This is an important question, as the American Opportunity Tax Credit program would be phased out if Stephen Burd of Education Sector has his way.

Burd points out that more upper-middle class Americans benefit from the AOTC than their needier counterparts. Burd backs this statement up by noting that nearly a quarter of these benefits went to families making $100,000 to $180,000 a year. Burd also notes that those earning $75,000 or more were two and half times more likely to file for AOTC than those earning less than $25,000 a year.

In contrast, Pell Grant eligibility has been tightened and have more cuts headed their way – which is a major blow to the low-income families that depend on Pell Grants for a college education.

“Unlike federal grant and loan programs,” Burd says, “the tax benefits are not counted as spending in the federal budget and therefore do not appear to increase the deficit, even though they reduce the amount of revenue the government collects each year.”

Burd also points out that upper-middle class families are more likely to vote than low-income families, meaning politics – once again – rears its ugly head into the American educational sector.

So what does Burd suggest? Let the AOTC expire this year and use the money earned from doing so to sustain and expand the Pell Grant program instead.

Truth be told, it does make sense. 13% of all education-related tax subsidies went to families making more than $100,000 a year, while a meager 11% of these same subsidies went to those earning less than $25,000 a year. Pell Grants only go to families that need education support the most, so Burd’s suggestion is not entirely off the mark.

Now the only problem is getting lawmakers to support his conclusions, which is something I don’t think they would be too eager to implement anytime soon.

The Democrats want to tax high-earning corporate stockholders and certain professional practices more for Social Services and Medicare payrolls. Republicans want to abolish a preventive health care program laid out in the 2010 health care reforms.

In short, both political parties are preserving the interests of their respective agendas – business prosperity for the Republicans and health care for the Democrats – and are adamant about their positions.

And then it comes as no surprise that both sides are accusing each other of stalling the process. As usual.

The problem here is that any party who budges will lose the support of their voters. If the Republicans cave in, big businesses and professionals will no longer believe that the party has their backs. If the Democrats cave in, the low-income families depending on universal healthcare will feel abandoned by the party they trusted.

So it’s back to the drawing board. How will the two parties come up with a plan to extend the current student loan rates without “hurting each other’s feelings?”

Well, I for one believe that there is room for compromise here. Moderately tax the professionals and stockholders while moderately cutting down on the healthcare program. Not ideal, I know, but at least this will allow both parties to say “hey, at least the other guys are hurting as much as us.”

Now it all boils down to who has the balls to propose such a plan to both parties.

What we really need, however, is a comprehensive method of tackling the root causes of student debt problem in the first place. I have touched on this topic multiple times in the past, but it is worth repeating a few times just to get the point across: what we are doing right now is nothing but a band-aid approach to the bigger problem at hand.

If we keep this up – partisan bickering included – then we will slowly find our country being filled with debt-laden graduates that just don’t have jobs waiting there for them.

The first and most direct answer to the current student debt crisis is to open up paths for small and medium businesses to thrive. Sure, we need to regulate these businesses so that the basic rights of workers are observed, but we also need to offset the business impact of these regulations with tax breaks and financial aid to promising startups.

Another solution to this imminent crisis is to make Americans a more attractive pool of labor for businesses. Many jobs are lost to second and third-world countries due to skilled but cheap labor over there, so we need to find some way to beat the competition in those countries. We either have to produce better workers that are worth the extra pay, or we enforce strict regulations on outsourcing – the former being the preferred option to keep businesses afloat.

And then the third answer to prevent student debt from becoming “another bubble” in the future is to educate our students about job prospects even before they fill out their FAFSA. School counselors need to be better educated as to the degrees that are most in-demand right now. These same counselors also need to be made aware of the employment needs of their home state and nearby states in order to better connect graduates to jobs.

Yes, these solutions are easier said than done, but at least they’re a good place to start.

Heck, even a single mistake on the FAFSA form can be serious enough to junk the whole application altogether!

This is where intervention comes in where a group of researchers set out studying 26,000 families in Ohio and North Carolina.¹

These families lived on incomes less than $45,000, and the researchers focused on what has more of an impact: giving information to these families or providing them with full assistance in the FAFSA application process.

Just doling out information about the FAFSA process didn’t have a significant impact, but what really boosted application and enrollment rates was the assistance.

