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Student Loan Debt Essays
Student loan debt essay topics and outline examples, essay title 1: the impact of student loan debt on higher education.
Thesis Statement: The growing burden of student loan debt has far-reaching consequences, affecting not only individual borrowers but also the accessibility and affordability of higher education in the United States.
- Introduction
- Rising Student Loan Debt Levels
- Barriers to Accessing Higher Education
- The Impact on Career Choices and Financial Stability
- Potential Solutions and Policy Reforms
Essay Title 2: The Psychological and Emotional Toll of Student Loan Debt
Thesis Statement: Student loan debt can take a severe psychological and emotional toll on borrowers, affecting their mental health, relationships, and overall well-being.
- The Stress and Anxiety Associated with Debt
- Impact on Personal Relationships and Life Choices
- Strategies for Coping with Student Loan Debt Stress
- The Need for Mental Health Support
Essay Title 3: Exploring Solutions to the Student Loan Debt Crisis
Thesis Statement: Addressing the student loan debt crisis requires a multifaceted approach, including policy reforms, financial literacy education, and innovative repayment options, to provide relief for borrowers and future generations.
- Policies Aimed at Reducing Student Loan Debt
- Empowering Borrowers Through Financial Education
- Innovative Repayment Plans and Loan Forgiveness Programs
- Ensuring Affordability and Accessibility of Higher Education
10 Student Loan Debt Essay Topics
Exploring solutions to the student loan debt crisis is crucial for mitigating the financial burden on graduates and ensuring access to higher education. The following essay topics delve into various facets of this issue, presenting opportunities for problem-solution exploration:
- The Role of Federal Policy in Mitigating Student Loan Debt
- Innovative Repayment Plans.
- Private Sector Solutions for Student Loan Debt
- Educational Reform for Affordable Tuition
- Financial Literacy and Student Loan Debt
- Community and Technical Colleges as a Solution to High Student Loan Debt
- The Impact of Scholarship Expansion on Student Loan Debt
- Bankruptcy Law Reforms to Address Student Loan Debt
- Public Service Loan Forgiveness Program Enhancements
- Technology-Based Solutions for Student Loan Management
Student loan debt in the United States has reached unprecedented levels, with millions of Americans grappling with the financial and emotional strain of repaying their education loans. This crisis not only hampers individual financial growth but also has broader economic implications, restricting consumer spending and contributing to wealth inequality.
Problem-solution essays on student loan debt offer a platform to investigate the roots of this issue and propose innovative solutions. From federal policy reforms to grassroots financial literacy programs, these essays explore multifaceted approaches to alleviate the student loan debt burden. By examining successful case studies and drawing on expert analyses, students can present comprehensive strategies that address both the immediate challenges of loan repayment and the systemic issues of higher education financing. Through such discourse, we can begin to envision a future where higher education is accessible and affordable for all, free from the shackles of debilitating debt. For those looking for problem solution essay examples offered free , ample resources are available to guide and inspire comprehensive solutions.
Student Loan Debt: Challenges and Solutions
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Apprenticeships as a Solution to Skills Gap, Student Debt, and Career Dead Ends
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The Student Loan Problem in America and Ways to Solve It
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The Issue of African American College Students Loan Debt
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Student loan debt refers to the financial obligation incurred by individuals who borrow funds specifically for educational purposes. It is a type of debt that students accumulate to cover the costs of tuition, fees, books, and living expenses during their pursuit of higher education. Student loan debt typically consists of borrowed money from government-based programs or private lending institutions, which students must repay over a specified period of time, often with interest.
Student loan debt in the United States has reached staggering levels and has become a pressing issue in today's society. As of recent data, the total student loan debt in the US exceeds trillions of dollars, making it one of the largest sources of debt for Americans. Many factors contribute to the current state of student loan debt, including rising tuition costs, limited access to grants and scholarships, and the increasing number of students pursuing higher education. The burden of student loan debt has far-reaching consequences for individuals and the economy as a whole. Many borrowers struggle to make timely repayments, leading to financial strain, delayed milestones such as homeownership or starting a family, and limited career choices. The ripple effects extend to the broader economy, affecting consumer spending, saving rates, and overall economic growth. Efforts to address the student loan debt crisis are underway, including income-driven repayment plans, loan forgiveness programs, and increased financial literacy initiatives. However, the magnitude of the problem necessitates further attention and comprehensive solutions to ensure that higher education remains accessible and affordable while mitigating the long-term impact of student loan debt on individuals and society.
Student loan debt has a significant historical context that spans several decades. The roots of the issue can be traced back to the mid-20th century when higher education became increasingly expensive, leading to a surge in the need for student loans. In the United States, the establishment of the Federal Student Aid program in the 1960s aimed to provide financial assistance to students pursuing higher education. However, the situation evolved over time, and the accumulation of student loan debt became a pressing concern. During the 1980s and 1990s, tuition fees continued to rise, and the availability of federal grants decreased. As a result, students increasingly relied on loans to finance their education. The early 2000s witnessed a further expansion of the student loan market, with private lenders entering the scene alongside the government-backed loans. This expansion brought about changes in lending practices and the increasing burden of debt on students.
The influence of student loan debt extends beyond the individual level and has a profound impact on various aspects of society. Firstly, it affects the financial well-being of borrowers, often causing stress, limited financial freedom, and delayed milestones such as homeownership or retirement savings. The burden of debt can also impact mental health, creating anxiety and depression among borrowers. On a broader scale, student loan debt influences the economy. High levels of debt can hinder consumer spending and savings rates, affecting economic growth. Graduates burdened with student loans may delay or forego major life decisions, such as starting a business or pursuing advanced degrees, which can impede innovation and entrepreneurial activities. Moreover, student loan debt exacerbates social and economic inequalities. Those from disadvantaged backgrounds may face additional challenges in accessing higher education due to financial constraints, widening the opportunity gap. The burden of debt can also perpetuate intergenerational poverty, as individuals struggle to accumulate wealth and provide for future generations.
Public opinion on student loan debt is multifaceted and varies among individuals. However, there are some common themes that emerge. Many people acknowledge the growing concern surrounding student loan debt and the challenges it poses for borrowers. There is a general recognition that the rising cost of education and the increasing reliance on loans have created a significant burden for students and graduates. Public opinion is often divided on the responsibility of borrowers versus the role of educational institutions and the government. Some argue that borrowers should take personal responsibility for their loans, while others believe that the education system and policymakers should be held accountable for the affordability and accessibility of higher education. There is growing support for measures aimed at addressing student loan debt, such as loan forgiveness programs, income-based repayment plans, and efforts to lower interest rates. Many individuals believe that these initiatives can provide relief to borrowers and alleviate the financial stress associated with student loans.
