If you are a college student or graduate, or the parent of one, you might find a poll released last week interesting.
LendEDU, a group that tracks the student loan industry, found millennials believe by a 70-30 margin that student loan debt is a bigger threat to the U.S. than North Korea.
The data suggest they are right to think this is a very real problem for our nation.
LendEDU reports that some 43.3 million borrowers collectively owe $1.41 trillion for student loans. Student loans now are the second-largest consumer debt category behind mortgages, outpacing credit cards.
LendEDU states 60 percent of college students graduate owing some debt — on average, about $28,400. The group found 11.8 percent of federal student loans are 90 days late or in default — far surpassing the ratio for home loans (4 percent) or car loans (1.4 percent).
Perhaps we shouldn't be shocked by the amount of student debt. The issue reflects the value our society has placed on obtaining a college education and our debt-driven economy. Unfortunately, most students must dive into debt to obtain a degree. Students seeking professional degrees must take on much more debt than other graduates.
But student debt remains a small fraction of consumer indebtedness relative to the mountain of mortgage debt — $10.6 trillion — that Americans racked up at the Great Recession's height. On average, the debt facing a new college graduate is $5,000 less than the price of the typical new car sold in the U.S. — with much lower monthly payments.
Thus, it seems for many graduates, this is a manageable problem. U.S. Sen. Bill Nelson, D-Florida, has offered a fix.
On Monday, Nelson filed a bill that caps the interest rate for new student loans at 4 percent, which is lower than the 4.45 percent that the rate climbed to on July 1. (Each July 1 the government sets the rate for the new academic year, and it lasts the life of the loan.)
Nelson's measure also allows borrowers with rates above 4 percent — the rate is likely closer to 7 percent if the loan was approved before 2013 — to refinance, which is now prohibited. Nelson's proposal also ends loan origination fees, which take a $400 bite out of the front end of the loan.
On the Senate floor, Nelson argued the prospect of repaying a large student loan is preventing some from buying homes or starting a business, or causing them to rethink college altogether.
"That's not in anybody's interest — not the students, not the families, not the communities and it's certainly not in the country's best interest," he said.
Nelson's idea attempts to make college more affordable while ensuring people with loans keep paying. It is well worth pursuing.
REPRINTED FROM THE NORTHWEST FLORIDA DAILY NEWS