Students should be able to refinance debt

Opinions_StudentDebt_ Simon Cunningham

photo courtesy of Simon Cunningham./ flickr

The Editorial Staff

It’s no secret that student debt is a bubble just waiting to pop. Earlier this year, the Wall Street Journal reported that student loan debt exceeds $1.3 trillion — more than “credit cards, auto loans, [and] refinancings.”

And to make matters worse, the St. Louis Federal Reserve reports that 31.5 percent of all student loan holders are at least one month behind on their payments.

Here at UNC-Greensboro, the problem is just as bad. According to the recently released College Scorecard, the average loan debt of a UNCG grad is $22,500, with a typical monthly payment of $250. Of course, this statistic is highly misleading.

As the Scorecard later details, only about 55 percent of UNCG students end up graduating from the university. So, for the 45 percent of students who are unable to finish school, the road to repayment will be much more difficult — after all, the earnings gap between millennials with a college degree and without is a staggering $17,500 per year, according to U.S. News.

Sadly, however, UNCG students can’t always bank on a lucrative college degree. In fact, the Scorecard reports that only 61 percent of UNCG graduates earn, on average, more than those holding only a high school diploma — with the average annual earnings of only $37,000.

So, it should be abundantly clear to everyone that student debt must be addressed in an orderly fashion. And since grandiose plans set forth by presidential candidate Bernie Sanders and others have little chance of ever coming to fruition, it is vital to advocate for pragmatic solutions to this gigantic problem.

It is through this practical approach that we have determined an easy, although minor, fix to the problem: allowing students to refinance their student loans.

As it currently stands, students with private loans are allowed to refinance and, increasingly, private lenders have been permitted to convert federal loans into private ones that are eligible for refinancing.

Yet, as U.S. News reports, only about 8 percent of students currently have private loans, which leaves the overwhelming majority of students with the loan options levied by the federal government. And, as many students know, these loans are accompanied by fixed interest rates set by Congress that cannot be refinanced.

We contend that this procedural safeguard is counterproductive and denies students the flexibility they say desperately need. This is especially true when one considers the fact that the federal government is profiting off of these interest rates — there is something inherently wrong about the government making money off of a young student’s investment in his or her education.

Another benefit to this strategy is that it seems to be bipartisan. For instance, Hillary Clinton and Mike Huckabee have come out in favor of allowing the refinancing of student loans, while Donald Trump, the Republican frontrunner, has even maintained the position of eliminating interest rates on federal loans altogether.

Now, regardless of your politics, this should be viewed as an encouraging sign. In the future, our generation will be faced with a variety of payments, ranging from a mortgage to health insurance; not to mention that we’ll be tasked with raising families of our own.

The current student loan crisis is simply too big to ignore. If our generation does not push elected leaders to make substantive changes to the loan process, then we will be left with a broken system that will only become more bloated over time.

So, it is imperative that we all advocate for federal student loan refinancing; after all, it is this small step that can get us back on the right path.

Categories: Editorials, Opinions

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