1. As of 2021, the total student loan debt in the United States exceeds $1.7 trillion, making it the second-largest consumer debt category after mortgages. 2. Approximately 45 million Americans carry student loan debt, with an average debt per borrower of around $38,000. 3. The average monthly student loan payment for borrowers aged 20 to 30 is $393, which can significantly impact their financial stability and ability to save or invest. 4. Student loan debt is not only prevalent among recent graduates. Around 14% of borrowers are over the age of 50, often carrying debt from their own education or supporting their children's education. 5. Student loan default rates remain a concern. As of 2021, the federal student loan default rate was around 9%, indicating the financial challenges faced by some borrowers. 6. High levels of student loan debt can hinder homeownership rates. Studies suggest that the burden of student loans can delay or deter individuals from purchasing homes, impacting the housing market. 7. Certain professions, such as doctors and lawyers, often accumulate substantial student loan debt due to the extended education required for their careers.
The topic of student loan debt is of paramount importance as it addresses a pressing financial and societal issue that affects millions of individuals in the United States. Writing an essay on student loan debt allows us to delve into the multifaceted consequences it poses on borrowers and the broader economy. The staggering amount of outstanding debt, coupled with rising tuition costs, presents a significant barrier to accessing higher education and achieving economic mobility. Furthermore, the burden of student loan debt impacts borrowers' financial well-being, hindering their ability to save, invest, and contribute to the economy. Exploring the public's opinion, representation in media, and potential policy solutions can provide valuable insights into the urgency of addressing this crisis. By discussing student loan debt, we foster a deeper understanding of the challenges faced by borrowers and encourage dialogues that may lead to effective measures for easing this financial strain and supporting the pursuit of education.
1. Akers, B., & Chingos, M. M. (2014). Is a student loan crisis on the horizon? The Brookings Institution. https://www.brookings.edu/research/is-a-student-loan-crisis-on-the-horizon/ 2. Baum, S., & O'Malley, M. (2003). College on credit: How borrowers perceive their education debt. The College Board. https://files.eric.ed.gov/fulltext/ED494509.pdf 3. Dynarski, S. M. (2014). Building the stock of college-educated labor. Journal of Labor Economics, 32(1), 1-26. https://doi.org/10.1086/674012 4. Houle, J. N. (2014). Disparities in debt: Parents' socioeconomic resources and young adult student loan debt. Sociology of Education, 87(1), 53-69. https://doi.org/10.1177/0038040713514014 5. Jackson, K. M. (2018). The impact of student loan debt on job satisfaction outcomes. Journal of Student Financial Aid, 48(1), 29-52. https://doi.org/10.4148/2572-456X.1018 6. Litten, L. H., & Ackerman, D. B. (2019). A comprehensive approach to student loan debt counseling. Journal of Financial Counseling and Planning, 30(1), 43-57. https://doi.org/10.1891/1052-3073.30.1.43 7. Looney, A., & Yannelis, C. (2015). A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising loan defaults. Brookings Papers on Economic Activity, 2015(1), 1-89. https://doi.org/10.1353/eca.2015.0001 8. Lusardi, A., Schneider, D. J., & Tufano, P. (2011). Financially fragile households: Evidence and implications. Brookings Papers on Economic Activity, 2011(2), 83-134. https://doi.org/10.1353/eca.2011.0016 9. Scott-Clayton, J. (2019). The looming student loan default crisis is worse than we thought. Brookings Institution. https://www.brookings.edu/research/the-looming-student-loan-default-crisis-is-worse-than-we-thought/ 10. Zafar, B. (2013). Borrowing constraints and the returns to schooling. Annual Review of Economics, 5(1), 347-365. https://doi.org/10.1146/annurev-economics-072412-133425
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A smarter way to solve the student debt problem
Blanket loan forgiveness less effective than helping those who need it most, research suggests.
Editor’s Note: This piece was written by Constantine Yannelis, an assistant professor of finance at the University of Chicago Booth School of Business, and shared by Chicago Booth Review . The essay is based on testimony Yannelis submitted to the U.S. Senate Committee on Banking, Housing, and Urban Affairs’ Subcommittee on Economic Policy in April 2021.
Education is the single highest-return investment most Americans will make, so getting our system of higher-education finance right is fundamentally important for U.S. households and the economy.
A key point in the student-loan debate is that the outcomes of borrowers vary widely. Undeniably, a significant number of borrowers are struggling, and are sympathetic candidates for some kind of relief. Student-loan balances have surged over the past decades. According to the New York Fed, last year student loans had the highest delinquency rate of any form of household debt.
Most student borrowers end up as higher earners who do not have difficulties repaying their loans. A college education is, in the vast majority of cases in America, a ticket to success and a high-paying job. Of those who struggle to repay their loans, a large portion attended a relatively small number of institutions—predominantly for-profit colleges.
The core of the problem in the student-loan market lies in a misalignment of incentives for students, schools, and the government. This misalignment comes from the fact that borrowers use government loans to pay tuition to schools. If borrowers end up getting poor jobs, and they default on their loans, schools are not on the hook—taxpayers pay the costs. How do we address this incentive problem? There are many options, but one of the most commonly proposed solutions is universal loan forgiveness.
Various forms of blanket student-loan cancellation have been suggested, but all are extremely regressive, helping higher-income borrowers more than lower-income ones. This is primarily because people who go to college tend to earn more than those who do not go to college, and people who spend more on their college education—such as those who attend medical and law schools—tend to earn more than those who spend less on their college education, such as dropouts or associate’s degree holders.
My own research with Sylvain Catherine of the University of Pennsylvania demonstrates that most of the benefits of a universal-loan-cancellation policy in the United States would accrue to high-income individuals, those in the top 20 percent of the earnings distribution, who would receive six to eight times as much debt relief as individuals in the bottom 20 percent of the earnings distribution. These basic patterns are true for capped forgiveness policies that limit forgiveness up to $10,000 or $50,000 as well.
Another problem with capped student-loan forgiveness is that many struggling borrowers will still face difficulties. A small number of borrowers have large balances and low incomes. Policies forgiving $10,000 or $50,000 in debt will leave their significant problems unaddressed.
While income phaseouts—policies that limit or cut off relief for people above a certain income threshold—make forgiveness less regressive, they are blunt instruments and lead to many individuals who earn large amounts over their lives, such as medical residents and judicial clerks, receiving substantial loan forgiveness.
A fact that is often missed in the policy debate is that we already have a progressive student-loan forgiveness program, and that is income-driven repayment.
If policy makers want to make sure that funds get into the hands of borrowers at the bottom of the income distribution in a progressive way, blanket student-loan forgiveness does not accomplish this goal. Rather, the policy primarily benefits high earners.
While I am convinced from my own research that student-loan forgiveness is regressive, this is also the consensus of economists. The Initiative on Global Markets at Chicago Booth asked a panel of prominent economists to weigh in on this statement: “Having the government issue additional debt to pay off current outstanding loans would be net regressive.” The panel included economists from leading institutions from both the left and the right. The results of the survey were telling. Not a single economist disagreed with the idea that student-loan forgiveness is regressive. This is because the facts are clear—to borrow a phrase commonly used, “The science is settled”—student-loan forgiveness is a regressive policy that mostly benefits upper-income and upper-middle-class individuals.
