Politicians should approach solutions to the student debt crisis as they've approached economic crises in the past, when fixing problems was more important than scoring points.
A student with a cap reading, “Embrace Your Dreams,” stands waiting for the start of the graduation ceremony for students at University of the Arts at the Academy of Music in Philadelphia in 2022.With the student loan payment suspension ending and the Supreme Court ruling that President Joe Biden’s loan forgiveness program was unconstitutional, the student loan crisis is back on the front burner.
How did the financial stress reach this extreme level? As noted, educational expenses — and therefore borrowing levels — have skyrocketed. But there is also the reality that these loans are made to students, and payments begin just six months after graduation.It is not unusual that new graduates have difficulty getting jobs that pay enough to afford living expenses and loan payments, especially in challenging economic times.
Then there is the issue that student and business loans are viewed differently by legislators, even though the borrowing occurs for the same fundamental economic reason. Conceptually, there is no difference between individuals investing in human capital and businesses investing in physical capital. The goal is to increase productivity and earnings.
A second option is to mirror the lending strategy started during the George H.W. Bush administration to ease the debt burdens of poorer, largely Latin American countries. Bush’s Treasury Secretary Nicholas Brady, a holdover from the Reagan administration, developed a plan to restructure the debt of foreign nations through the use of securities backed by the U.S. Treasury. They were called Brady Bonds.
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