Millions of student loans could be headed for a shakeup in coming months as Congress looks to remake the entire business. However, the American Enterprise Institute's Preston Cooper believes the government should get out of the student loan business altogether.
“It's no surprise that with so little private sector involvement, we're seeing costs go up like crazy, we're seeing students being tricked into going to poor quality schools, we're seeing emensely high default rates, about one in four undergraduate borrowers are projected to default,” he says.
Cooper says Congress could at leat make loan forgiveness more fair.
“If you borrow more and you're already on track to receive forgiveness, you're just going to get more foregiveness,” he says. “Whereas the people who might be financing more of it with savings or through work, they're not going to benefit from that because they will probably pay off the balance of their loans before they get foregiveness.”
Kevin Fudge, manager of government relations and community affairs with American Student Assistance, likes the idea of a employer contributions.
“Employers get a tax credit for providing a repayment option as an employee benefit for employees, and any sort of involvement by the private sector helps because it is a multifaceted solution,” he says.
Congress also is looking at possibly eliminating the PLUS program, or Parent Loan for Undergraduate Students.
“It really highlights the need for people to pay attention to the fine print,” says Fudge. “If they're taking out a loan, that means understanding what the interest rate is, understanding what their repayment options are, understanding they may not necessarily need to borrow the full amount.”