The Real Holders of Student Debt and Why Richard Sanders' Plan Falls Short
The ongoing debate around student debt revolves around who is ultimately responsible for the financial burden faced by students and graduates. Richard Sanders has proposed a plan to reduce the profit on student loans, but the details of his plan and its feasibility are questionable. Let's explore who is holding the student debt, and why Richard Sanders' approach may not be the best solution.
Who Holds the Student Debt?
Contrary to popular belief, the student debt is not solely held by individual borrowers. Various entities from the federal government to banks share the responsibility. Many student loans are actually held by government-established 'private' lending entities that are quasi-governmental in nature, and these loans are backed by the US government. In the event of a default, the US government pays the entities, thus ultimately putting the burden on the American taxpayers.
According to projections, nearly 40% of student loans are projected to end in default, with another large percentage being covered by government programs such as forbearance and elimination. This means that regardless of Sanders' plan, the American taxpayer remains the ultimate recipient of the financial burden.
Richard Sanders' Proposed Solution
Richard Sanders' plan to reduce the profit on student loans is well-intentioned but lacks practicality. His approach to fixing the student debt crisis hinges on voiding loan agreements or having the US government buy all of these loans before any forgiveness can be implemented. Both these methods come with significant legal and political challenges.
The first method, voiding loan agreements, involves a long legal battle with the Constitutional prohibition against 'illegal seizure' of private property as a sticking point. This could be a major obstacle in implementing Sanders' plan. The second method, involving a budget spending change, would need the approval of Congress, and with the current political climate, such an approval is highly questionable.
Furthermore, it's worth noting that the vast majority of those who have taken out student loans have been relatively unsophisticated in their borrowing practices. This is often a result of the student loan process being overly complicated and opaque, leading many students to take on debt without fully understanding the implications. This makes the situation even more complex and underscores the need for a comprehensive and practical solution.
The Role of Community Colleges
Another factor to consider is the availability and effectiveness of community colleges. Community colleges offer a low-cost alternative to traditional four-year universities, and their purpose is to serve as stepping stones for students seeking higher education. By utilizing community colleges, students can often start their education at a lower cost, which can reduce the overall debt burden significantly.
Furthermore, community colleges can provide valuable skills and education that can be directly applied to the job market, helping students to start their careers sooner and potentially reducing the need for large amounts of student debt in the first place.
Conclusion
In conclusion, the student debt crisis is complex, with various entities holding the debt and the ultimate burden falling on the American taxpayer. While Richard Sanders' desire to address this issue is commendable, his proposed solution lacks practicality and may face significant legal and political obstacles. A more comprehensive and practical approach, including the effective use of community colleges, may be more effective in addressing the student debt crisis.