By Geneva Sands - 04/23/13 11:13 PM EDT
Last year, Nii-Quartelai Quartey, 29, sat in the living room of his mentor, Rep. Karen Bass (D-Calif.). He and more than two dozen other young adults joined the congresswoman for a casual roundtable discussion on the issues facing his generation and what public policies could assist them in achieving their goals.
They talked about a lot that day, but the thing that stood out was student loan debt.
Total student debt almost tripled between 2004-2012, according to the Federal Reserve Bank of New York, and it was the only type of household debt that continued to rise through the recession.
In March, Bass introduced the Student Loan Fairness Act, which moved to cap the interest rate on federal student loans at 3.4 percent, suspend interest rates while borrowers are unemployed and offer loan forgiveness to qualified borrowers.
“I want to see this raised as an issue for our country to debate. I think families are suffering in silence over this issue,” Bass said.
Many people agree that the ballooning student loan debt is a problem, but not everyone agrees on how to solve it.
Lindsey Burke, an education policy fellow at the conservative Heritage Foundation, argued that student loan forgiveness shifts the burden to taxpayers and won’t lower college costs in the long term.
“These are loans that students took out and should have to repay,” Burke said. “When you forgive student loans, you do it on the backs of waitresses, truck drivers and others who themselves did not earn bachelor’s degrees.”
Without congressional action, the current 3.4 percent interest rate for subsidized Stafford federal loans will double on July 1. Last summer, Congress approved a one-year extension of the lower rate at a cost of nearly $6 billion. With the rate hike less than three months away, the issue is back on the table.
Earlier this month, Republican Sens. Tom Coburn (Okla.), Richard Burr (N.C.) and Lamar Alexander (Tenn.) offered a long-term fix. Their bill requires all newly issued Stafford, Graduate PLUS and Parent PLUS loans be set to the U.S. Treasury’s 10-year borrowing rate plus 3 percentage points.
“This proposal is fairer to all students who are borrowing taxpayer dollars to continue their education,” Alexander said in a statement.
In their own legislation, Sen. Jack Reed (D-R.I.) and Rep. Joe Courtney (D-Conn.) are asking legislators to lock in the lower rates for two years so that Congress can work toward a long-term solution.
For Quartey, debt isn’t an abstract problem. Between his undergraduate degree from the University of Southern California and a master’s degree from Pepperdine University, he said he’s accumulated more than $100,000 in student debt and is currently making interest-only payments of around $1,000 per month.
Quartey said his financial obligations have prevented him from taking more risk in his consulting business and factored into decisions on marriage and home buying.
“I don’t mind paying back my student loans, but wow, if I had a little bit more flexibility and if I was able to pay down my principal in a way that wasn’t so costly ... that would be a proven game changer for me,” he said.
Rohit Chopra, student loan ombudsman of the Consumer Financial Protection Bureau, pointed out that incurring a large amount of debt can have a “significant impact” on post-college life.
“It could be the difference between owning a home and needing to live with roommates. It could be the difference between being able to contribute to your retirement plan vs. living paycheck to paycheck. And it could impact your ability to borrow, to buy a car or start a small business,” he said.
Many factors can contribute to rising debt, such as higher enrolment, increasing costs, cuts to state funding and diminished family contributions post-financial crisis, Chopra said.
College administrators have taken note, and many have implemented programs to better educate students on the costs of education.
Sarah Bauder, assistant vice president for financial aid and enrollment services at the University of Maryland, said that the economic downturn has put financial education on the “front burner.”
The university teaches its students money management, using its website and class instruction as well as internally monitoring students’ indebtedness levels.
“In the end [students] make their own choices, but we’re trying to make them aware,” she said.
South of the Maryland border, Howard University President Sidney A. Ribeau launched a $25 million campaign last March to provide additional financial assistance to “deserving Howard students.”
Caleb Davis, 21, an electrical engineering major at Howard, served as an ambassador for the campaign, sharing his personal experience about the importance of need-based aid.
“I was blessed ... because depending on how much money I did or didn’t get, I couldn’t go to Howard,” he said.
During high school, the Texas native got a large accordion folder and put manila folders inside to keep track of all available scholarships and deadlines.
“I applied for 100 [scholarships] and I got a good amount, so I really was trying my best to not choose loans, but I was going to a school that I wanted to go to, so I would sacrifice what I could in order to make sure I was here,” he said.
Davis, a junior, said his goal is to have less than $30,000 in student loan debt when he graduates, an amount he thinks is “reasonable,” given his job perspectives and willingness to budget.
“You have to know yourself, you have to understand what you can handle,” he said.