A Real Education

For several years now - even before she was elected to the U.S. Senate from Massachusetts - Elizabeth Warren has been one of our favorite policy wonks,  for a whole host of reasons.

As the children and grandchildren of a few our friends graduate college this month, Sen. Warren and a few others on Capitol Hill are looking to help them - and us - with a huge and growing problem nobody wants left on their doorstep.

While the economy continues improving, and college grads are faring surprisingly well in the job market - as they did even through the great recession - the facts are still fairly brutal. As Brad Plumer of Wonkblog pointed out recently, if your child didn't get a post-secondary education, the economy isn't getting any better.

Even for hundreds of thousands of recent college graduates, the promise that a higher education would lead to higher wages and a better life has proven to be false, a version of the American social contract that our nation has broken, leaving thousands of people - if not millions - with piles of college debt and no way to pay it back.

So it was with great excitement Wednesday, that we watched Senator Elizabeth Warren present her first official bill, an idea that might allow more Americans to finish college without those piles of debt, while repairing the credibility of America's social contract.

Senator Warren is not alone. The Consumer Financial Protection Bureau, and even The Seventh U.S. Circuit Court of Appeals also appear to be ready to give some of the banks behind the student loan squeeze a real education in ethical financial practices.

The CFPB - the government organization Sen. Warren helped to start - also issued a group of proposals Wednesday, designed to help the millions of Americans being buried by private student loan debt. In short, the CFPB loan plans would force the private banks and institutions that lend money to students to be more flexible with their repayment plans. Further, the CFPB's new proposals also push the banks and bank regulators towards new industry reforms.

That's where Sen. Warren's bill comes into play. Warren, proposing her bill on the floor of the Senate, made herself clear, stating that students who get government subsidized student loans should get the same extremely low discount rate banks get from the Federal Reserve. That's currently around 0.75%, instead of the approximately 7% rate students and grads are hit with now.

The Seventh U.S. Circuit Court of Appeals has also begun attacking the problem, with its recent decision in April. The Court's decision effectively forces back the draconian standard passed in 1976, when student loans were disallowed from being discharged under the bankruptcy code. In short, the court seems to have found their initial restriction to be ridiculous, which may finally open back up the ability - under limited circumstances - for graduates to be able to get rid of their outstanding student debt through bankruptcy.

The combination of the three actions, if enacted and used in other bankruptcy cases, might actually force Wall Street and other banks to stop preying on college graduates and start treating them like the adults they are.

All of which will likely get those same young people out of their parent's houses and onto their own path forward in life significantly faster.