3 Huge Problems With Student Loans and How to Fix Them

Student loan debt is often the bane of a young professional’s existence. An extremely competitive job market and an ailing economy make graduate and post-graduate degrees necessities but  the debt we incur while getting our educations puts us in the financial hole for years after our diplomas are framed and caps and gowns are buried in storage.

In light of this looming crisis of highly-educated but delinquent debtors, TheLoop21has identified three of the biggest problems with the student loan system and offers solutions to them:

1 – No longer is the interest on Stafford loans (for graduate students) subsidized by the government while the student is in school.

So not only will graduate students be getting deeper into debt, they’ll be doing it with even less assistance from the federal government.

A fix would be to subsidize loan interests until the graduate starts working. This would be far too cost prohibitive to do for all graduates into perpetuity. Instead, it should be done when the general unemployment rate is above a certain level — say 8%. This would not only give students more confidence in pursuing their programs of choice, it’ll also increase their range of job positions because they’ll be able to accept less pay, relatively speaking. In a USA Today poll, “22% [of college graduates] say they’ve taken a job they otherwise wouldn’t have because they needed more money to pay off student-loan debt.”

A similar plan is already in place. The Income-Based Repayment Plan caps payments and is based on 15% of the difference between your [adjusted gross income] and 150% of the Department of Health and Human Services Poverty Guideline for your family size and state. For instance, a person with an annual income of $50,000 could cap their monthly payments at $421, far less than would be the case with another repayment option. So, if Congress believes we can afford this, then why not a plan that does even more to stem interest costs in the event that the economy is particularly bad?

Check out the rest of the problems with student loans  and their fixes  here.