The student loan system is broken, and we need new ideas for fixing it.
Student debt now totals more than $1 trillion, and students are borrowing some $113 billion a year. With this year’s college graduates owing $32,500 on average, these debts threaten to be dead weights on their financial futures.
The nation is moving toward a mobile information and transaction paradigm, with purchases and payments online. Students bank electronically, shop electronically and study electronically. They should be able to repay their loans electronically, especially the large percentage of borrowers who are non-banked or under-banked.
The Obama administration is starting to make student loans more transparent and repayment more affordable. The new online “scorecard” measures colleges based on tuition, graduation rates, debt levels and graduates’ earnings. The Department of Education is reaching out to struggling borrowers, informing them of their options. The Consumer Financial Protection Bureau is scrutinizing the largest loan servicers. And Congress is holding hearings on the student debt crisis.
Still, we need to do more to consumerize and democratize student lending practices. As the founder of a company that has helped more than 2 million current and former students to avoid delinquency and default, and talks to students daily about their financial situations — and as a parent who has put children through college — I have offered federal policymakers new ideas that are Web based, user friendly and money saving.
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