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Student Loans Aren’t Going Away, but They Could Be Improved

This past fall, Occupy Wall Street protesters announced a “student-debt refusal” campaign, in which participants would stop paying their loans once a million people had signed up to do so. Meanwhile, a petition, which calls on the government to forgive Americans’ student-loan debt, has some 660,000 signatures.

Neither of those approaches is particularly practical, according to Mark Kantrowitz, the student-aid expert behind the Web sites FinAid and Fastweb. In a column for the National Association of Student Financial Aid Administrators’s Web site, Mr. Kantrowitz writes that refusing to repay loans will hurt borrowers more than the government or other lenders, and that mass loan forgiveness is not the best way to stimulate the economy.

Still, Mr. Kantrowitz writes, the protesters and petition signatories have a point:

“Many of the protesters claim high levels of education debt and difficulty getting jobs,” he writes. “Unemployment rates won’t drop to pre-credit crisis norms for at least four more years, assuming the current economic downturn follows the pattern of previous recessions. But even after the economy recovers, the debt will continue. There are also ever-increasing numbers of students graduating with excessive debt each year, due to a failure of grants to keep pace with increases in college costs, inadequate counseling, and some students blindly following their dreams without contemplating the consequences of too much debt.”

There is no easy fix to this problem, but Mr. Kantrowitz suggests several things Congress and colleges could do to help. For example, he says the government should let student loans be discharged in bankruptcy and make the improved income-based repayment plan available to all borrowers, while colleges should require students to go through financial-literacy training.

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