Clinton student loan plan would addle a college grad


May 07, 1993|By ROGER SIMON

Let's say somebody owed you a thousand bucks and would not pay it back.

The deadbeat wasn't poor -- he had a job and enough money to buy compact discs and go to movies -- he just didn't feel like paying.

You had tried appealing to his better nature. You had threatened him. You had tried legal means. But nothing worked.

So you got an idea.

"What if I give you $1,000," you tell the deadbeat. "Will you pay me back $1,000 then?"

The deadbeat thinks about it for a moment. "Yeah, OK," he says.

This is the essence of Bill Clinton's new student loan/national service plan.

I am being a little unfair: Students would have to do some work of a public-spirited nature. But they would get a salary for that.

In addition to that salary, however, they would get $5,000 a year to repay government college loans.

In other words, the government would give them part of the money to pay the government back.

As goofy as this sounds, it may be better than the current system.

Currently students borrow money from banks and the government guarantees the loans. When the students default, the government pays the banks.

This costs U.S. taxpayers about $3 billion per year.

Clinton promises that his new plan will give students more, but also be more vigorous in collecting what they owe.

"We'll make it easier to borrow money and much easier to pay it off," Clinton told a college audience on April 30, "but this time you have to pay it off. You can't just default on the loan."

Right. Say what you want about the college graduates of today, they are smart enough to find a way around any system if the reward is great enough.

And some students think that because colleges charge so much, the students are getting ripped off and therefore don't have a real obligation to pay the money back.

The average cost of tuition at public universities in this country is currently about $7,600 per year. At private universities, it is about $16,300.

"It's no secret that over the last 10 or 12 years, the cost of a LTC college education is about the only essential thing that's gone up even more rapidly than health care costs," Clinton said.

I wanted to find a recent college graduate who was not paying back his or her loans. It was not difficult.

Leah grew up in Maryland and attended the University of Chicago because she didn't think the University of Maryland, though cheaper, would give her the kind of education she wanted.

Schooling in Chicago cost around $15,000 per year, not including living expenses. She graduated in 1989 and now owes about $12,000.

She is supposed to be paying $175 per month on her loans, but currently she is paying nothing.

"I paid for about the first six months, but that was with the help of my parents," she said. "Then I started falling behind in my payments. I lost my job and got a deferment for being unemployed."

Leah found a new job, but has lied to the loan agency and told it she is still unemployed.

"I am just feeling overwhelmed by my financial commitments," she told me. "I don't even conceive of how I am going to pay my loan back."

Leah makes around $30,000 a year, which is far above the median income in this country, but finds this does not go very far.

"I don't really own anything," she said. "I supposed they could take away my black-and-white TV. I don't own a car. I don't have credit cards. I am not living a lavish lifestyle. I just cannot afford to repay these loans."

I asked her if she worries about getting caught.

"My main fear of not paying these loans and, in fact, lying about them is that it will hurt my credit rating later on if I have to buy a home or a car," she said.

She has heard about the Clinton plan and, in general, likes the idea, though she sees one drawback.

"It would further encourage universities to drive up tuition charges artificially," she said.

Some would look at Leah and see her degree from a prestigious university and her $30,000-a-year job and figure she is a member of America's privileged class.

Leah takes a look at the high cost of college and the large amount of her loan and sees it differently.

"I am," she said, "the modern-day indentured servant."

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