Few people in America know more about student debt than Elizabeth Warren does. Before being elected to the Senate from Massachusetts, she was a professor teaching bankruptcy law at Harvard Law School, and has written books on financial literacy, such as "The Two Income Trap." Now Senator Warren is writing legislation to improve the situation.
Commencement speakers may spout cliches and optimism, with their gushing words of advice. But the reality is not abstract or philosophical. Debt is real.
Americans collectively owe about a trillion dollars in student loan debt. It is hard even to grasp what that figure means, but it is useful to note that about 40 million current and former students carry some part of that crushing debt load. Student loan debt follows the borrowers for much of their lives, affecting their credit for years after graduation, affecting where they live, and even affecting what jobs they can take. It is not just a personal hardship, but a national tragedy when students cannot afford to take an entry level job, apprenticeship, or intern opportunity in the very field they incurred debt in order to train for.
Democrats, lead by Senator Elizabeth Warren and supported by the Obama administration, have come up with the best practical solution offered in many years. The Warren proposal would allow students and alums the opportunity to refinance that debt at lower interest rates those commonly available for other types of loans. "When interest rates are low, homeowners, businesses and even municipalities refinance their debt. But right now the government doesn't offer a refinancing option to students," Senator Warren explained. "Allowing students to refinance their loans would help give them a fair shot at an affordable education." This kind of relief is long overdue, and could go far to help students and former students get their credit life back on track.
In a familiar refrain Warren said, "Student loan debt is a real and growing crisis that is crushing young people and dragging down our economy." That sounds familiar. What is new is that the government is stepping in. The student loan refinance proposal is part of a coordinated congressional agenda that Democrats label "A Fair Shot." Meanwhile, President Obama is not waiting for Congress to act. He is issuing a partial fix by executive order today, directing the secretary of education to ensure that certain federal student loans be capped at 10 percent of the borrower's monthly incomes. Hopefully, election year politics will encourage bipartisan support rather than partisan debate. You can read more about the Warren proposal here and more about Obama's executive action here.