DN Editorial: College loans the next "debt bomb"

CONTRARY to what Rick Santorum says, Americans who want to send their kids to college are not snobs.

Nor does the president, as Santorum says, "want to remake you in his image. I want to create jobs so people can remake their children into their image, not his." It's a perverted populism that assumes that working- and middle- class parents fear that their children might learn more than they know or rise higher on the economic ladder. After all, isn't that the American Dream?

Obama had actually called for at least a year of higher education or career training, not only in a four-year college program, but also a community college, vocational training or apprenticeship. And with good reason: Extra training means higher salaries and more job security.

Taking out college loans to do all this was once a responsible and even wise risk. The better jobs helped graduates (and their proud parents) to pay them off quickly. But times have changed as the economy has stumbled, the cost of higher education has climbed - and states like Pennsylvania have slashed education budgets.

According to a report last month from the Federal Reserve Bank of New York, student debt is now at $870 billion, topping the total owed by Americans on credit cards ($693 billion) and even cars ($730 billion). Right now, 27 percent of borrowers are in default. The nation's bankruptcy attorneys have warned that unpaid student loans could provide the next "debt bomb" in the American economy.

Even those who are managing to make their payments are carrying a heavy burden, one that is causing many of them to put off taking the life steps that many people their age usually do. So they are spending less money on things like getting married, buying homes, having kids. Which means the economy isn't growing the way it needs to, and that is a problem for everyone.

And right now, seven million students are facing a doubling of the interest they pay on subsidized Stafford loans. A law passed in Congress five years ago had reduced the interest rates from 6.8 percent to 3.4 percent, but it is set to sunset July 1, meaning an increase of average debt by $2,800. Democrats have introduced bills in both houses of Congress to extend the lower rates. Student groups, organized by the federation of State Public Interest Research Groups (uspirg.org) delivered 130,000 letters supporting the legislation to Capitol Hill last week. Conservatives oppose the law, saying it will increase the deficit, but but this is an investment worth making.

Higher education is a multifaceted problem that needs a multi-faceted solution: for starters, lowering tuition, raising financial aid, and getting Wall Street out of the student-loan business. Another is helping more students graduate in a reasonable amount of time. Making college affordable is not just for snobs or even just for students. It's in all our interest.