For several years now we’ve been hearing about a ballooning of student loan debt in America that’s crushing young professionals, or at least keeping them from being financially comfortable for years or even decades. Student loan forgiveness and free tuition have become political talking points.
Detroit Today host Stephen Henderson speaks with Brian O’ Connor, finance columnist for The Detroit News, Mark Kantrowitz, Publisher of Cappex.com and Jeffrey Dorfman, Professor of Agricultural and Applied Economics at the University of Georgia about student debt.
There have been significant milestones in the ever-increasing student debt load. Student debt has surpassed credit card debt, auto loan debt, and grown to the $1.35 trillion mark. Many Detroit Today callers expressed concern about the ability to pay back loans in an uncertain job market. Some callers even went as far to suggest that some young people have no intention of paying back their student loans. Kantrowitz responded to this sentiment saying, “It just isn’t going to happen, especially in a Republican Congress…Forgiving student loans doesn’t yield any public policy benefit. It doesn’t increase the number of people going to college or graduating from college. It’s simply a handout.” O’Connor agrees, “Bernie Sanders isn’t even talking about that,” but he went to say that some companies particularly in the financial services industry are beginning to offer student loan payment as a job perk and that the income based repayment plans are an effective existing tool for helping students repay their loans.
Dorfman says the student debt crisis is blown out of proportion. He says the average student debt is $16,000 and does get paid off, noting that many of the defaults were from students that went to for-profit colleges. Dorfman feels that the student debt crisis is overblown especially when compared to the non-existent auto loan crisis. He reasons that while auto loan debt, like student loan debt is over a trillion dollars, auto loans require a higher monthly payment for an asset that depreciates. Once you graduate from college there is no further costs incurred and you automatically have the potential for more earning power. Dorfman says that a college education is a far better investment then a car. He concedes that while many college dropouts and students swindled by for-profit colleges have legitimate grievances, “personal anecdotes” are not a reason to restructure an existing program. If they were to transfer the trillion-dollar debt load to taxpayers, many of the students that would be bailed out would have a higher long term earning potential than many average taxpayers.