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Financial Planning > College Planning > Student Loan Debt

Debate: Can More Information Ease the Student Debt Crisis?

By Robert Bloink By William H. Byrnes

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Senate Republicans recently unveiled a counterproposal to address the nation’s student debt problems. The proposal consists of five separate bills that are designed to address the root cause of sky-high student loan payments.

Two of the bills address the types of information that colleges are required to provide to students before they enroll and take on student debt. The three remaining bills address how lenders provide information to student borrowers (including information about estimated monthly payments and how long it would take to pay off a given loan).

These bills would also limit the availability of student loans in certain situations (including ending Grad PLUS loans that do not have borrowing limits and are often used to fund graduate school).

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the alternative student loan modification rules proposed by Republicans in Congress.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Thumbs down Bloink
thumbs up Byrnes

Their Reasons:

Byrnes: The latest proposal by GOP members of Congress does much more to address the root cause of America’s student debt problem. Instead of the “giveaway” option supported by Democrats in Congress, this proposal puts more pressure on educational institutions to lower costs.

It simplifies the types of information given to student borrowers so that these (often 18-year-old) students can make educated decisions. These are the issues that need to be addressed if we’re ever going to fix the system. Simply forgiving existing student debt does nothing to address the root cause of the problem.

Bloink: Sure, the new GOP proposal could help reduce the cost of college and help student borrowers make smarter decisions. On the other hand, the proposal would do absolutely nothing to address the immediate student loan crisis that we have on our hands today. We first need to take steps to help student borrowers who have already taken out loans and would not benefit in any way from rules designed to help student borrowers at the outset.

Byrnes: We aren’t going to solve this nation’s student debt crisis by merely forgiving the loans that millions of Americans took out willingly for the privilege of obtaining an education. This GOP proposal would create the type of pressure that educational institutions need to reduce the sky-high costs of higher education.

It also prohibits lenders from offering loans for undergraduate or graduate degrees that have shown that their earning potential is not more than a high school degree — so that fewer students are given loans that they have no hope of ever repaying.

Bloink: We’re already in a place where millions of borrowers cannot afford their student loans. With repayment obligations starting again, we must focus on loan forgiveness as a way to offer assistance. Without that forgiveness, millions of Americans will be forced to choose whether to default on their student loans or pay for basic necessities, including food and housing.

Byrnes: This is not a socialist country. It’s not up to the federal government to fix the problems that American borrowers have created for themselves. The fact is, student borrowers have been given a three-year interest-free loan. They should have been making use of those funds to earn interest with the full expectation that student loan payments would someday resume. The government should not bail out borrowers who instead spent the money on things they can’t really afford, given the knowledge that these loans exist.

Bloink: In the end, we may need a compromise position that both forgives a portion of existing student debt (no one is suggesting an across-the-board clean slate for student borrowers) and takes steps to reduce the cost of higher education. Yes, students deserve to have full information before they take out their student loans.

The fact of the matter is that millions of Americans took out student loans without the types of clear and understandable information that these new bills are proposing — and we first must address the problem at hand.

Images: Adobe Stock

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Robert Bloink

William H. Byrnes

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