Considering Congress frequently threatens to cut or even eliminate this program, this particular reform is unlikely to be enacted.

Block and Dugas also explain that the federal government could try to reduce college costs by linking federal aid to college affordability. Colleges that try to keep costs to student down will be eligible for more federal money. Colleges that keep hiking tuition will face punishment from the Education Department. President Barack Obama proposed something like this in his State of the Union speech in January.

Another way to reduce student debt, according to Block and Dugas, is just to “educate borrowers.” Many college students have an incomplete understanding of their student loans, in part because the rules are so complicated and agreements keep changing. The more information students have before they sign up, the better they might be at making payments once they graduate.

These are possible solutions. The way to really get this done, to really reduce student debt without making any radical changes, is probably some combination of these things.

I’ve long argued that since state governments have essentially given up on funding affordable higher education, it might be time for the federal government to just step in to ensure access (keep tuition low by statute, that’ll force colleges to operate more efficiently) but without that sort of serious change, it’s very much time for some new rules about bankruptcy and student loan forgiveness.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer