Everyone knows there is a problem with student debt, yet the only solution you here is for President Biden to cancel a certain dollar amount of the debt for each student. This is only a band aid approach. Some issues going forward are, what do we do with the portion that isn’t cancelled and how do we allow borrowing for future students to be an option to pay for college for those that need it.
Historically I try to come up with alternate solutions our country faces and so I have packaged some thoughts to address the present and the future.
This may or may not be the exact answer we need, yet as always there is flexibility built into my ideas.
This is a three part approach for the current debt and then what to do going forward.
First I am going to say a certain amount of the loans will need to be cancelled. How much is the question. For right now I am not going to suggest an amount because that is dependent on two other factors and the first one is the next step.
This is the hardest step, not because it isn’t feasible or the logistics of it can’t be done. The hard part is getting a certain group of people to agree and then accept they need to act. I am talking about the colleges that have trust or endowment or any other types of funds, use a portion of each of their funds to make a one time payment towards the debt of students that attended their university. Trust fund managers are not the type of people who like to give money away and the boards of these universities are not inclined to accept they have a responsibility towards some of the debts their students incurred. This managing the public pressure and finding a way to induce government pressure will be needed. Their participation in this program is needed. And I think should be required. How do we get to the required is a sticky endeavor. I do feel their goal would be to help their students so eventually the students give back when able.
Lets say we get some buy in, then we need to determine that a percentage of the existing trust fund balances would be peeled off and split among the students that attended each university equally and not dependent on the size of the debt.
A simple example and of course this can be adjusted once realistic numbers come into play. So each trust fund sets aside 20% of their total balance and for a period of time students with debt sign up. Once the number of students have signed up then you do the simple math, so if the trust fund is a billion, then 20% is 200 million and if 100,00 students sign up then $2,000 would be paid off for each student. Again this is just an example and is only part of the solution. This would include all loans including loans parents took out. And as time goes on there is a second step Trust funds would have to contribute
Add in what the government cancels and maybe you can get to a reasonable reduction of debt for many students.
The third step is for the present and for the future.
And as we resolve reducing the current dollar amount in debt we need to help people going forward and as a conservative I am anathema to saying this, but we need a one stop financial center probably similar to the social security system where the money is managed by government agency, but kept apart from the government budget. Basically I am saying we consolidate all of the non private student loans into one organization and charge a very minimal interest rate basically to pay the administrative costs, not interest used to make a profit. And when I say minimal rate, I mean one percent give or take. Again this is for administrative purposes only. This allows people to pay down the rest of their debt timely and quickly if possible. It is the interest rates that grow the debt so if we remove most of that issue then people will be able to make payments that actually reduce the amount they owe.
And we also have a charge on the income of the above mentioned university trust or endowment funds, and it will not be a cumbersome amount to help fund the loan fund above. Why you ask, because this same administrative organization for paying back debt would now be in charge of loaning money to students through FASFA or something similar. Eventually the money paid back to the fund becomes the source for new loans and add in a small amount each year from the universities and now student loans become affordable with ongoing minimal interest. The universities benefit because students have another manageable resource and students benefit because basically they are only paying back the cost of their education not continuing interest fees.
In the end we have one resource for all student loans, not motivated by profit and the current student debt is reduced in a one time paydown and the remainder becomes manageable debt because 99% of each payment goes to the actual debt.
The math is all for example, but you can understand the gist of the idea and play around with it to make it work.
Just a thought since no one else seems to have one.
Cheers
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