Americans now owe more in student loans than in credit cards. While consumer advocates were pushing for credit card reform, lenders managed to get hefty subsidies and guarantees, made student loans non-dischargeable in bankruptcy, and started handing out piles of cash to anyone with a high school diploma.
This played an important part in the inflation of the cost of education because, hey, you can pay for it with those piles of cash. But how much good is an educated workforce that is saddled with mountains of debt and that can't work because there aren't any jobs?
Today in Minneapolis, the Consumer Financial Protection Bureau's Raj Date launched the CFPB's "Know Before You Owe" for student loans and outlined how the CFPB will take on student loans. First, the CFPB has published a model student loan disclosure sheet (PDF) for colleges to use. Current students can also visit the CFPB's website to find out more about student loan repayment options. Date said the CFPB would also work to bring transparency to the student loan sector.
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.
The CFPB doesn't have the authority to regulate schools (nor should it, really), so the best it can do is try to make sure students know what they are getting into when they finance an education. But that won't strike anywhere near the heart of the problem.