Solutions for the Student Debt Fiasco
In the United States, Student Loan Debt now totals over $1.6 trillion — more than the total of credit card debt in the entire nation. This has created a burden which, for some students, lasts decades. It affects a student’s decisions about career paths — forcing many to seek jobs which do not best use their talents and skills or which do not meet our country’s critical needs but are jobs which allow them to repay their debts.
Too many Higher Education institutions have encouraged students to take out loans to cover increases in tuition & fees. To cover increasing costs, including those for the salaries of faculty & staff, colleges and universities have become dependent on raising tuition, typically at a rate higher than inflation.
Those same institutions — including the University of Colorado — have failed to adequately disclose the actual value of the degrees they are granting. This is especially true and salient when it comes to Higher Education institutions having avoided informing applicants and matriculants of the tremendous difference in the value of specific degrees when examined by department or program.
Some institutions have severely abused lending programs because they know their graduates will be unlikely to get jobs which will allow them to easily repay their loans. This has been especially true with a number of private, vocational schools.
One of the most serious — and unaddressed — issues concerns the extraordinary difficulty which occurs for students who have taken out loans and then do not finish their degree or certification.
Another fiasco in the Student Loan arena is the lack of quality financial counseling students and their parents often receive before they take out loans. Higher Education institutions need to develop these kinds of counseling opportunities using independent, autonomous experts who can help students and families.
As the only candidate with experience regulating debt-related issues, when I served as the first public member ever to be elected Chairman of the Attorney General’s Collection Agency Board in the Colorado Department of Law, I successfully fought to expand the rights of citizens with debts. If elected, I will use my expertise and experience to help undergraduate and graduate students and graduates today.
With an academic background which includes Economics and real-world experience as founder of the Colorado Accounting Service and the Colorado Tax Service as well as having been a Registered Investment Advisor with the U.S. Securities & Exchange Commission, I understand the intricacies of predatory practices and debt-related issues.
Using my knowledge, experience, and expertise, I have developed a multi-prong solution and would propose to do the following.
- Provide basic education in financial decisions so students make much better choices. Make certain they understand what their obligations actually will be.
- Make certain, if there are any co-signers on loans, that they understand they could be obligated to pay the full amount of the principal and interest balances due as well as any fees so they will know, in advance, the financial risk they are taking and how it could impact their household finances, retirement plans, et cetera.
- Do a much better job being transparent by advising students the actual likely value and earning power of specific degrees over time by department and program vis a vis the possible debt they might incur, with data points in five-year post-graduation increments.
- Explain the financial impact of borrowing coupled with then not completing a specific degree or certification program. This is extremely important because such situations often are the worst of all scenarios and can be financial death spirals.
- Begin a major long-term cost reduction program at every institution of Higher Education so tuition & fees can be frozen, if possible, and the need for loan funding is reduced.
- Create cooperative paid internship and apprentice programs for students while in school so they (a) do not need to take on so much debt and (b) increase their chances at securing a job after graduation and doing so at a higher salary. These types of programs can increase the success rate of a significant percentage of students while creating closer school-community ties and relationships which could have other benefits for each college or university.
- Establish university-wide advising programs by creating a Faculty Mentor System to help ensure students get their degrees rather than leave school with debt and no diploma (which can be a financial death spiral). Too many schools have “professionalized” advising to the extent that they deploy separate advising departments rather than depend on Faculty members to do advising, as many schools have in the past. It’s time to reincorporate Faculty members into the advising system so students have more information about their anticipated or actual departmental major and what is required as well as what that major can offer post-graduation.
- Allow debtors to refinance loans at lower interest rates without any penalties. This should be a tremendous expansion of existing opportunities with automated portals so students can easily reduce the interest rates on their loans and lock into lower rates with ease (and with no prepayment penalties or significant refinancing fees).
- Stop the Federal Government from making a profit on student loans. There is no reason any governmental entity should be making a profit on student loans because all this does ultimately is make loans more costly.
- Set higher standards for educational institutions (especially for-profit entities) seeking to have access to student loan programs by insisting on higher levels of student graduation, post-graduate employment rates, and employment remuneration levels. If Higher Education institutions became responsible for their students’ success and even had financial repercussions for failing their students, many loan decisions would be made more thoughtfully and many colleges and universities would pay greater attention to what happens to students once they leave school.
- Aggressively counter unscrupulous lenders and related businesses pursuing holders of student debt. As the former Chairman of the Attorney General’s Collection Agency Board in the Colorado Department of Law, I because acutely aware of some of the practices of those trying to collect debts. Young people often are unaware of their rights and the unscrupulous practices of some of those seeking to collect debts. These debt collectors need to be reined in and more closely regulated. And educational efforts are needed to ensure those with student loan debts are aware and fully informed of their rights under the law at both State and Federal levels.
- Actively lobby at the State and Federal level for forgiveness programs which reduce debt based on serving the public in specific ways. The concept of having opportunities to work in targeted communities with specific shortages (such as teachers, doctors, other medical personnel, social workers and other mental health experts, et cetera) in exchange for getting a bonus of having a portion of a loan forgiven for each year of service needs to be vastly expanded. This could apply to AmeriCorps, The Peace Corps, Teach for America, the Department of Defense, and many other positions.
- End the taxation of loan forgiveness so, when a loan is forgiven, in whole or in part, debtors do not have to pay taxes on the amount which was forgiven. To consider loan forgiveness as taxable income for student debt should no longer be a State of Federal policy.
- Overhaul the loan servicing and collection business to be more consumer friendly. As described previously, this industry needs better regulation and monitoring. Ideally, there should be a multi-year regulatory effort to have debt collection and servicing businesses actually be responsible for educating those persons with student loan debt. While this would be a 180o change, in some respects, it is entirely feasible and would enhance the reputation of the collection industry.
- Lobby to allow educational debt to be considered the same as most other debts in bankruptcy — i.e., subject to being discharged normally instead of making it almost impossible for a debtor to shed the debt through bankruptcy. Right now, all kinds of debt can be discharged in bankruptcy but doing so for student loan debt is nearly impossible. Why should someone who borrowed thousands of dollars for a car or millions of dollars for a real estate deal be allowed to wipe out that debt while someone with a student loan who declares bankruptcy still gets stuck with most or all of the debt?
- Suspend any required payments during emergencies, such as the COVID-19 pandemic. In such times, student loan debt payments should be suspended and interest should not accrue on those debts during any State or Federal emergency as declared by an appropriate official. This should apply in whole month increments with an additional 90-day period added on to the end of the emergency period so the person with the loan obligations has at least a little time to recover. While three extra months is not a lot, it should be a reasonable period. So, if an emergency exists for three months, once it ends, t here would be an additional three-month period for the debtor to recover and then begin repaying his or her loan.l
Just as importantly, students, alumni, parents, and grandparents need someone who can take on the U.S. Department of Education and its leader — Secretary Betsy DeVos — who has been the antithesis of what students, alumni, and parents need. Secretary Vos has not sought to help students and, in fact, has promulgated policies which are regressive in nature.
As mentioned, one of the keys to reducing students’ dependence on loans is for parents and grandparents who co-sign on loan to do better Financial Planning because they often end up finding they have to liquidate retirement assets to cover these liabilities despite having originally been assured such a scenario was highly unlikely. Everyone involved needs be better informed so they know what their obligations truly are.As the only candidate who has dealt and deals with the Federal Government at the highest levels on a continuous basis through my work, I am well-positioned to make a difference for all Coloradans and am committed to leading the charge for change. I would look forward to having that opportunity.