Don’t compound student-loan crisis

Poughkeepsie Journal Editorial Board | Poughkeepsie Journal

One company will service all student loans The U.S. Education Department is changing its approach to student-loan servicing. The contract to handle outstanding debts will be awarded to just one company, instead of the previous four.

It’s no secret millions of college graduates are swimming in debt -- a situation exacerbated by a deep recession followed by a sluggish recovery.

The federal government has not helped matters much, and what the Trump administration is proposing will make the problem far worse in the future.

Inconceivably, the president’s budget would eliminate subsidized student loans for low-income families and end student-debt forgiveness for those who enter public service.

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Congress must reject these ideas and, actually, should be working much harder to lower the interest rates many graduates are paying on their loans.

The U.S. Education Department is the largest issuer of federal loans, but it outsources the work to various private lending companies. Of the $1.4 trillion of student loans outstanding, more than $1 trillion are federal loans issued by the department. That means federal policy holds great sway over student loans.

Unquestionably, reducing the piles of college debt is one vital way to get the economy at full throttle again.

For years, U.S. Sen. Elizabeth Warren, D-Mass. and others have backed the sensible plan to allow graduates to refinance their loans at a lower interest rate. That’s because the interest on these loans can run as high as 7 percent or more, and the idea has been to essentially cut that number in half. Supporters would pay for the change by raising taxes on individuals earning more than $1 million a year. But Trump and congressional Republicans have their own budget priorities and alleviating the student-loan crisis this way is not among them.

The Trump administration is proposing to simplify the student loan repayment plans and to make Pell Grants, which provide tuition aid for low-income students, available year-round. Both are good ideas. But the president’s budget also would cut funding for the Pell Grant program and, overall, doesn’t address that fact that too many recent graduates are awash in debt. The federal government shouldn’t be profiting in a way that keeps many young people from buying homes, starting families and spending and saving money, all of which would be more helpful to the economy than what we are witnessing now.