Another facet of this policy issue is the effect of student-loan forgiveness on racial inequality. One of the most distressing failures of the federal loan program is the high default rates and significant loan burdens on Black borrowers. And student debt has been implicated as a contributor to the Black-white wealth gap. However, the data show that student debt is not a primary driver of the wealth gap, and student-loan forgiveness would make little progress closing the gap but at great expense. The average wealth of a white family is $171,000, while the average wealth of a Black family is $17,150. The racial wealth gap is thus approximately $153,850. According to our paper, which uses data from the Survey of Consumer Finances, and not taking into account the present value of the loan, the average white family holds $6,157 in student debt, while the average Black family holds $10,630. These numbers are unconditional on holding any student debt.
Thus, if all student loans were forgiven, the racial wealth gap would shrink from $153,850 to $149,377. The loan-cancellation policy would cost about $1.7 trillion and only shrink the racial wealth gap by about 3 percent. Surely there are much more effective ways to invest $1.7 trillion if the goal of policy makers is to close the racial wealth gap. For example, targeted, means-tested social-insurance programs are far more likely to benefit Black Americans relative to student-loan forgiveness. For most American families, their largest asset is their home, so increasing property values and homeownership among Black Americans would also likely do much more to close the racial wealth gap. Still, the racial income gap is the primary driver of the wealth gap; wealth is ultimately driven by earnings and workers’ skills—what economists call human capital. In sum, forgiving student-loan debt is a costly way to close a very small portion of the Black-white wealth gap.
How can we provide relief to borrowers who need it, while avoiding making large payments to well-off individuals? There are a number of policy options for legislators to consider. One is to bring back bankruptcy protection for student-loan borrowers.
Another option is expanding the use of income-driven repayment. A fact that is often missed in the policy debate is that we already have a progressive student-loan forgiveness program, and that is income-driven repayment (IDR). IDR plans link payments to income: borrowers typically pay 10–15 percent of their income above 150 percent of the federal poverty line. Depending on the plan, after 20 or 25 years, remaining balances are forgiven. Thus, if borrowers earn below 150 percent of the poverty line, as low-income individuals, they never pay anything, and the debt is forgiven. If borrowers earn low amounts above 150 percent of the poverty line, they make some payments and receive partial forgiveness. If borrowers earn a high income, they fully repay their loan. Put simply, higher-income people pay more and lower-income people pay less. IDR is thus a progressive policy.
IDR plans provide relief to struggling borrowers who face adverse life events or are otherwise unable to earn high incomes. There have been problems with the implementation of IDR plans in the U.S., but these are fixable, including through recent legislation. Many countries such as the United Kingdom and Australia successfully operate IDR programs that are administered through their respective tax authorities.
Beyond providing relief to borrowers, which is important, we could do more to fix technical problems and incentives. We could give servicers more tools to contact borrowers and inform them of repayment options such as IDR, and we could also incentivize servicers to sign more people up for an IDR plan. But while we may be able to make some technical fixes, servicers are not the root of the problem in the student-loan market: a small number of schools and programs account for a large portion of adverse outcomes.
To fix this, policy makers can also directly align the incentives for schools and borrowers. For example, Brazil, which has had similar problems with its student-loan program, recently gave schools skin in the game by requiring them to pay a fee based on dropout and default rates. This helped align the incentives of the schools and the student borrowers. Making revenues go directly to schools from IDR plans, or implementing income-share agreements in which individuals pay an uncapped portion of their income, could also help align the incentives of schools, students, and taxpayers.
Federal student loans are an important part of college financing and intergenerational mobility. The root of our student-loan crisis is a misalignment of incentives. Since the problem has been so slow moving and continuous, I like the analogy of a frog slowly boiling in a pot of water over a flame. Policies such as student-debt cancellation are not extinguishing the flame—they aren’t fixing the incentive problem. All they do is move the frog into a slightly cooler pot of water. And if we don’t fix the core of the problem, even if we forgive $50,000 of debt for current borrowers, balances will continue to grow, and we will be facing a similar crisis in 10 or 20 years.
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Causes of and Solutions to the Student Debt Crisis
Student loans are one of the highest sources of debt for Americans, second only to mortgages. Across the country, more than 40 million people carry a total of over $ 1 . 7 trillion in student loan debt . Despite the student loan relief enacted by the Biden administration in August 2022 , millions of borrowers still suffer the burden of insurmountable debt. The financial insecurity caused by ballooning interest on monthly student loan payments affects individuals and households nationwide and disproportionately harms communities of color.
Read on to understand the history of America’s student debt crisis, who is hurt most and ways public and private entities can take action.
The History of the Student Debt Problem
Student loans are a type of financial aid that is designed to help college students afford the costs of attending the university of their choice. Unlike other forms of financial aid, such as scholarships or grants, student loans must be paid back.
There have been two major federal student loan programs :
- The Federal Family Education Loan ( FFEL ) program guaranteed loans issued by banks and nonprofit lenders from 1965 to 2010 . The Health Care and Education Reconciliation Act of 2010 eliminated new FFEL loans.
- In 1994 , Congress established the William D. Ford Federal Direct Loan program, which issued student loans directly, with funds provided by the Treasury.
Between 1995 and 2017 , the balance of outstanding federal student loan debt increased from $ 187 billion to $ 1 . 4 trillion (in 2017 dollars) — more than sevenfold. The volume of student loans has grown because the number of borrowers rose, the average amount they borrowed increased and the rate at which they repaid their loans slowed. As the tuition that colleges charged went up, the volume of student loans increased.
What Caused the Student Debt Crisis?
Several factors have contributed to the current student loan problem in America:
- The cost of the services that colleges and universities provide has risen.
- The cost of employing faculty and staff has grown.
- Support from states and localities has decreased — particularly affecting public colleges and universities.
- Students have easier access to education loans. Filling out a Free Application for Student Aid ( FAFSA ) is as simple as going online and answering a few questions. Undergraduate and graduate students and their parents may apply for four types of direct loans . Often, no credit check is required. Undergraduate students may borrow up to $ 12 , 500 per year, while graduate students may borrow up to $ 20 , 500 per year. Applicants may accept all or part of a loan.
- State funding for higher education has declined. According to The Pew Charitable Trusts , “ Over the past two decades and particularly since the Great Recession, spending across levels of government converged as state investments declined, particularly in general-purpose support for institutions, and federal ones grew.”
- College degrees are losing value. Debt arising from a postsecondary education has typically been considered a necessary step for increasing lifetime income. Historically, individuals with a bachelor’s degree or higher earn hundreds of thousands of dollars more over their lifetimes than high school graduates. In recent years, having a college degree has not guaranteed a well-paying job — especially for Black female borrowers who face both structural racism and sexism. With an increasing number of college grads having to accept lower-than-expected paid work or being unemployed altogether , a college degree doesn’t carry the value it once did.
