A Nation Drowning in Student Loan Debt
Student loan debt was one of the biggest issues in the 2020 American presidential campaign. For good reason: it has replaced credit card debt as the second largest debt burdening American households after mortgage debt.
According to Educationdata.org, of the $1.73 trillion in student loan debt in the United States, 43.2 million student borrowers are in debt by an average of $39,351. With more students from low and middle-income families going to college than ever before, there is also a rise in first-generation college students. Unfortunately, they are twice as likely to be behind in making timely student loan payments.
One reason for this national debt tragedy is that the cost of a four year degree has doubled from $26,902 in 1989 to $104,480 in 2016, even after inflation. Additionally, minorities owe more in student loan debt on average, for example African-Americans graduates on average owe $25,000 more in student loan debt than White college graduates.
In general, student loan growth has even managed to outpace the sky-rocketing rise in tuition costs by 353.8%. This begs the question of whether the quest for improving one's education and employment prospects, along with increasing the educational status of the American workforce, should be rewarded by crushing student loan debt. Progressive leaders in Congress do not think so.
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In April this year, Senator Bernie Sanders and Representative Pramila Jayapal introduced the College for All Plan, legislation that makes college free for millions and provides support to students that attend minority institutions such as Howard University. Coupled with the idea of securing President Joe Biden's campaign promise of eliminating at least $10,000 in student loan debt, Representative Jayapal explained the purpose of the bill was so that Congress could "ensure that working families never have to take out crushing loans to receive a higher education in the first place." Certainly, the College for All Plan would address debt for prospective students. However, the more urgent issue is loan forgiveness for millions of college students who are currently struggling with debt.
On one hand, progressive Democrats such as Jayapal, Sanders, and Alexandria Ocasio-Cortez are currently pushing for total elimination of all federal student debt. On the other hand, President Biden and other Democrat moderates are aiming to eliminate a maximum of $25,000 in debt per student.
Progressive Democrats argue that total elimination of student loan debt would inject health into the American economy and they rest on the advice of many leading economic experts. For example according to vice-president/senior credit officer William Foster of Moody's, a prestigious company that has assessed U.S borrower risk since 1909, current estimates indicate that "U.S real GDP could be boosted by $86 billion to $108 billion per year, on average, if all student loans were forgiven." Foster also states that total forgiveness would help address rising income equality. Furthermore, Foster indicates that "Student loans are now contributing to what's perceived as lower economic prospects for younger Americans."
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Lawrence Yun, chief economist of the National Association of Realtors, released a survey showing that student loan debt has caused students to delay home ownership by five to seven years. Yun estimates that broad student loan forgiveness would immediately boost the number of home sales in the United States by 300,000. Yun adds that this would immediately boost the American economy.
Representatives Ilhan Omar and Jayapal and Senator Sanders introduced the Student Debt Cancellation Act in 2019 to address debt currently owed by college students. The bill proposed to cancel all federal and private student loans. How was it proposed to be paid off? The answer was Wall Street. The bill called for Wall Street to bail out the disappearing U.S middle class in the form of a tax on speculation of 0.5 percent on stock trades, a 0.1 percent fee on bonds, and a 0.005 percent fee on derivatives, resulting in $2.4 trillion in available funds. The proponents of the bill argued that Wall Street should be taxed in return for the bailout that Wall Street similarly received in 2008 from taxpayers, making the transaction the largest tax payer bail out in U.S history. Wall Street's returned favor, the bill's proponents adds, would eliminate all student loan debt and avoid federal debt. The bill was supported by more than 1,000 economists.
In contrast, moderate Democrats, including President Biden, opt for a more cautious approach to the student loan crisis. When progressive congressional democrats asked President Biden to meet them in the middle of the road by forgiving up to $50,000 in student loan debt for all students through executive order, President Biden declined and instead stated that he would only support $10,000.
Similarly, during a February 2021 CNN town hall television special, a woman in the audience asked President Biden, "The American dream is to succeed, but how can we fulfill that dream when debt is many people’s only option for a degree? We need student loan forgiveness beyond the potential $10,000 your administration has proposed. We need at least a $50,000 minimum. What will you do to make that happen?", to which President Biden immediately said "I will not make that happen." Nevertheless, the Democrat's top leader in the U.S Senate, Schumer stated in his own February press conference that “We are not going to let up until we accomplish it, until $50,000 of debt is forgiven for every student in the country.”
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When President Biden was asked specifically why he would be unable to forgive at least $50,000 in student loan debt, he responded that it would disproportionately benefit those who go to elite private colleges. However, students from Ivy League schools graduate with the lowest amount of student loans owed because of well-funded student aid programs. President Biden also added that funds used to alleviate up to $50,000 of student loans for current borrowers would better be used on future generations, by providing for early childhood education for children from low-economic backgrounds. He also added that there is a proposed bill that would make four years of public universities and community college free for all students who's families make less than $125,000 annually.
This is unfortunate for millions of current college students and graduates who are now saddled with overwhelming student loan debt. Moreover, the most economically burdened by the debt are minorities and people from low-economic backgrounds. Simply put, the crushing student loan debt acquired in their attempts to further their education and elevate to a new economic status, will just have to be issue that they juggle with until further notice.
President Biden and many Democratic moderates do not want to eliminate the student loan debt crisis fully, however they earnestly are offering some alleviation that should help many students and graduates. Although the concept of fully eliminating student loan debt is one that most economists agree will boost the American economy, the morality of paying off current debt while giving nothing to graduates who already payed off their debt is argued to be unfair, and thus nonsensical. Such a controversial move may threaten to divide the Democratic Party at a time when solidarity is regarded as key to defeating rivals in the Republican party for political office.
Nevertheless in a democratic nation, where student loan debt is exponentially rising as more Americans are acquiring college degrees, the solution for the nation's student loan debt crisis may rest on the next generation of elected congressional and presidential leaders. As such, only time will tell as this issue will continue to grow.
