Weekly Column: Best Student Loan Repayment Plan Is A Job

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Bachelor's degree recipients graduating with debt had an average burden of $27,204, according to a recent analysis done using Department of Education data. That average has sky-rocketed from just $17,646 over the past decade.

The cost of obtaining a college education is on the rise, as is the number of students who must use some sort of student loan to help pay for school. While older generations might have been able to pay for college as they studied, the cost of an education today makes that extremely difficult. Now most students can look forward to years of slowly paying off their education after graduation. As one who is working on finishing my bachelor degree I understand firsthand the sticker shock associated with school. (Although it is important to note that an education in South Dakota is much more affordable than many other states.)

Recently President Obama announced a new plan he claims would significantly help lower student loan payments. While he claims the plan could lower payments by "hundreds of dollars per month," other independent analysts calculate that only about 16% of loan holders can take advantage of the consolidation incentive and end up saving between $4.50 and $7.75 per month. Another part of the plan would reduce the cap on monthly loan payments from 15% to 10% of discretionary income and change the date upon which the federal government will forgive the outstanding balance of the loan from 25 years to 20 years. According to the materials provided directly from the White House, only 1.6 million students will benefit from this program next year -- that's just 4% of the nation's student loan holders.

President Obama is right to be concerned about how recent and future graduates will be able to pay off their education but his plan fails to make the grade. The best loan repayment plan we can provide college graduates is ensuring they have the ability to find a decent job. Nibbling around the edges of loan programs is simply missing the forest for the trees. We need a strong, vibrant private sector that isn't worried about the threat of some new tax or regulation lurking around the corner. We need small, and larger, businesses to be optimistic about their future growth here in the U.S. and looking to expand their workforce with smart graduates.

One thing President Obama could do right now is reconsider his support for the government takeover of student loans. As of July 1, 2010, private sector and state-based lenders are no longer allowed to make Federal Family Education Loan (FFEL) loans to students leaving only the federal government itself as the primary lender to students. This had a direct impact on jobs in South Dakota, where we once had a vibrant private student loan industry. Regardless, it is imperative that policy makers focus on strengthening our economy not only for those who are currently unemployed but also those future graduates who will soon need to begin repaying their student loans.

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