1958 was the first time the US allowed students to borrow money for college. Since then, the ability to take out student loans has granted millions of US citizens access to higher education.
We have now painted a picture of the American Dream containing the white picket fence and also a diploma hanging on the wall.
But the access to student loans has also put a large number of borrowers into debilitating debt.
Following my graduation in 2021 I found that I had $13,000 accrued in loans.
We are in this mess because of failed public policy.
As the amount of money owed by student borrowers grows to be more than $1.7 trillion, the call to cancel student debt has gotten louder.
Because that's what student debt cancellation is. It's an investment in the people
We are going to cancel all student debt in America.
What does canceling student debt mean? And can it be done?
Dateline Russia October 4 1957.
The student debt crisis began somewhat surprisingly with the space race. In 1957, the USSR launched the first Earth orbiting satellite named Sputnik, past Earth's atmosphere, beating the U.S. to space. Fed up with lagging behind the Soviets in 1958, President Eisenhower signed a bill allowing students to borrow up to $1,000 a year from the federal government for college. The policy was a success. In 1960, there were 3.6 million people enrolled in college. By 1970, there were 7.5 million. Over the last five decades, Congress has modified the federal student loan program and students became allowed to borrow 10s of 1000s of dollars to go to college. Today they owe over $1.7 trillion in student debt. The median borrower owed about $17,000 in 2016, some or about 6% of borrowers owe over $100,000.
We see how student loan borrowers struggle to save for retirement, to have emergency savings, to buy houses, to start small businesses. I think where this becomes really a national crisis is the ripple effect of those individual student loan borrowers.
A lot of the increase in student debt over the last decades can be attributed to rising costs of college. 41 states spent less per student when funding public colleges between 2008 and 2018, according to one analysis by the Center on Budget and Policy Priorities, they also found that annual published tuition at public colleges rose 37% between 2008 and 2018.
Wages have been stagnant for decades, even as the cost of a college education and the cost of living in America generally, has skyrocketed.
And a lot of the folks who are, like, struggling most with student debt, have $100,000 - $200,000 worth of debt, and are truly trapped, like, they actually can't pay off their debt faster than the interest accrues.
Aiden Sova, a recent graduate from the University of Michigan was rewarded with a full ride to the university based on merit and financial need. But due to rising and hidden costs, he's still graduated with over $13,000 in debt.
Something that people do not talk about nearly as much is that when you walk into that dorm room, there is no computer, there are no bedsheets, there aren't -- there is no food if the dining halls closed.
It takes borrowers an average of over 20 years to pay off their student debt. According to a One Wisconsin poll, and in those 20 years, many borrowers shy away from living alone, making large purchases and even taking out a mortgage while they pay off their student debt. About 20% of the decline in home ownership of young adults over the last one to two decades can be attributed to increased student loan debt, according to an analysis by the Federal Reserve. And one of the biggest problems in student debt comes from students who took out loans but failed to get a degree.
You find yourself in this position where you know what is really sort of not a large amount of money puts you in the place where you find yourself dropping out.
One in five borrowers at public four year colleges and one in three borrowers at community colleges did not complete the college degree for which they borrowed money.
We see a lot of people start in college, not finishing, and taking out loans to do that. Those people are really up a creek because the whole point of borrowing to invest in yourself is that you're going to make more money in the future and that makes repayment of those loans affordable. If you don't complete your degree, you're really in trouble.
There are also racial disparities in student loan borrowing. Four years after graduation, Black student borrowers are still likely to owe almost twice that of their white counterparts, according to Brookings. And black borrowers are twice as likely as white borrowers to never be able to pay off their student debt, according to the JPMorgan Chase Institute. Aiden was lucky to accept a job after graduation that not only paid him enough to be able to pay down his debt, but also assists him in paying off his student loans.
However,
I am a huge anomaly in this case, especially among my generation in general, but also Black student borrowers, people of color student borrowers. And so with that, if you cannot tell already, I was massively anxious about the entire process.
One of the most widely cited plans to tackle the student debt crisis for all groups is outright student debt cancellation. It was first made popular by Senator Elizabeth Warren, who ran for the Democratic presidential nomination in 2020. Now it's become a standard policy platform for the progressive flank of the Democratic Party. But what does canceling student debt even mean? It depends on who you ask. Elizabeth Warren's plan is a progressive system. Households making less than $100,000 would have $50,000 of student debt eliminated, with the amount of student debt canceled phasing out at households making $250,000. Senator Bernie Sanders' plan would have all federal student debt canceled for every single student borrower, regardless of income. Other Senate Democrats have introduced a plan that would eliminate $50,000 of debt from every student borrower, regardless of income.
We are here today to introduce our proposal to cancel $50,000 in student debt.
President Joe Biden has said he's in favor of canceling up to $10,000 in student debt for borrowers, but his administration hasn't yet acted on that plan.
I'm prepared to write off the $10,000 of debt, but not $50,000.
Many activists call for universality in the elimination of student debt.
Most of the young folks that I know are in favor of full student debt cancellation. And the reason is it doesn't leave anyone behind.
Universal programs are the right direction in which we need to be going in this country. Folks benefit from Social Security regardless of their assets or their other sources of income. And the same is true or should be true for student debt cancellation.
But some economists argue that universal student debt cancellation isn't reasonable, saying it unfairly benefits people who are receiving a high return on their investment through a degree that gives them a leg up in society.
If I were to say to you, would you borrow $100,000 to go to Harvard Law School, you wouldn't blank and you say yes, that's clearly a good deal. We shouldn't be absolving those people of their debt. They made an enormous investment that's going to pay off, really, a lot.