- Low-performing and fraudulent schools can access federal loan programs. A large number of for-profit colleges misrepresented students’ employment prospects, including guarantees they would find a job , encouraging them to take on federal student loans they likely wouldn’t be able to pay back.
The Social and Economic Impact of the Student Loan Debt Crisis
Unpaid student loan debt can have wide-ranging consequences. The burden of debt leaves individuals and households more vulnerable to other kinds of debt, such as medical expenses, and less able to generate wealth. This in turn slows economic growth, as those who carry debt are less able to spend money or purchase major assets, such as a home or automobile.
Student debt can also negatively impact the borrower’s:
- mental health;
- ability to build retirement savings;
- ability to accumulate emergency savings; and
- decision to start a family.
How Does Student Loan Debt Affect the Economy?
The Education Data Initiative notes, “ The effect student loan debt has on the economy is similar to that of a recession, reducing business growth and suppressing consumer spending.” Student debt reduces spending, with borrowers less able to maintain disposable income or build wealth. It increases reliance on social programs, impedes the housing market and slows business growth — small business creation is especially hampered by student loan debt.
- In addition, many borrowers who carry debt struggle to repay their loans .
- An average of 15 % of student loans are in default at any given time.
- About one in 10 student borrowers defaults on their educational loans within their first year of repayment.
- One in four defaults within their first five years of repayment.
- Student loan borrowers with law degrees are the most likely to fall into delinquency.
Why Is Student Loan Debt a Social Problem?
Because of long-standing inequities, Black families have less generational wealth to pay for a college education. As Black borrowers are more likely to borrow and must borrow more, student loan debt disproportionately affects them. This further exacerbates the racial wealth gap , making it difficult for Black families, and other families of color, to build generational wealth and maintain economic security. A lack of wealth makes it difficult to participate in economic pursuits, including:
- obtaining an education;
- taking investment risks;
- moving or buying a home; and
- starting a business.
This can have dire consequences for psychological, physical and community health.
Who Is Hurt Most by the Student Debt Crisis?
The student debt crisis does not affect all borrowers equally and student debt disproportionately harms borrowers of color . According to Making the Case :
- Black and Latino borrowers are more likely to be behind on student loan payments than their white counterparts.
- The average Black borrower owes 95 % of their student debt 20 years after enrollment.
- According to the Education Trust , Black women owe 13 % more debt within 12 years of leaving college than they had borrowed compared to white men, who had paid off 44 % of their debt in that timespan.
- Eighty percent of Black public school graduates take out student loans for a college degree.
- In addition, almost 40 % of Black borrowers drop out with outstanding debt and struggle to pay it back.
Students who are parents or caring for other family members, first-generation students, women, those enrolled in for-profit colleges and low-income borrowers are also likely to be negatively affected by student loan debt.
Is There a Solution to the Student Debt Crisis in the United States?
The pandemic’s impact on the U.S. economy underscored the need for viable solutions to the student loan debt crisis. There are several actions that policymakers, colleges and universities and employers can take to lessen the burden of student loans on borrowers.
Solving the Student Debt Crisis at the State and Federal Levels
According to How States Can Solve the Student Debt Crisis , another Aspen Institute publication funded by the Casey Foundation, policymakers looking to curb current and future student loan burdens should develop legislation that targets low-income borrowers as well as borrowers of color. The report suggests three key solutions to the student debt crisis:
- Reducing the out-of-pocket cost of college attendance. Strategies could include free college programs, additional aid and grants and four-year community college programs.
- Protecting students as they navigate existing debt. The report recommends reenrollment programs that encourage former students to return to school with the offer of debt forgiveness as well as legislation and enforcement of regulations that would better protect borrowers from predatory lenders.
- Decreasing existing student debt burdens. This could take the form of target loan repayment programs, housing assistance and employer tax credits.
In addition, Making the Case argues in favor of policies that aggressively combat student loan debt:
- Restricting access. New federal loan policies could restrict access to federal loan funds for public and private higher education institutions with a history of poor outcomes for students.
- Offering incentives. Governments could motivate businesses and other employers to provide student loan repayment benefits and tuition assistance with tax breaks and other perks.
How Colleges and Universities Can Reduce Loan Debt for Students
Making the Case offers two solutions for how higher education institutions can help students avoid the burden of debt:
- Limit tuition rates at public colleges.
- Increase grant aid and tuition waivers for low- or moderate-income students.
How Employers Can Combat the Student Debt Crisis
Employers also can play a role in student debt relief by helping employees repay their loans:
- Provide repayment benefits. Employers can offer student loan repayment benefits and tuition assistance to employees.
- Make direct contributions. Increasingly, employers are offering monetary contributions to student debt as part of benefits packages.
- Tie payments to retirement plans. Workers make student loan payments themselves and then the company deposits a corresponding “ match” into the employee’s 401 (k) account.
- Financial counseling. Companies and organizations can connect employees to financial coaches or counselors to help them organize repayment plans.
Additional Resources for Understanding the Student Debt Crisis
The student debt crisis is a complex problem for which there are no simple solutions. Delve into the topic with these Casey Foundation resources:
- Center for Working Families at Community Colleges: Clearing the Financial Barriers to Student Success, Emerging Practices and Trends
- The Disparate Effects of Student Debt on Black Borrowers
- How States Can Solve the Student Debt Crisis
- How Student Debt Hurts Young Adults of Color
- Making the Case: Solving the Student Debt Crisis
- Solutions to the Student Debt Crisis in a Time of Economic Distress
This post is related to:
- Assets and Savings
- Federal Policy Reform
- State Policy
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Student Debt - Essay Samples And Topic Ideas For Free
Student debt refers to the cumulative outstanding loans taken out to cover educational costs, which has become a significant issue, especially in the United States. Essays could delve into the causes and consequences of escalating student debt, its impact on economic mobility, and proposed solutions to alleviate the burden of student debt on individuals and society. We have collected a large number of free essay examples about Student Debt you can find at PapersOwl Website. You can use our samples for inspiration to write your own essay, research paper, or just to explore a new topic for yourself.
