Student loans are an important aid for those attending college, and many students depend on them in order to attain higher education. Because of this, a startling trend has emerged.

In September 2011, the Department of Education released a statement expressing the default rates for student loans for fiscal year 2009:

“The U.S. Department of Education today released the official FY 2009 national student loan cohort default rate, which has risen to 8.8 percent, up from 7.0 percent in fiscal year 2008. The cohort default rates increased for all sectors: from 6.0 percent to 7.2 percent for public institutions, from 4.0 percent to 4.6 percent for private institutions, and from 11.6 percent to 15 percent at for-profit schools.”

Federal education assistance programs are abused at all levels, but the most notably at the institutional level, where students are allowed (granted, by federal authority) to borrow far more money than needed for tuition.  As a result, many students claim refunds in excess of six thousand dollars off of a refund check.  Considering the national graduation rate is stagnant despite climbing enrollment rates, the debt continues to increase among those who choose not to graduate.

Students who receive grants and scholarships are particularly guilty.  Many of them have begun, in a lot of cases, to use grants and scholarships to pay their tuition and then take on federally backed loans to use as spending money.  In fact, the loans are promoted by the government in the form of tuition “assistance” packages.  In other words, the government is encouraging students to take on unnecessary debt.

The government is bleeding money through the student loan system. With more and more students returning to school due to the current recession, it is getting worse.

Government should be working towards a solution, but instead the Obama Administration is doing the exact opposite. President Obama used — or some might say abused — his executive powers to revamp the student loan program and allow students to refinance at a lower rate.  This move made it easier for students to acquire more debt; more debt equals more dependency.

A very simple solution could curb this disturbing trend.  If the government would implement a cap on refund checks at one thousand dollars, this would allow students enough money to pay for books and small incidentals, while decreasing the amount of student loan debt that they could acquire.  A cap would also keep people from entering college to buy cars and televisions, as I have personally seen.  The average student loan debt carried by a college graduate is over twenty-five grand.

The amount of federal aid that a college receives should be tied to their graduation rates — nothing else.  The New York Times submitted a report entitled Sublime Opportunity, in which the Education Trust found that “in 2008, only 22 percent of the first-time, full-time bachelor’s degree students enrolled in for-profit colleges graduate within six years, compared with 55 percent at public institutions and 65 percent at private non-profit colleges.”

USA Today recently reported that for-profit schools, such as trade schools and online colleges, accounted for over half of all student loan defaults belonging to students. In fact, the same report showed that the University of Phoenix receives eighty-eight percent of its total revenue from federal student loan programs.  Oddly enough, students attending these types of institutions only make up about 10% of higher education students nationwide.  For-profit schools must be held to higher standards or risk having their federal aid privileges revoked.

In the previously mentioned article, USA Today projects that student loans will top 1 trillion dollars this year. In order to begin reversing the economic crisis, we must stop allowing the abuse of student loans while decreasing our dependency not only the Department of Education, but also on debt.  With the current dire financial situation in the United States, we cannot allow these abuses to take place.

Mark Mayberry // University of Tennessee at Chattanooga // @MarkMayberry85