Kara McGuire writes about all things related to personal finance. Follow our coupon clipping, retirement saving, bargain hunting, budget mama as she saves, spends and searches for ways to keep more money in her wallet – and yours.

Is the problem really student loan debt?

Posted by: Kara McGuire under Debt, Paying for college Updated: October 27, 2011 - 12:05 PM

President Obama’s plan to ease student debt by capping payments at 10 percent of discretionary income and forgiving loans after 20 years of payments is expected to benefit unemployed, or low-paid Americans struggling to repay student loans.

That same day, the Consumer Financial Protection Bureau visited the University of Minnesota and announced the latest piece of its “Know Before You Owe” project — designed to help borrowers understand the student loans and mortgages they are committing to repay.

The agency introduced a one-page student loan disclosure sheet that would outline the costs of college before you send in your first tuition payment and is asking for comments. There is also a repayment assistant tool to help borrowers understand the various options for repaying student loans. Both are available at consumerfinance.gov.

In his remarks at the University, the Consumer Financial Protection Bureau’s Raj Date admits that transparency alone won’t solve the problem of rising college costs, but it’s a big step.

Sam Glover, a Minneapolis consumer attorney writing for the Consumer Law and Policy blog sponsored by consumer advocacy group Public Citizen, wonders, “To what end?

Is the goal to deter people from getting higher education? Because disclosures are as likely to deter students from taking out loans as the threat of prison time is likely to deter a thief from robbing a bank. Neither expects to get caught — the student by unemployment (or underemployment), and the thief by the police.

That is probably a good thing. We want an educated citizenry. We just can’t afford one at current prices.

The real issue lying at the heart of the student loan problem is this: Americans have been overpaying for higher education. There’s plenty more to education than job training, but it’s also true that if we can’t pay back our student loans, our education isn’t worth what it cost.

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