LETTER: The student loan problem

In response to Megan McArdle’s Sunday commentary about the national debt, “America’s most boring nightmare”:

I have for some time been suggesting to dozens of federal politicians a way of dealing with a “small” portion of the national debt, specifically the student loan deficit of approximately $1.8 trillion. My proposal is to retroactively reduce the interest rate on all student loans to 1 percent from the current 3.1 percent to 8.1 percent. This would immediately reduce everybody’s balances and very likely increase the amount of student loans that are paid back rather than written off. Because after 10, 20, or 25 years of making minimal monthly payments based on 10 percent of net income, many of these loans are written off, thereby increasing the deficit.

Doing this would not incur losses to the government nor write off any student loans. Accountants agree this would instead be a reduction of expected income rather than a write-off, like a bank choosing to lower an individual’s mortgage rate. The bank still earns money, just not as much, although the analogy is that the government would not be writing off as much as it used to. Why is Congress charging students so much that it creates this huge student loan deficit? Shouldn’t the intent of the program be to help students and not coincidentally create a huge deficit?

This should be a bipartisan effort as it has something for both parties, i.e. easing of student loan debt and reduction of the student loan deficit. But sadly, there has been virtually zero response from said politicians.