More than Stress Biological Effects of Student Debt
Introduction: ""Student debt is on the rise is a statement made by every article that examines student debt. Studies that consider the effects of student debt on college students have concluded that that those who take out loans and gain debt are affected negatively by the need to pay those debts and having to add that to their long list of responsibilities. Thus, the popular notion is that student loans make these students stressed and full of anxiety even leading […]
Decrease Student Debt as Step for the Future of America
America has always been known as one of the freest and most prosperous countries that exist in our modern world today. Freedom is the staple of our country and is what distinguishes us from other places in the world. We, as citizens in the United States, enjoy an incredibly vast array of rights and laws from which we benefit every day, even if we are not actively aware of it. There are so many reasons why we can take pride […]
Why College Matters
The price of attending college has risen dramatically over the past few decades, so much that it causes many second thoughts and doubts from young adults who preferred to attend. These doubts are mostly centered around the amount of student debt loan they might be burdened with. Americans now have 1.3 trillion in student debt, this is a crisis that many people have been said will be solved with free community and state college. State and community college should be […]
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Reflections on the Worth of College and Student Debt
The unemployment levels for high school and college graduates alike have reached record heights. This surfaces the hugely controversial argument: Is college worth it? With student debt crossing detrimental lines and acceptance rates at all-time lows, many people are starting to lean towards the negative side of this ongoing argument. Although college does teach more than just the basics for scholastic intelligence, my beliefs have started to stray towards the negative side as well. Unless you need a college education […]
Why College Tuition should be Free
There are so many reasons why college should be free for everyone. First there would be fewer people that would need to have government assistance. Also with free college education there would be smarter people making better decisions that could help solve our most difficult challenges. Students won’t graduate without a job and $ 30,000 student loan debt. Finally, most jobs in today's society ethier need some kind of degree, or technical training of some sort. This is why I […]
Is College Worth the Expense?
This paper will be debating whether the cost of college is worth the expense. There are several factors that go into debating whether you should attend college or not. The stress associated with financing college in the United States has raised a big red flag for many people. Not only can college put you in debt, but it can also cause you a lot of stress. As many people know college is very pricey. You can go several thousand dollars […]
The Economic Burden: Analyzing the Impact of Student Debt on Individuals and Society
Within the realm of higher education, a looming specter casts its shadow—a financial burden that not only burdens individuals but also reverberates throughout society. Student debt, an omnipresent reality for many, holds sway over both personal finances and broader economic structures. To truly grasp the extent of this issue, one must navigate the intricate network of factors that contribute to the economic weight of student loans. At the heart of this issue lies the individual experience, where the repercussions of […]
Breaking the Chains: Strategies for Addressing and Alleviating the Student Debt Crisis
In the labyrinth of higher education, a formidable specter haunts the dreams of countless students: the student debt crisis. Like chains forged from the weight of financial obligations, it binds aspirations and stifles progress, leaving a generation burdened with unprecedented economic strain. Yet, amid this daunting challenge, lies a tapestry of innovative strategies waiting to be woven, promising liberation from the shackles of debt. Central to any effective approach is a deep understanding of the crisis's roots. The soaring cost […]
The Double-Edged Sword of Student Loans in Higher Education
In the expansive domain of advanced learning, the terrain is profoundly influenced by the availability and ramifications of student loans, a fiscal apparatus crafted to bridge the chasm between aspiration and actuality for multitudes aspiring toward tertiary education. While student loans have unquestionably unlocked doors for myriad individuals who may otherwise have been unable to afford college, they also carry ramifications that reverberate through diverse facets of access, affordability, enrollment rates, scholastic achievement, and post-graduation outcomes. This discourse delves into […]
How to Write an Essay About Student Debt
Understanding the issue of student debt.
Before writing an essay about student debt, it's essential to understand the extent and implications of this issue. Student debt refers to the money borrowed to finance higher education, which can include tuition, room and board, and other related expenses. Begin your essay by outlining the current state of student debt, including the average amount of debt per student and the total debt nationwide. Discuss the factors that have contributed to the rise in student debt, such as the increasing cost of college tuition, changes in government funding for education, and the broader economic context. It's also important to understand the impact of student debt on individuals, including its effects on financial stability, career choices, and mental health.
Developing a Thesis Statement
A strong essay on student debt should be centered around a clear, concise thesis statement. This statement should present a specific viewpoint or argument about student debt. For example, you might explore the socioeconomic implications of student debt, analyze the effectiveness of current loan forgiveness programs, or argue for a particular policy solution to address the student debt crisis. Your thesis will guide the direction of your essay and provide a structured approach to your topic.
Gathering Supporting Evidence
To support your thesis, gather evidence from various sources, such as economic studies, government reports, and personal testimonies. This might include data on the long-term financial impact of student debt, analysis of the demographic disparities in student debt, or case studies of individuals or communities particularly affected by it. Use this evidence to support your thesis and build a persuasive argument. Be sure to consider different perspectives and address potential counterarguments.
Analyzing the Impact of Student Debt
Dedicate a section of your essay to analyzing the impact of student debt. Discuss how it affects individual choices and opportunities, including career decisions, homeownership, and family planning. Consider the broader economic and social implications, such as the potential for student debt to exacerbate income inequality or influence economic growth. Also, explore the psychological effects of carrying large amounts of debt over a prolonged period.
Concluding the Essay
Conclude your essay by summarizing the main points of your discussion and restating your thesis in light of the evidence provided. Your conclusion should tie together your analysis and emphasize the importance of addressing student debt as a significant issue facing society. You might also want to suggest areas for future research, policy changes, or action steps to mitigate the impact of student debt.
Reviewing and Refining Your Essay
After completing your essay, review and refine it for clarity and coherence. Ensure that your arguments are well-structured and supported by evidence. Check for grammatical accuracy and ensure that your essay flows logically from one point to the next. Consider seeking feedback from peers, educators, or financial experts to further improve your essay. A well-written essay on student debt will not only demonstrate your understanding of the issue but also your ability to engage with complex economic and social topics.
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Is it fair to forgive student loans? Examining 3 of the arguments of a heated debate
Scott Horsley
Student loan borrowers stage a rally in front of The White House on Aug. 25 to celebrate President Biden cancelling student debt. The plan has sparked heated debate, including about its economic fairness. Paul Morigi/Getty Images for We the 45m hide caption
Student loan borrowers stage a rally in front of The White House on Aug. 25 to celebrate President Biden cancelling student debt. The plan has sparked heated debate, including about its economic fairness.
President Biden's plan to forgive hundreds of billions of dollars in student debt is sparking heated debate.
Biden last week announced plans to forgive up to $20,000 in federal student loan debt for Pell Grant recipients and up to $10,000 for others who qualify.
The news will provide relief for borrowers at a time when the cost of higher education has surged.
Student loan forgiveness is politically popular. But not all Democrats are on board
But critics are questioning the fairness of the plan and warn about the potential impact on inflation should the students with the forgiven loans increase their spending.
Here are three key arguments – for and against the wisdom of Biden's decision.
Raising living standards or adding fuel to inflation?
Undoubtedly, student debt is a big burden for a lot of people.
Under Biden's plan, 43 million people stand to have their loan payments reduced, while 20 million would have their debt forgiven altogether.
People whose payments are cut or eliminated should have more money to spend elsewhere – maybe to buy a car, put a down payment on a house or even put money aside for their own kids' college savings plan. So the debt forgiveness has the potential to raise the living standard for tens of millions of people.
Critics, however, say that additional spending power would just pour more gasoline on the inflationary fire in an economy where businesses are already struggling to keep up with consumer demand.
