Student loans m ay be issue in pr esidential r ace

By BARTHOLOMEW SULLI VAN - Scr ipps How ar d New s Ser v ice Fir st Post ed: Januar y 13 , 20 12 - 9 : 2 2 am Last Updat ed: Januar y 13 , 20 12 - 9 : 2 2 am

Ou t st andin g st u den t loan debt - - w h ich exceeds $ 1 t rillion , m ore t h an w h at Am erican s ow e on cr edit car ds - - is lik ely t o be a m aj or polit ical issu e t his elect ion y ear as st u dent s an d t h eir par ent s qu est ion t h e r isin g cost and value of a college edu cat ion . I n Occu py Wall St r eet en cam pm ent s ar ou n d t h e cou nt r y , som e are dem andin g t h at t h e law be changed so st udent debt cou ld be disch ar ged - - er ased - - in ban k r u pt cy pr oceedin gs. Ot her s ar e lobby ing for st at es t o incr ease su bsidies and low er t uit ion at st at e sch ools. The r at e of defau lt s r ose fr om 7 per cen t in 2 0 0 8 t o 8 .8 percen t in 2 0 0 9 , t h e lat est official figu r es av ailable. Th at 's 3 2 0 ,1 9 4 of t he 3. 6 m illion people w h o began r epaym ent t h at y ear, accordin g t o t he U.S. Depar t m ent of Educat ion. " Th is m ay becom e t h e fir st elect ion in m oder n h ist ory w h ere high er edu cat ion r ises t o t h e lev el of being one of t h e t op h alf- dozen issu es," said Rich ar d Vedder , an econ om ist and sch olar at t h e con ser v at iv e Am er ican En t er pr ise I n st it u t e an d au t h or of " Going Br ok e By Degr ee: Wh y College Cost s Too Mu ch." Most year s, only 5 per cen t or 6 per cen t of t h e U.S. populat ion is in college, Vedder n ot ed, m ak ing high er educat ion a " back - bur ner " cam paign issue. Bu t m any st uden t s ar e com in g ou t of college deeply in debt in a falt er in g econ om y w it h few good en t r y - lev el j obs. St uden t loan debt fu eled on e of t he fir st an d lou dest com plain t s as t h e Occupy Wall St r eet m ov em en t m ush r oom ed last y ear. Tw o of t h e can didat es seek ing t he GOP pr esident ial n om inat ion answ er ed quest ion s abou t m ak ing college m or e affor dable du rin g a Novem ber debat e at Oak lan d Univ er sit y in Roch est er , Min n .: - - Rep. Ron Pau l en cour aged get t in g " r id of t he loan progr am s," callin g t h em a " t ot al failu r e. " - - For m er House Speak er New t Gin gr ich said t h at w it h t he cur ren t loan pr ogr am s, st u dent s " st ay in college longer because t hey don 't see t he cost ." I nst ead, h e r ecom m en ded t h e approach of t he College of t he Ozar k s, a Missour i sch ool t hat doesn 't offer loan s bu t pr ov ides w or k - st u dy opt ions. He said it w ou ld be " cu lt ur e sh ock for t he st u den t s of Am er ica t o lear n w e act u ally ex pect t h em t o go t o class, st u dy , get out quick ly , ch ar ge as lit t le as possible an d em er ge debt fr ee by doin g t h e r ight t h ings for fou r year s." For Un iv er sit y of Pit t sbu r gh English pr ofessor William D. Scot t , w ho spen t a r ecent sabbat ical leave as a libr ar ian at t he People's Libr ary at Occu py Wall St r eet in low er Manh at t an , fin an cial aid dr ives up edu cat ion cost s. Sa llie M a e , w h ich h old s b illion s of d o lla r s in st u d e n t d e b t , su p p or t s r e f or m s t o d isch a r g e su ch d e b t in b a n k r u p t cy " f or t h ose w h o h a v e m a d e a g oo d - f a it h e f f or t t o r e p a y ... o v e r a f iv e - t o se v e n - y e a r p e r iod a n d st ill e x p e r ie n ce f in a n cia l d if f icu lt y ," sa id Pa t r icia Cr ist e l, a sp ok e sw om a n f or t h e com p a n y . " Sch ools k eep r aisin g t h eir t u it ions becau se t h ey k now t h eir st uden t s h av e easy access t o t h ese st u den t loan s," Scot t said. " I t 's alm ost becom e a t y pe of pr edat or y len din g." Scot t cont ends debt st r esses j obseek er s so m u ch t hat t h ey set t le for any t h in g, ev en dead- end j obs u n r elat ed t o t heir st u dies, and t hat t h is h ar m s societ y as a w hole.