One alternative is to reform the Income Based Repayment System. So the
way these programs work is that they modify your monthly payment, so that you pay a lesser amount that's in proportion to how much you're earning. If you're earning a lot, you're going to pay back the full monthly payment on your loan. If you're earning little, you're either going to pay back, little in that month, or even nothing at all. Sometimes the payment actually drops to zero.
In 2007, Congress passed a law to encourage college graduates to enter the field of government and nonprofit work. It promised student borrowers that after 10 years if they paid all their student loan payments on time and pursued certain careers, the government would eliminate the rest of their debt. The program has long been plagued with problems though, and at times more than 98% of those who applied for student debt cancellation were rejected. In October, President Biden's administration announced they're working on an overhaul to the program, which the Department of Education says will help more than a half million people get closer to debt relief. One thing most folks agree on, however, is that the system needs to be reformed to stop feeding the $1.7 trillion crisis.
If we want a well educated workforce, if we want a well informed electorate, if we want a functioning democracy, and -- we know that all of that is imperative to have higher education system in this country, then we need to be willing to pay for it. I don't know a single person who works on student debt issues -- so trying to help the people who have student loans -- who are also fierce advocates of trying to tackle college affordability on the front end.
There are plenty of proposals for how to make college more affordable too. One idea popularized by the progressive movement is making public colleges and universities tuition free.
The reason that people are struggling with debt is twofold. One, that governments made a policy choice to not adequately fund higher education. And two, the policy choice by universities, which are in competition with each other to be sort of like seen as more elite and want to increase their budgets. And so while university presidents are trying to increase their budgets, and governments, especially state governments are paying less money, that, like, gap is made up by tuition.
Some economists like Professor Levine fear that lowering or eliminating tuition costs are actually harmful to lower income students, which is the population these proposals are aiming to help the most.
In some ways it might actually even backfire. In the sense that if you lower tuition, the sticker price, which is the price that only higher income students pay, that reduces resources available to the institution, and if you reduce the resources available to the institution that also reduces the amount of money they have available for financial aid.
He sides with a proposal that specifically makes college less pricey for students from low income families.
The simplest solution to address an issue like that is to double the size of the Pell Grant. So the Pell that is the largest federal financial aid grants that goes to students attending college. That policy, based on calculations that I've performed, goes a very long way to reducing the affordability gap for lower income individuals.
I am very supportive of expanding Pell Grant eligibility, and increasing the amount that is possible under the Pell Grant program for any eligible individual. That is no substitute for making public colleges and universities tuition free.
I grew up in a very low income single parent household. And so with that level of destitution for a very long time, I was unsure if I could go to college at all. A huge retort to that feeling is frequently that college will be paid for if you are truly that low income. And so keeping that framework in mind, once it was my sophomore year, and I was really starting to take on those loans, I felt the weight of every single dollar that I was taking out because at the time, taking out $13,000 in loans total was devastating. I had quite literally never seen or felt the impact of that much money in my entire life.
Another solution proposed by Beth Akers doesn't actually rely on policy actions for change. It encourages a free market solution where lowering demand for high price colleges could force them to lower their prices.
I personally believe that the solution is going to come from individual consumers, that's students and their families, saying 'I'm not going to pay that price.' We've got colleges who are getting away with charging these ever escalating costs. I believe part of that is because we've sold people on the idea that you're not okay, without a bachelor's degree in this country, right? Even though the majority of people who are working our economy right now do not have college degrees. And so I think we need to get more realistic with people and say, yes, there are lots of pathways to career so that they have the option to say, 'You know what, that price tag does not work for me.' And when we get people acting this way, I think what it will ultimately do is cause institutions to have to lower their prices, or at least to bring their prices in line with the value that they're providing.
This type of solution could help lessen the burden of loans because students could take on less debt by attending cheaper schools.
I think people often dismiss a low cost institution, whether it's an in state public college or community college as a lesser option. And I think that's not necessarily the case.
With proposals on all sides for how to find relief from the student debt crisis, the ultimate question is, can the President actually cancel student debt?
Under a statute called the Higher Education Act, the President of the United States has the legal authority to cancel federally owned student debt.
Since the start of his term earlier this year, President Biden actually has cancelled significant amounts of student debt to the tune of nearly $10 billion. For student borrowers with disabilities, the President and Department of Education effectively forgave all student loans. For active duty service members with student loans, the department waived all interest on loans, and the Biden administration erased student debt for former students of ITT Technical Institute, a former for profit college chain. The President still hasn't announced a plan for any kind of broad student debt cancellation or loan forgiveness. Progressive policymakers are still confident that Biden will come around during his administration.
Canceling student loan debt is the single most effective executive action that President Biden can take to kickstart this economy.
This is something that does not require legislative action. Thank God, the filibuster is not standing in the way of canceling student debt. It doesn't have to go through the reconciliation process, which is a budgetary process, none of those things are hindrances to the cancellation of the vast majority of the student debt that exists in this country.
Activists hope that broad public support for the measure will help President Biden justify a decision to cancel at least some portion of student debt. 51% of likely voters would support the president canceling $50,000 of student loan debt for people making less than $125,000 a year, a late 2020 poll found.
Creating a system that burdens students with debt or excludes students who don't have a lot of money from higher education. That is not the kind of society that I want to live in.
The people who have went through the tremendous struggles they have had to endure because of student loan debt are often the fiercest advocates for ensuring that their kids, their neighbors, the next generation doesn't have to deal with the same.
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