Inflation remains near its highest rate in 40 years and the Federal Reserve is moving to aggressively raise interest rates in hopes of bringing prices back under control.
Not all economists believe the debt forgiveness will do much to fuel inflation.
Debt forgiveness is not like the $1200 relief checks the government sent out last year, which some experts say added to inflationary pressure. Borrowers won't suddenly have $20,000 deposited in their bank accounts. Instead, they'll be relieved of making loan payments over many years.
President Biden announces student loan relief in the Roosevelt Room of the White House in Washington, D.C. on Aug. 24. Olivier Douliery/AFP via Getty Images hide caption
President Biden announces student loan relief in the Roosevelt Room of the White House in Washington, D.C. on Aug. 24.
Because the relief is dribbled out slowly, Ali Bustamante, who's with left-leaning Roosevelt Institute says Biden's move won't move the needle on inflation very much.
"It's just really a drop in the bucket when it come to just the massive level of consumer spending in our very service- and consumer-driven economy," he says.
The White House also notes that borrowers who still have outstanding student debt will have to start making payments again next year. Those payments have been on hold throughout the pandemic.
Restarting them will take money out of borrower's pockets, offsetting some of the additional spending power that comes from loan forgiveness.
Helping lower income Americans or a sop to the rich?
Another big point of contention has to do with fairness.
Forgiving loans would would effectively transfer hundreds of billions of dollars in debt from individuals and families to the federal government, and ultimately, the taxpayers.
Some believe that transfer effectively penalizes people who scrimped and saved to pay for college, as well as the majority of Americans who don't go to college.
They might not mind subsidizing a newly minted social worker, making $25,000 a year. But they might bristle at underwriting debt relief for a business school graduate who's about to go to Wall Street and earn six figures.
Students from George Washington University wear their graduation gowns outside of the White House in Washington, D.C, on May 18. Economists worry President Biden's plan to forgive student loans could encourage more people to take on debt in the hopes of also being forgiven. Stefani Reynolds/AFP via Getty Images hide caption
Students from George Washington University wear their graduation gowns outside of the White House in Washington, D.C, on May 18. Economists worry President Biden's plan to forgive student loans could encourage more people to take on debt in the hopes of also being forgiven.
The White House estimates 90% of the debt relief would go to people making under $75,000 a year. Lower-income borrowers who qualified for Pell Grants in college are eligible for twice as much debt forgiveness as other borrowers.
But individuals making as much as $125,000 and couples making up to $250,000 are eligible for some debt forgiveness. Subsidizing college for those upper-income borrowers might rub people the wrong way.
"I still think a lot of this benefit is going to go to doctors, lawyers, MBAs, other graduates that have very high earnings potential and may even have very high earnings this year already," says Marc Goldwein senior policy director at the Committee for a Responsible Federal Budget.
Helping those in need or making college tuition worse?
Goldwein also complains that the loan forgiveness doesn't address the larger problem of soaring college tuition costs.
In fact, he suggests, it might make that problem worse — like a Band-Aid that masks a more serious infection underneath.
For years, the cost of college education has risen much faster than inflation, which is one reason student debt has exploded.
And now what? The question that follows Biden's student loan forgiveness plan
By forgiving some of that debt, the government will provide relief to current and former students.
But Goldwein says the government might encourage future students to take on even more debt, while doing little to instill cost discipline at schools.
"People are going to assume there's a likelihood that debt is canceled again and again," Goldwein says. "And if you assume there's a likelihood it's canceled, you're going to be more likely to take out more debt up front. That's going to give colleges more pricing power to raise tuition without pressure and to offer more low-value degrees."
The old rule in economics is when the government subsidizes something, you tend to get more of it. And that includes high tuition and college debt.
- student debt forgiveness
- student loans
- student loan debt
- college tuition
Student Debt Crisis in America Exploratory Essay
Quality education is one of the major factors that guarantee future economic prosperity of various countries. Education improves the knowledge of people in the society. Higher education is one of the most important educational levels.
Heavy investments in education after the Second World War is one of the major factors that has made the U.S. be prosperous. Heavy investments in education and scientific research led to the economic boom of the U.S. in the second half of the twentieth century (Greenberg and Page 48).
However, there has been significant reduction of state funding on higher education over the past decade. This has led to skyrocketing of the higher education.
This has led to the creation of another problem. There has been a meteoric rise in student debt. Student debt poses a real threat to the current and future generations.
The number of Americans who receive college education has increased significantly in the past three decades. It has increased by more than 1000%.
Approximately 70% of students graduate with loans of more than $24,000. 10% of these students have loans of more than $54,000 (Johnson, Ostern and White 1).
African American and Latino students are the major groups that have huge student loans. The high debt burden of these students is because African Americans and Latinos families are less wealthy than white families.
Parents of white students can afford to provide financial support to their children. This forces African American and Latino students to rely heavily on student loans for their college education.
The debt burden of American students is more than $1 trillion (Johnson, Ostern and White 1). The global financial crisis is one of the major factors that have led to the rapid increase in student loans.
During the global financial crisis, there was a significant increase in the enrolment of students in different colleges. This led to a significant increase in the number of students who borrow money to finance their education.
Reduced state funding for higher education is also one of the major factors that has led to a significant increase in student loans. State funding helps in making the cost of college tuition affordable (Sreenivasan 278).
Therefore, reduced state funding necessitated colleges to increase the cost of tuition. The increase in the cost of college tuition necessitated students to borrow money to finance their education.
The high cost of college tuition made it difficult for families to rely on savings, grants, or scholarships to finance the education of their children.
Since education is one of the major factors that led to economic prosperity of the U.S., reducing state funding on education may reduce the competitiveness of the U.S. in the global market (Greenberg and Page 48).
The global financial crisis had a direct effect on the increase in student loans. It reduced the value of endowment funds of colleges. This reduced the amount of scholarships and grants that colleges offered students.
In addition, the global financial crisis reduced the amount of money that the federal government offered institutions of higher education (Johnson, Ostern and White 1). These factors necessitated students to borrow more money to finance their education.
A significant increase in the number of for-profit colleges has also contributed to the significant increase in student loans. For-profit colleges collaborate with private lenders. They market the loans directly to students.
This practice makes students obtain loans without knowing all their options (Johnson, Ostern and White 2). This has made students incur unmanageable loans.
After graduating, students have to repay the loans. Repaying the loans is very challenging. Repaying the loans may burden the students and their families for decades. This poses a threat to the current and future generations.
These loans limit the ability of the students to build successful careers. In addition, it increases the financial burden of their families.
In some instances, the huge student loans may force students to take low paying jobs. The students may be unable to wait for high paying jobs. Taking the low paying jobs, which are readily available, enables the students to stop the payments and interests from increasing significantly.
This practice reduces the number of graduates who are willing to start businesses. This has a negative effect on the U.S. economy.
