Commentary: Student loan programs need reform

This editorial appeared in The Miami Herald.

With the cost of a college education soaring all over the country, including in Florida, reforming college-loan plans is taking on a new urgency. Fortunately, there is a proposal on the table that won't be a burden on taxpayers and could ease the staggering debt load for young people entering the workplace. This should be a no-brainer for Congress. When it comes to legislation, though, nothing is ever easy.

College students and their families need no reminder that it's harder than ever to pay for a four- or five-year education. College tuition has risen at a clip of 58 percent since 2000, faster than inflation. Close to 70 percent of students borrow for their education, and they owe an average of $20,000. Doctors, lawyers and those with graduate degrees can easily end up owing well over $100,000.

The result is that thousands of students either forgo college altogether or drop out because they can't afford it. Many of those who do graduate find themselves years later still paying off college loans when they should be saving for their own kids' educations.

One part of President Barack Obama's proposed reform would enlarge the pool of loans by cutting out the middlemen – principally, banks. Private lenders get a public subsidy under the Federal Family Education Loan program, which accounts for more than two-thirds of student borrowing. Taxpayers guarantee the lender 97 percent of the loan if there is a default, so the risk to private lenders is small. Cutting out the middlemen – who would surely put up a fight in Congress – would save at least $4 billion per year.

To read the complete editorial, visit The Miami Herald.