The federal government should absolutely offer some kind of assistance to those holding student loans. This does not mean total debt forgiveness but some kind of loan modification. It is in the best interest of the nation’s economy ultimately. It is also the right thing to do.
There are several effective ways to approach this. Postpone the date to begin repayment, giving them a chance to get their feet under them. Reduce (or eliminate) the interest rate and eliminate penalties. Allow longer terms for repayment.
Another consideration that would help these loan holders and ultimately the country would be making it illegal to attach a credit score to student loans. When the economy does pick up and these students are employed, they should not be burdened with a ruined credit score before they ever get started. That will force them to pay more for insurance, another kind penalty. The nightmare seems to go forever!
People in their 20s, 30s and 40s are at their peak spending years. Is it wise to hamper their ability to get credit for the big-ticket items such as a home, furnishings, and automobiles? As is so often reported, consumer spending makes up 70% of our national economy. We need this group to be financially fit, not encumbered for life because they had trouble repaying education loans!
Aside from sound economic reasons for helping this group of citizens, there is a fairness issue here as well. These students did exactly what they had been encouraged to do: go to school, postponing immediate gratification for distant rewards. How on earth could we as a nation jerk the rug out from under them when they need help the most?
Many of these students may have turned to loans as a last resort. Much of what parents put into state sponsored higher education funds vanished when the market collapsed. Had those parents ignored the state plans and put the savings into a simple passbook account, they would have had more to offer their children! That’s tragic. Some parents had planned to finance their children’s college expenses through home equity loans (banks pushed that notion for a decade or more!). That option vanished as well when the value of their homes dropped dramatically.
These students had every reason to believe they would be able to repay their loans; they must have been totally dismayed when everything fell apart just as they were ready to move into the workforce. Why on earth would we just leave them on the side of the road?
This is a chance to do the right thing, the pragmatic thing. The nation needs these disciplined, creative and educated people as we confront years of righting our national life. Can the nation afford to abandon an entire generation?