On June 2, Federal Reserve Board Chairman Ben Bernanke returned to his former employer to address Princeton University’s 2013 graduates at their commencement ceremony.
His speech, which cited the Gospel of Luke as much as it did economics (three times apiece), contained 10 suggestions “about the world and your lives after Princeton.”
In between urging graduates to expect the unexpected as they depart on their careers and to remember to call their parents from time to time (“remember who paid your tuition to Princeton”) he offered the following insight on money:
“I’m not going to tell you that money doesn’t matter, because you wouldn’t believe me anyway. In fact, for too many people around the world, money is literally a life-or-death proposition. But if you are part of the lucky minority with the ability to choose, remember that money is a means, not an end.”
We can’t argue with Bernanke’s principle. But it’s worth pointing out that the question of money — particularly in the immediate aftermath of graduation — is becoming an increasingly urgent concern for the youngest members of the workforce.
With Connecticut engrossed in the biennial budget process and questions over whether to allow Keno and how to classify federal Medicaid assistance, the student debt crisis — and it is a crisis — has become the country’s most overlooked fiscal threat.
Under current law, the interest rate on government-subsidized Stafford loans will double from 3.4 percent to 6.8 percent July 1. That means 7.4 million of the neediest students will be saddled with an average of $1,000 in additional debt, according to the White House.
As of this writing, there are at least seven competing plans to act on the deadline. They range in simplicity from U.S. Rep. Joe Courtney’s proposal to extend the current rates — 3.4 percent for subsidized Stafford loans and 6.8 percent for unsubsidized Stafford loans — another two years, to plans by President Barack Obama and various senators and representatives that would tie interest rates to the 10-year Treasury rate plus a certain percentage. For some of those plans, the interest rate would be fixed over the life of the loan, and for others it would be variable.
Each side has pitched its plan, with Democrats and Republicans accusing each other of “playing politics” with the issue. The truth is, both sides are playing politics, as usual.
But the student debt crisis is one issue that Congress should avoid politicizing, for a change.
According to the Federal Reserve, student loan debt has nearly quadrupled from less than $250 million in 2003 to a shade under $1 trillion. At least 37 million Americans have some amount of student loan debt.
That rise directly correlates with an increase in the cost of a college education and changes in the way students finance their tuition. Over the last quarter century, the cost of going to college has increased 440 percent, according to news publication Mother Jones. About 60 percent of students take out loans to pay college, and in 2012 more than half of all student borrowers took out more than $10,000 in loans.
If the U.S., and states such as Connecticut, wish to maintain their educational advantages, it is necessary for lawmakers and universities to come up with some progressive solutions.
For the Class of 2011, Connecticut had the fifth-highest average student loan burden of any state, with the average student having $28,783 in debt, according to the nonprofit Institution for College Access and Success. That year, 64 percent of Connecticut students had some amount of student loan debt.
Commencement speakers routinely call on today’s graduates to be the leaders of tomorrow, to be innovators and to provide some economic spark. But that prospect is made ever more difficult when these graduates are saddled by thousands of dollars in student loan debt.
What today’s graduates need are long-term solutions when it comes to both the availability of federal loans and their interest rates, and the rising cost of college.
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