Having experts fill out the FAFSA for students boosted college enrollment rates from 34% to 42%. That doesn’t sound much on paper, but its implications are massive considering that there are literally hundreds of thousands of students enrolling each school year.

What’s even better is that more of these students stuck around in college longer too, with second years soldiering on with the help of FAFSA. This is also significant considering that many colleges provide plenty of financial aid for freshmen but then cut off that money in their subsequent years – thereby causing students to drop out in the long run.

Now if we take the results of these studies far enough to catch the attention of local politicians and college presidents, we could see experts popping up on campus and helping students fill out their FAFSA forms.

That will definitely play a big role, especially when both parent and child realize the full extent of the benefits they can get from FAFSA without having to worry about the technicalities of the application process.

1. Source: Oxford Journal – The Role of Application Assistance and Information in College Decisions

Then things changed.

Student loans became less oriented for the benefits of the student and became nothing more than tools for lenders to impose loans irremovable by bankruptcy.

These same lenders know that people will come to them for student loans regardless, as education is a must in today’s society. These lenders then freely distribute loans without caring whether the borrower can use this money to finish his or her education. The problem now is that there aren’t enough jobs out there – much less good ones that will allow the average American to pay off his or her education in a short period of time.

And then there are the educational institutions that focus on increasing enrollees without producing competent and well-placed graduates.

Colleges can provide exaggerated (or even outright false) claims about the profitability of a career, focusing only on getting more enrollees. Then they provide substandard education – which an enrollee doesn’t even know is substandard – and then produce graduates that realize their education just won’t cut it in the stiff job market of today. It is a common sight to see a graduate of X degree working on a totally unrelated field just because it was the first job to come along the way.

This is why we have to change the way student loans are managed.

We have to put pressure on both lender and college to receive payments based on the income of a graduate – not on a fixed amount per month. The Student Loan Forgiveness Act of 2012 is close, but not complete.

Student loans and their interest rates must be based exclusively on the discretionary income of a graduate. This will allow both lender and college to have a vested interest in the actual success of a student instead of just running off with the tuition.

We are finding more and more college grads working as clerks, waiters, bartenders and receptionists among other low-wage jobs. What hurts even more is the fact that these grads are burdened with five or even six-digit student loans that they have to pay off on a monthly basis.

Good news: not all college grads face such dim prospects in the future.

Those who graduated from fields in science, education and health can usually find jobs on the market if they look hard enough. You would probably be surprised to find out that low-skill, high-focus positions like home health aides are projected to employ more people than mid-level jobs like bank tellers. The success of prospective entrepreneurs will depend on their ingenuity, innovation and doggedness, so you really can’t put a solid finger on how they will perform.

But for bachelor’s degree-holders in the arts and humanities, job prospects are extremely slim – if any are available at all.

“If you’re not sure what you’re going to be doing, it probably bodes well to take some job, if you can get one, and get a sense first of what you want from college,” says Harvard economist Richard Freeman. Freeman points out how early-life decisions will have an inevitable impact later on in life, especially when graduating with a degree that costs about $20,000 to $50,000 or more.

While we as a country need to do more to provide jobs, we also have to educate our youth about their prospects in the future – especially when we are taking out tens of thousands of dollars in student loan debt.

Obama is proposing a whole truckload of reforms and easy repayment schemes for student loans. Romney is focusing on getting more jobs to the economy. Santorum is promoting for-profit colleges as a solution for debt. Gingrich calls student loans “a ponzi scheme”. Paul wants to get rid of the student loan system in its entirety.

But wait just one darned minute: what exactly does it mean for our nation if we should allow the student loan debt to continue blowing up out of proportion?

Those directly affected by the loans – aka the borrowers – will find themselves burdened with a debt they cannot expunge with bankruptcy. No matter how destitute they are, not matter how long they’ve been unemployed, they will still have to pay off their debt one way or another.

This is a significant problem for students that pay a premium to colleges that exaggerate the potential income and employability of a particular degree. And this isn’t limited to young adults, too: 40 or 50-somethings hoping to step up in life with a college degree could instead find themselves burdened with debt and lack of job opportunities.

But it’s not only the grads that end up footing the bill. Parents, grandparents and anybody else who co-signed the loan will have to shoulder the burden as well. The problem here is that these people get older and will soon have to face that fact whether they like it or not. Their health and their ability to generate income will generally decline as they get older, which is why they are the least-equipped to pay off their debt.

