Last Wednesday President Barack Obama announced he had approved an executive order offering help to students who are carrying significant amounts of college loan debt.
He's doing so in order to bypass what he calls a “do-nothing Congress.” But it's not hard to read between the lines and see this as an effort to rally a base of potential voters who will be vital in the president's run for a second term in 2012.
A recent CNN story shows the average college student today carries debt of $23,000. In 2009 the loan default rate climbed from 7 percent to nearly 9 percent. There's no question this is yet another in a long list of financial crisis that have dogged the nation.
Obama's plan would allow 5.6 million people to consolidate loans, cap payments on low-income borrowers and offer loan forgiveness after 20 years. But as with many other such government programs, there are questions that need to be answered:
• Who pays for other people's poor decisions in taking out too much debt they can't pay back?
• What message does this send to those who have sacrificed to pay their debt?
• And what might be wrong with borrowers having to present a business plan much like an entrepreneur does when asking for start-up capital?
As good as these intentions might be, Atlantic Monthly did some math and reports Obama's plan will save a borrower on average less than $10 a month.
Regardless, the question remains, does this really solve the problem when the root of skyrocketing student debt really seems to rest with the cost of a college education, something that has risen over 500 percent since 1999?
A College Board Advocacy and Policy Center study showed costs at four-year colleges jumped 8.3 percent last year, twice the current inflation rate. College costs continue to go up during a recession when other segments of the economy have been freezing spending.
But colleges are not like many traditional businesses, Eastern Washington University's vice president of student affairs Stacey Morgan Foster explained.
A college is different than other businesses in that there is a near never-ending need to acquire the latest and greatest technology in order to offer the best learning environment. A cutting-edge institution that is trying to teach tomorrow's leaders can't do the job with yesterday's tools.
Also unlike other traditional businesses, which are commodity or product based, education is people-driven with large costs for salaries and bargained benefit packages. Morgan Foster likes to remind us that there have been no recent raises for staff at Eastern.
Consider too that the state has trimmed the funding of institutions like Eastern from a rate in the 60-80 percent range in prior years to the 30-35 percent of today. Then remember colleges are highly regulated by the federal government and the picture of out-of-control costs should begin to paint itself.
Dealing with the issue of college loans and tuition certainly seems to be a problem with no easy answers. Much like the final exam that once held your diploma hostage.
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