Monday, Jun. 02, 2008

Shoring up student loans good move for government

The nation's credit crisis is rippling through most of the economy, shrinking savings and triggering foreclosures.

But as sad as it is to see others lose what they've worked so hard to acquire, it's even more depressing to see someone miss out on a brighter future.

That would have happened to more young people if the federal government hadn't stepped in to help out student loan companies, which were threatening to cease issuing new loans.

With the soaring costs of college tuition, it seems students are more and more dependent on loans to see them through to a higher education.

Average tuition costs for a four-year university, depending on whether it's public or private, range from $5,000 to $20,000.

That's the average. The cost of an elite institution can run much, much more. And those figures don't include food, rent, books or any other of life's necessities.

The most recent government figures, which are years out of date, show that the average student loan debt for a college graduate is about $20,000 by the time he or she dons a cap and gown.

While that debt may seem like a scary thing to face as the newly minted grad steps into the real world, the prospect of giving up on educational goals for lack of funds is even more frightening.

Many student loan companies have all kinds of plans to ease the borrower into payments he or she can afford, even offering deferment periods.

When lenders like Sallie Mae began to feel the effect of our current economic crisis, they said they needed help from the government to keep the federal student loan program afloat, putting the educational fate of thousands of college students in jeopardy.

These federal loans, with low interest rates and gracious repayment options, are key for many students. Private loans can be had, but are not as consumer focused or student friendly.

The federal government will buy some existing loans from lenders, providing much-needed capital for them to make new loans.

A fee of $75 per loan would be paid to lenders for administrative costs, and the loans would be purchased at face value, plus loan origination fees and interest. The government will also invest in loan pools, to open up more capital for lenders.

Education Secretary Margaret Spellings said "We want students to be able to concentrate on their studies rather than worry about disruptions in the student loan market and whether they will be able to obtain federal loans to help pay for school."

We couldn't agree more. The federal government has a direct stake in the education of the residents of this nation. Higher education is critical to a strong nation.

And while many other industries may suffer during these tough economic times, our country's future -- and its future leaders -- should not.

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