Though it sounds like an impressive step on the surface of things, college and university programs aimed at increasing student loan literacy seem little more than a smoke screen. Colleges are the ones driving tuition sky-high. If they really wanted to help their students avoid increasing debt, and subsequent default, wouldn’t tuition be the place to start?
That said, perhaps it’s asking too much to expect any organization to actively limit its income, particularly when rising tuition is an industry-wide standard. Isn’t that why student loan debt now exceeds credit card debt for the first time in U.S. history? So it could be argued that student loan literacy programs are something to celebrated — at least colleges and universities are doing something. On the other hand, just how effective and respected can these programs be when the very organization offering the solution is the same organization creating the problem?
As I blogged back in August, there are really only three ways to get student loan debt in check:
1) Restore the possibility for including student loan debt in bankruptcy filings. This is not to encourage the realization of that, but to encourage the Department of Education to better protect the interests of students over that of lenders. As it turns out, lenders (the federal government included) make more off student loan defaults than they do off of loans in good standing. But if students have the option of filing bankruptcy (i.e., meaning lenders get nothing), the Department of Education is more likely to help ensure students get their loans paid on time.
2) Set a limit on student loan lending. Since students can theoretically borrow an unlimited amount of funds for school, colleges are following suit by raising the cost of tuition every year, double and even triple the rate of inflation.
3) Since the job of the Department of Education is to protect the interests of students, clearly it needs a good going-over.
What do you think? Are college and university student loan literacy programs a step in the right direction or do they just encourage the problem to grow behind a thin smoke screen of a solution?