Adjust the balance of debt and education

You don't have to be in college, or have a child who is, to realize that the student loan crisis is close to a tipping point. In 2004, the average loan burden of graduates, $17,600, nearly matched the maximum that undergraduates are allowed to borrow from the federal loan program over four years.

In the student-loan industry's own estimate, 39 percent of student borrowers have an unmanageable debt burden after college. That figure includes 55 percent of blacks and 58 percent of Hispanics.

For hundreds of young people across the country whom I have interviewed over the past two years, unmanageable debt burden has a specific meaning. Before they ever get to college, it means downsizing their choice from a public university to a regional state college, to a community college, or a trade school. While they're in school, it means working more hours (an average of 30.5 per week), going to school part time, and being more likely to drop out. About half of those who start at a four-year college don't finish within six years. Debt burden is a major risk factor for persistence.

If they do manage to graduate, it means putting off buying a house or starting a family. It makes saving difficult, so a car repair or an illness lands them in credit card debt. It stops people from taking entrepreneurial risks, going to graduate school, working in low-paid social service professions, or moving to a city with better job opportunities but a higher cost of living.

In short, debt neutralizes many of the positive effects of education.

Yes, college is still a good deal on average for those who graduate, even with the debt. But saddling young people with these obligations is a bad deal for our country as a whole. A phenomenon called debt aversion means low-income and minority students are less comfortable with borrowing.

As our economy faces ever more challenges from developing superpowers, we will need all hands on deck. We can't afford to lose 2 million college-qualified high school graduates by the end of the decade - as we are on track to do - because they can't afford to go on to college.

The good news is that the growth of student loans - and the simultaneous growth of lenders' profits - are finally edging into public consciousness.

Both the Department of Education and the Republican leadership in Congress tried to spin the recent budget reconciliation bill, which cut $12 billion from the student aid program, as achieving its savings by cutting subsidies to banks like Sallie Mae. But local newspapers from Washington State to North Carolina printed the truth: Most of the savings taken out of the student-loan program come from borrowers. That means higher interest payments and fees for students and parents.

Last September, Secretary of Education Margaret Spellings announced a major, blue-ribbon Commission on the Future of Higher Education. The commission is in a public comments period, and the student Public Interest Research Groups have begun a nationwide grass-roots campaign to get these experts to acknowledge growing student debt as a necessary target of policy change. By April, they want to collect 10,000 comments from students on the impact of their debt. You can see entries from their "Student Debt Yearbook" online at www.Studentdebtalert.org. "We are the generation of the future," writes Amanda, a graphic design major at Portland State University who will owe $30,000. "We need to be able to start fresh once we are done with our education so we are able to put something back into our community rather than worrying about paying off our outrageous debt."

Amanda is right. And now is the time to take action. As bad as the situation is now, if left up to the free market it will get even worse. Sallie Mae, now a fully privatized giant with its stock prices on fire, controls $11.5 billion of the $15 billion market in private student loans.

These loans, unsubsidized by the federal government, carry higher interest rates than federal loans and fewer repayment options. With astonishing 27 percent annual growth over the past seven years, private student loans are on track to surpass federal loans within a decade.

The issue of excessive student debt demands a federal solution, in cooperation with colleges, to hold down costs for students. The alternative is to give a monopolistic lending industry with its own narrow profit motives control over our nation's competitiveness and our children's futures.

• Anya Kamenetz is a columnist for the Village Voice and the author of "Generation Debt."