Although there have been some marginal reforms over the last few years, they have been inadequate to alleviate the nearly $1 trillion of student loan debt consumers are servicing, and increasingly, failing to service—according to recent data from the Department of Education, 1 of 7 borrowers have defaulted on student loan payments within the first three years of repayment.
So today, Consumers Union has released a new report, "Degrees of Debt: Stories from Student Loan Borrowers Highlight Urgent Need for Reform" (PDF) featuring consumer stories that illustrate the major problems in need of reform. The report also proposes a comprehensive policy agenda for restoring fairness to the student loan system. These "Seven Principles for Fair Student Lending" include:
Transparency: Schools should provide plain-language documentation for prospective students to understand the mix of grants, scholarships, and loans available to them.
Options: Schools need to provide students with all the financing options for which they might be eligible.
Flexibility: Lenders should be required to offer flexibility for borrowers to repay loans, no matter if they're public or private loans.
Reasonableness: In fees and how payments are applied to the loan.
Accountabilty: Borrowers should have inquiries and disputes resolved in a timely fashion.
Fairness: Deceptions throughout the educational process, from schools to lenders to loan servicers, must be prohibited by law, and regulated when necessary.
Relief: Borrowers shouldn't be saddled with lifelong educational debts that can't be effectively rehabilitated or discharged in extraordinary circumstances.
Addressing student loans is only one problem facing higher education today. Increases in college costs outpace virtually all other goods and services in the economy, and the college admissions process alone seemingly requires its own coursework. But by not effectively taking on the student loan problem, we as a nation run the risk of not only hobbling millions of student loan borrowers, but also the greater economy.