The income of graduates who have federal loans determines their monthly repayments. However, this option is not available to graduates who have private loans (Maeda 261).
A significant increase in the cost of college tuition has increased the financial burden of students and their families. In some instances, students turn down admissions in colleges that they desire since they are unable to raise fees for the colleges.
In addition, inability to raise college fees may force students to delay or fail to attend college. Thousands of students leave college without a degree annually (Johnson, Ostern and White 2). This is despite the fact that they may have huge student loans.
Despite the fact that higher education has many problems, it is a fact that higher education is vital. People who have a college degree are more likely to find employment that people who have only a high school diploma. College education is usually a pathway to future financial prosperity.
In addition, college education provides students with skills that are vital in the development of the American economy.
Greenberg, Edward and Benjamin Page. The struggle for democracy . 11 th ed. 2013. Upper Saddle River, NY: Longman. Print.
Johnson, Anne, Tobin Van Ostern and Abraham White. The student debt crisis , Washington, DC: Center for American Progress, 2012. Print.
Maeda, Martha. How to wipe out your student loans and be debt free fast: Everything you need to know explained simply , Ocala, FL: Atlantic Publishing Company, 2009. Print.
Sreenivasan, Jyotsna. Poverty and the government in America, 2-volume set: A historical encyclopedia , Santa Barbara, CA: ABC-CLIO, 2009. Print.
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Student debt cancellation should consider wealth, not income
As enrollment numbers and tuition at higher education institutions grow, the rise in student debt is outpacing both. According to the Pew Research Center , from 1993 to 2012, the share of students taking out loans to finance their degrees rose from roughly half (49%) to over two-thirds (69%), with no indication of slowing. Over the same period, the average loan amount grew from $12,434 to $26,885, and surpassed $30,000 in 2020 —a nearly three-fold increase in the last three decades.
About the Authors
Andre m. perry, senior fellow – metropolitan policy program, research assistant – metropolitan policy program.
If wages and wealth were growing at similar rates, this rise in the cost of education might not be a problem. But the rise in the cost of tuition has outpaced the rise in wages and overall inflation . As more students take out more loans at higher amounts, the issue of student debt—and proposals to mitigate it—has taken greater prominence in national policy debates. The problem is especially pertinent for Black households, for whom a lack of generational wealth risks making student debt a long-term financial burden.
After graduation, loans quickly balloon , delaying or even preventing Black Americans from building wealth. According to our analysis of the Census Bureau’s 2018 Survey of Income and Program Participation (SIPP), there is a significant wealth disparity between Black and non-Black people at every age group, and Black people are not building wealth at the same pace as their non-Black peers, particularly in their prime working ages. Black households’ economic position is often precarious, and defaulting can actively jeopardize their financial health. Yet when we talk about student debt cancellation , rarely is that conversation centered on the experiences of Black Americans—missing a significant part of the problem.
Based on an analysis of the 2018 SIPP, we argue that because student debt disproportionately harms the wealth-poor—and the Black wealth-poor in particular—student debt cancellation could be a powerful tool in dismantling institutional discrimination and shrinking racial wealth disparities if implemented correctly.
We compare the effects of cancelling debt against the status quo, and at three different levels of intervention: 1) $10,000 cancelled for all (as President Joe Biden has proposed ); 2) up to $50,000 cancelled based on means-testing for households earning under $100,000 and a sliding scale cancellation for households earning up to $250,000 (as Sen. Elizabeth Warren [D-Mass.] has proposed ); and 3) total debt cancellation (as Sen. Bernie Sanders [I-Vt.] has proposed ). As might be expected, we find that the more student debt that is cancelled, the greater the effect increasing Black wealth, particularly for households below the wealth median.
In this paper, we center the Black experience in our consideration of student loan debt and draw from our own analysis to argue for debt cancellation that is not means-tested (predicated upon household income) as an important mechanism for closing the racial wealth gap.
The rise in student debt is not hitting American families equally
Education has long been heralded as the solution to the racial wealth gap. But as our colleague Darrick Hamilton notes , “Higher education is associated with greater wealth within race groups, but more education will not solve the problem of racial wealth disparity.”
That may be because of student debt, which exacerbates the racial wealth gap born from systemic racism leveled against Black families. A 2019 study from The Journal of Consumer Affairs found that, as of 2016, student debt accounted for between 3% and 7% of the racial wealth gap, and that student debt was growing.
Critics of student debt cancellation often focus on the higher income earnings of professionals. Our Brookings colleagues, for instance, argue that debt cancellation is a regressive policy that unfairly and disproportionately aids already affluent individuals at taxpayers’ expense.
But these broadside critiques often miss three key details in the labor market. First, an American Economic Association study showed that while individuals with student loans do have higher incomes, they do not have statistically significant higher hourly wages, suggesting that student debt is forcing loan holders to work longer hours. Second, student debt pushes graduates to choose work they are less passionate about and away from public interest careers that offer lower salaries relative to corporate work. Third, a study in the Economics of Education Review shows that recent graduates with student debt take jobs that have higher initial salaries but lower potential wage growth.
Critics of student debt cancellation also misrepresent who borrows and who holds federal student debt. According to our Brookings colleagues , Black borrowers typically owe 50% more in student debt upon graduation than their white peers. Four years after graduation, this gap increases to 100%. While poor and Black households’ student debt increases, nonbank marketplace lenders like Splash Financial and SoFi offer lower refinance rates to low-credit-risk households . By targeting the student debts of the highest-income and highest-net-worth households, private companies have forced the federal government to hold the highest-risk loans (those held by lower-income and low-wealth households), according to the Congressional Budget Office . So, by cancelling federal student debt, lawmakers are ipso facto aiding low-wealth households.
Race and class dynamics place the heaviest loan burden upon low-wealth families, particularly low-wealth families of color. A JPMorgan Chase study found that 13% of Black borrowers are projected to never pay off their loans because the compounding interest outpaces their ability to pay down the principal. As the Education Trust reports , “a Black bachelor’s degree recipient is more likely to default than a White college dropout, and Black borrowers from families in the highest income quintile have higher default rates than White borrowers in the lowest income quintile.”
According to our Brookings colleagues , 37.5% of Black borrowers will default at some point, compared to 12.4% of white borrowers. Additionally, majority-Black ZIP codes tend to have higher student loan borrowing rates and larger balances compared to majority-white ZIP codes, which means that the aggregate impact of loans depresses whole communities—not just individuals.
As the nation recovers from the COVID-19-induced economic recession in the coming years, it will be helpful to look back at what helped and hindered the last recovery. A study from the Federal Reserve Bank of St. Louis showed that student debt harmed the recovery from the Great Recession. One reason is that households build wealth during and after recoveries through home equity—the largest driver of net worth for the typical family. But a study from the Federal Reserve Board found that an increase in student debt is inversely correlated with home ownership rates. And a working paper from Washington University in St. Louis’ Center for Social Development found that households with student debt had a projected $54,334 less in home equity than households without student debt, even after accounting for differences in age, income, occupation, marriage, race, and health status.
