Forum: In recession, people can't afford student loans

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The government must intervene now to prevent more young people from defaulting on their student loans. With high unemployment, few job opportunities and rising tuition rates, people cannot afford to pay for their education. Educational opportunity was supposed to be a way up and a way out for millions of poor and working-class Americans.

But their education has become an albatross around their neck, as they are saddled with thousands upon thousands of dollars in debt.

According to new figures recently released by the Department of Education, 12 percent of borrowers who began repaying their federal student loans in fiscal year 2007 already have defaulted - an increase from 9.2 percent the previous year.

Because limits on federal student loan borrowing did not keep up with the rising costs of college over the years - and the limits were only recently increased by Congress - private lending has skyrocketed.

In the 2007-08 school year, students borrowed $19 billion in private loans, a sixfold increase over a decade earlier, according to the College Board.

During that time, the lucrative student loan market more than doubled, from $41 billion to $85 billion. Over the past decade, private loans jumped from 7 percent of all student loans to 23 percent. These private loans often have exorbitant and variable interest rates, highly punitive late fees and charges, and are based on the borrower's credit rating rather than his or her need.

The unregulated private loan industry, much like the unscrupulous and predatory subprime mortgage market, exploits borrowers with an expensive, deceptive and unfair product.

In a 2008 study, the Boston-based National Consumer Center concluded that some private student loans are so expensive, they are destined to fail.

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