" You can 't m iss a pay m en t or be lat e on a pay m en t ( becau se) y ou r cr edibilit y as a cit izen is lin k ed n ow t o y ou r cr edit scor e," he said. " I f y ou w ant t o h av e an y kin d of life aft er t h is, y ou h ave t o en sur e y ou pay t h ese loan s off." Those w h o default ar e ev en m or e m ar gin alized. Gr een Par t y act iv ist Mar ia Allw ine of Balt im or e said h er hu sban d, Rich ar d Allw in e, r ack ed u p $ 1 7 ,0 0 0 in loans for an I n dian a Univ er sit y m u sic m ast er 's degr ee he didn't finish . Now h e faces a $ 7 9, 93 5 bill fr om a collect ion agen cy , inclu ding un paid in t er est ch ar ges an d fees. Wh en h e t r ied t o get t h e debt disch ar ged in ban k ru pt cy , h e fou n d t h e law pr ohibit ed it . Ever y t h ing t he couple ow ns is in her n am e t o pr ev ent seizu r e by cr edit or s. The sit uat ion pr om pt ed Allw in e t o j oin Occu py Wash in gt on, D.C., in Oct ober . " I t 's u sur y, " sh e said. " I t 's un j ust . I t 's out rageou s." Alan Collin ge h as an aer ospace engin eer in g degr ee fr om t h e Univ er sit y of Sou t h er n Califor n ia, w h er e he t ook ou t loans t ot alin g $ 3 8 ,0 0 0. Now h e h as a debt " n or t h of $1 5 0 ,0 0 0 " an d fu ll- t im e, u n paid w or k r u n nin g St uden t Loan Ju st ice.or g, w hich h e fou n ded in 2 0 0 5 . I t adv ocat es for st u den t debt t o be t r eat ed lik e credit car d debt , w h ich can be er ased in bank r upt cy . The Obam a adm inist r at ion last fall pr oposed lim it in g loan r epay m en t t o no m or e t h an 1 0 per cent of a st u dent 's in com e for 2 0 y ear s an d for givin g any r em ainin g balance, a ch ange fr om t he cur ren t 1 5 per cent of in com e ov er 25 year s. A bill pendin g in Con gr ess w ould u n do a 20 0 5 ch an ge in t h e bank r upt cy code t hat pr ohibit s pr iv at e st uden t loan debt fr om bein g er ased in bank r upt cy . I t s sponsor , Rep. St ev e Coh en, D- Ten n., doesn 't see it goin g any w h er e t h is y ear w it h a Repu blican- dom in at ed Hou se, bu t say s it is gain ing nat ional at t en t ion. Sallie Mae, w h ich holds billion s of dollar s in st u dent debt , su pport s r efor m s t o dischar ge su ch debt in bank r upt cy " for t h ose w h o h av e m ade a good- fait h effor t t o r epay ... over a fiv e- t o sev en - y ear period and st ill ex per ien ce fin an cial difficult y," said Pat r icia Cr ist el, a spok esw om an for t he com pan y. Sallie Mae w or ks w it h cu st om er s t o help t h em " nav igat e difficult fin an cial cir cu m st an ces," Cr ist el said. But , she added, " The v ast m aj or it y of st u den t loan cu st om er s ar e su ccessfully m eet ing t h eir obligat ion s." ( Reach Bar t h olom ew Sulliv an at su lliv anb( at ) shn s.com .)