Here's some nonpartisan perspective on the student loan crisis.

Here’s a surefire way to know when something officially becomes a “crisis” in this country: Both liberal Democrats and conservative Republicans utter the word.  Hence, the current “immigration crisis.” Next up, I predict a “student loan crisis.”

Sadly, the political parties agree upon little else except the word. With student loans topping $1.2 trillion — far more than the $872 billion in credit card debt — I don’t care which lawmaker has an R or a D after their name. The only letters I care about are CPA. I’m one, and here’s what I hate about both parties’ proposals so far.

Where Democrats come up short

You can’t spend your way out of debt. That’s never worked with any individual I’ve ever counseled on credit card debt, and I doubt it will work for student loans.  Here’s what I am talking about: This summer, Sen. Elizabeth Warren (D-Mass) wanted to allow students to refinance their loans at 3.86 percent. The problem was, it would have cost the government $51 billion over a decade to offer borrowers that lower rate.

Warren offset that expense by pushing for the so-called Buffet Rule, which would tax millionaires who pay less than 30 percent in income taxes. In June, Senate Republicans blocked her legislation. Warren said she wanted to “help young people who are just starting their economic lives.” Adding to the federal debt they’ll inherit seems like a little help now for a lot of trouble later on.

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Where Republicans fall short

About the same time, Sen. Marco Rubio (R-Florida) partnered with moderate Democratic Sen. Mark Warner from Virginia to introduce the Dynamic Repayment Act, which has two key components: those with federal student loans automatically pay a percentage of their income so they don’t go broke, and the money is automatically deducted from paychecks, just like withholdings. This bipartisan plan has so far elicited cautious optimism from both the left and right, but it doesn’t actually reduce the nation’s student loan debt. That’s what Republicans campaign on: Reducing debt.

The problem isn’t the problem

The solution to the student loan “crisis” has nothing to do with student loans. For that, we need to trace the problem back to its origins: Skyrocketing tuition.  A couple of years ago, the federal government crunched some numbers and found that tuition in 1981 cost just under $8,500 (measured in 2011 dollars).  In 2011, it cost more than $19,300.  Only recently have tuition hikes ebbed. The College Board reported a “relatively small increase” of 2.9 percent for in-state students at public four-year institutions last year. That was 0.9 percent after adjusting for inflation.

I’m not the first to cynically suggest that universities raised tuition because they knew they could — the government was subsidizing students, and the universities capitalized. Now that there’s a “student loan crisis,” those schools are scaling back their increases. So really, there’s a “tuition crisis.”

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched I’m glad you’re here.

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