And then there’s you and me – the average American taxpayer. The federal government handles most of the student loans in the market. If too much debt is out there and no one is paying it properly, you and I will have to fork over our money in taxes to help fill in the financial black hole created by student loan debt.

So yes, student loan is something that we need to clear up before it dismantles our country from the inside out.

The Free Application for Federal Student Aid is one of the most useful financial tools at the disposal of the average student.

It can mean the difference between obtaining the necessary funds to earn a college degree or being stuck in a low-paying job flipping burgers or running errands.

Some high school students, however, are either not aware or not interested in filling out the FAFSA. This puts them at a serious disadvantage, even if they think they are not qualified to receive student aid. On the other hand, some students may have unknowingly submitted incomplete applications to as well. These incomplete applications will be rejected and not counted unless the student remedies the missing or erroneous data.

High schools used to estimate the completion rates of their students, but this data could be inaccurate at times. This is especially true since the high schools can so easily manipulate the results of their estimates to make it look “higher than they really are”.

Now the government is taking center-stage and releasing the FAFSA completion rates of each individual high school online.

This is a useful tool for both parents and school counselors. Parents can check if the schools of their children have a 100% completion rate and take action if the school does not reach that magic number. Counselors can also be alerted to find out if any of the students in their school have skipped out on completing their FAFSA.

You won’t know who failed to submit their FAFSA, though. The government only releases the data without naming any particular student, so it is a very slim chance that anyone will be able to tell who’s holding out on the applications.

At least for one year, according to the White House.

This proposal is indeed a welcome one for students all over the country, especially while the economy is still weak and job prospects are anemic. But extending the slashed interest rate for one year is but a band-aid solution to the real problem at hand.

That real problem is unemployment.

Sure, we can definitely use the interest rate break for some time to come. But we have to remember that we, the taxpayers, will ultimately pay for this in the long run. We have to find some way to revitalize our economy; to bring more jobs to the disgruntled graduates who can’t earn enough to pay the interest in the first place. If we depend too heavily and too frequently on breaks like these, then we will ultimately be piling the burdens on ourselves.

This is why we have to create more jobs that allow real­ – not borrowed – money to keep our country alive.

Going back to politics, though, Obama will win whether Congress accepts or rejects the proposal. If Congress gives it the green light, then Obama will affix himself in the public’s eyes with a victory. If Congress blocks it, then the Obama camp can point their fingers at the Republicans for blocking the measures.

So it’s a win for Obama no matter what happens. If this gives Obama the support of the young students he needs to win a second term, then we had better push him hard to get started on the real solution: more and better paying jobs for the average American.

Oh by the way, check out this interactive map to see what’s in store for your state if Congress doesn’t keep interest rates on federal Stafford loans from doubling on July 1.

This is the argument that Senators Tom Harkin (D-Iowa) and Kay Hagan (D-N.C.) use in a new proposition to restrict for-profit universities from spending federal money on marketing expenses.

If you want to get technical, then the proposed bill aims “to amend the Higher Education Opportunity Act to restrict institutions of higher education from using revenues derived from Federal educational assistance funds for advertising, marketing or recruiting purposes.”

Sen. Hagan says that it is unacceptable for colleges – which are using billions of taxpayer money – to promote activities that are unrelated to the education of their students. Hagan goes on to say that our dollars should not be used in expensive marketing campaigns, but to invest in a brighter future for students.

This is a statement with a ring of truth in it.

The Apollo Group – owner of multiple for-profit universities including the University of Arizona – spent $377 million for advertising last 2009. It even outspent Apple in terms of marketing during that year. This is accompanied by a report showing that for-profit universities actually spend a mere one-third of what public universities spend on actual education.

Hagan and Harkin’s solution: require colleges to report how much they spend on advertising each year, wherein the government would compare this amount to the percentage of federal dollars doled out to the school.

Harkin is quick to note that schools are free to spend their money however they want – as long as they don’t use taxpayer dollars meant for educating students.

The only real problem right now is that the bill has a slim chance of passing, thanks to the House being controlled primarily by Republicans – who have regularly prevented any form of regulation against for-profit colleges in recent years.

They may want to reconsider when federally-backed student loans have reached an excess of $1 trillion.