Proposed Solution to the Student Loan Related Economic Problem

¶ … Student Loans Dangerous to the Economy?

In Sharon Epperson's interview with Sarah Bloom Raskin, it becomes clear that not only are student loans dangerous to the economy, but also that the solution to the student-loan debt crises might have a significant impact on the financial future of multiple generations of Americans. The interview also makes it clear that Bloom Raskin's approach to loan debt does not appear to involve making education more affordable for students, but rather on educating people about interest rates and the ramifications of taking on certain levels of debt (Epperson, 2014). However, that solution ignores the fact that education cannot work as a stepping ladder to success if financial barriers continue to outline who has access to the best educational opportunities and all of the networking opportunities that come with those schools. The fact that there may be equivalent educational opportunities in lower-cost schools ignores the very real fact that the less prestigious schools have traditionally been the less expensive schools, and their networking opportunities are simply not as well established, extensive, or influential as those arising from more prestigious, more expensive universities.

One does not have to come up with an innovative solution to help reduce the potential dangers created by student loan debt; many of those solutions have already been proposed. For example, Senator Elizabeth Warren has been very vocal about her concern about student loan debt and its impact on borrowers. She just introduced a bill that would allow students to refinance student loan debt, which is something that students had not previously been allowed to do in a private capacity outside of the consolidation structure. This solution is a logical one that strikes a balance between student needs and the expectations of the federal government when it originated the loans that are the subject of the debate. "Warren said the measure, which would also allow those with privately held student loan debt to refinance their debt under the Federal Direct Loan program, equals savings for the consumer, which would be funneled back into the economy. It would also take a crack at the statistic showing that one in seven borrowers defaults on their student loans within three years of beginning repayment" (Rizzuto, 2014). As anyone who has refinanced a mortgage may understand, the ability to refinance loans to obtain better interest rates can not only result in much lower overall repayments, but can reduce the monthly burden by hundreds of dollars, making loan repayment affordable.

Endorsing Warren's suggestion involved examining the same criteria she probably examined to make the suggestion, initially. Would the proposed solution: reduce defaults, reduce monthly loan burdens, make or keep college affordable for many, and free up money that is currently being spent on student loan payments to stimulate the economy? The answers to all of those questions were yes, which made Warren's proposed bill seem like a reasonable, if not ideal, solution to the student loan issue.