By Paul Atkinson
Student loans are a growing financial concern for many individuals, with ripple effects slowing economic growth throughout the country.
Student loan defaults surged in the first three months of 2013, while efforts to collect bad loans are faltering, according to credit analysts and government audits. It is the latest twist in a college debt crisis that is hanging over recent graduates and dragging on the broader economy.
Sen. Kirsten E. Gillibrand, D-N.Y., has announced her Federal Student Loan Refinancing Act, a bill that would lower interest rates for many student borrowers repaying their federal student loans.
Gillibrand’s bill is the first recognition that student loan debt is a major national problem. We applaud this intervention, and seek additional, ongoing funding for student loan counseling.
Due to the complexity of the student loan market and options available during repayment, many individuals with student loans feel overwhelmed and have no place to turn for help.
Credit rating firm Equifax said $3.5 billion in government and private student loans went bad in the first three months of 2013, the most since the company began keeping track. The U.S. Department of Education said 6.8 million federal student loan borrowers are in default, representing $85 billion in debt.
In addition to loan borrowers who are in default, nearly 7 million consumers are significantly behind on their student loan payments. Gillibrand’s bill presents a viable solution for millions of debt-saddled borrowers.
Consumer Credit Counseling Service of Buffalo encourages adoption of Gillibrand’s bill and seeks more assistance from the federal level. Given that the federal government allocates funding for home ownership and foreclosure and bankruptcy counseling, the government should respond accordingly to the student loan crisis by funding student loan counseling programs.
In these programs, certified financial counselors:
• Evaluate student loan debt.
• Explore options including deferments, forbearances, alternative repayment plans and consolidation loans.
• Assist in applying for the appropriate option.
• Assist in communicating with the lender, as needed.
• Review credit score, credit report and living expenses.
With average student loan debt upon graduation at $25,000, many people will find relief through counseling programs. It is time for the government to do its part.
Paul Atkinson is president and CEO of Consumer Credit Counseling Service of Buffalo.