Key distinctions in different student debt cancellation proposals
In recognition of the vast sums of student debt and their economically restrictive and socially inequitable effects, numerous policy recommendations from major political contenders have surfaced over recent years. Sen. Sanders, Sen. Warren, and Vice President Kamala Harris each rolled out proposals during the Democratic presidential primaries, and now the Biden administration is prepared to push for action as well.
- Sen. Sanders’s plan was the most expansive, proposing to cancel all $1.7 trillion of the nation’s student debt in a one-time action.
- Sen. Warren’s plan was more targeted, offering a tiered approach based on income. Borrowers earning less than $100,000 per year would be eligible for a maximum of $50,000 in relief, with a gradually decreasing benefit for those with incomes between $100,000 and $250,000. No relief would be offered to those earning over $250,000 annually.
- Vice President Harris’ plan offered up to $20,000 in relief to entrepreneurs in disadvantaged neighborhoods who were Pell Grant recipients. Practically speaking, the Harris plan was a community development proposal that used debt cancellation as a tool to support small businesses, but was not a student debt relief plan in its own right.
Are any of these proposals possible? With a majority in the Senate, Democrats could pass a measure on student debt through the once-yearly process of budget reconciliation , or President Biden could use the power of the executive to waive debt held by the federal government. However, Democrats are currently not treating the issue as a top priority for the budget reconciliation process (which is a limited tool), and Biden himself has expressed skepticism that his executive power should be used in this way.
Instead, Biden has called on Congress to cancel $10,000 in debt for borrowers, which would be wide in scope but a thin amount compared to the average debt held by most students, particularly Black students. The Biden plan would have significant impact for many families (according to a study done by the Obama White House , two-thirds of defaults occurred in households with less than $10,000 in student debt), but it would not have the ameliorative racial wealth effects that larger cancellation policies would have. Because the effects of student debt disproportionately lie along lines of race and wealth, any debt cancellation effort would do well to consider the effect of intergenerational wealth on student debt. If implemented correctly, student debt cancellation could be a powerful tool in dismantling institutional discrimination by shrinking racial wealth disparities.
Cancelling student debt has the greatest effect for low-wealth households
Our examination of wealth data shows the effect of debt cancellation on the overall net worth of Black households across different metrics. In order to calculate differences in household wealth, we use the standard procedure for transforming wealth data—making possible comparisons between positive and negative values. The downside in using this standard transformation is that it overstates differences between positive and negative net worth households. Using this method, we follow the study by the Jain Family Institute showing the effects of student debt cancellation across net worth percentiles. By showing the effects across net worth percentiles, we can show the distributional effects of student debt cancellation for all households, not just the median.
Because we use the 2018 SIPP, our estimates of total debt are slightly different than the often-cited estimates from the Federal Reserve Board’s monthly report on consumer credit. Our data underestimates the total amount of student debt held. This happens for two reasons. First, this occurs because much of the nation’s total student debt is held by individuals not considered to be part of “households”—for example, because of how “households” are defined in surveys like the SIPP and the Survey of Consumer Finances, independent young adults are weighted for the entire young adult population and young adults who live with their parents are discounted . Second, many households that hold student debt are young and of color—groups that are harder for surveyors to get accurate measures for.
We find that households held just over $1 trillion in student debt in 2018. According to the Federal Reserve Board’s monthly report on consumer credit, in the third quarter of 2020 (the most recent data available), there are $1.7 trillion in student loans owed and securitized. Despite our lower estimate, we still find that student debt is a larger source of household indebtedness than credit card and vehicle debt.
Taking out student loans is an attractive offer for many people because households with a college-educated head of household tend to have a higher net worth. If heads of households with a bachelor’s degree have positive net worth (indicating lower debts and higher asset ownership), they have significantly higher wealth than their counterparts without a college degree. In our analysis of households with a bachelor’s degree at every wealth percentile, non-Black households below the 11th percentile and Black households below the 28th percentile have zero or negative net worth. And for these wealth-negative households, those with a non-college-educated head of household actually have more wealth than those with a college-educated head of household, due to a lower debt burden (see Figure 2).
Two key data findings bolster our claim that student debt disproportionately harms wealth-poor households and, in particular, wealth-poor Black households. First, we find that more than half of all student loan debt is held by households that have a zero or negative net worth (see Figure 3).
Second, we find that of households with student debt, 52% of Black households and 32% of non-Black households have zero or negative net worth. Of households without student debt, 25% of Black households and 9% of non-Black households have zero or negative net worth. Households with student debt have lower net worth than households without student debt at every percentile.
To examine the effects of different debt cancellation policies, we plotted Black and non-Black households’ net worth and wealth percentile. By examining household net worth at every wealth percentile, we show that cancelling debt shifts wealth up across the distribution. This shift disproportionately helps wealth-poor Black households (see Figure 5 below).
We also plotted the numerical difference between Black and non-Black household net worth, meaning non-Black household net worth minus Black household net worth at every wealth percentile. We find that when all student debt is cancelled, the numerical difference between the wealth of non-Black and Black households shrinks for households between the second and 20 th percentiles. But for households at the first percentile and between the 21 st and 54 th percentiles, cancelling all student debt increases the numerical difference between Black and non-Black wealth. For households above the 50 th percentile, the numerical difference is negligible (see Figure 6 below).
While the numerical difference does increase for some households, this does not imply that cancelling all student debt would increase the relative difference between Black and non-Black households. In most conversations about the racial wealth gap, the relevant metric is the wealth ratio—e.g., when our colleagues wrote that “The median white household has a net worth 10 times that of the median Black household.”
We plotted the ratio of the racial wealth gap at every wealth percentile to examine the relative effects of debt cancellation. As previously discussed, the transformation used on the wealth data overstates differences when comparing between positive and negative values. Due to the transformation, the ratio of non-Black wealth to Black wealth spikes above 1 million where Black households have zero or negative wealth and non-Black households have positive wealth. Under the different cancellation plans, this spike shifts to the left and narrows due to more Black households becoming wealth-positive under the debt cancellation plans. In contrast with the finding that the numerical difference between Black and non-Black households only decreases for some, we note that that debt cancellation has the broad effect of reducing the wealth gap ratio at different wealth percentiles. Further, we find that the more debt is cancelled, the greater the racial wealth gap is reduced (see Figure 7 below).
Americans like to think that if individuals are educated in great schools, they can pull themselves up by their proverbial bootstraps and bring their families with them. From childhood, we’re told that we can achieve middle-class status if we work hard in school and get good grades, no matter if obstacles such as bad policing, weak labor markets, and discriminatory housing policies litter our path. We believe that a good education can propel us past those barriers, and we can surpass our parents’ social standing.
But many Black college graduates are not surpassing their parents in wealth and improving their chances of achieving the American Dream. The reality is that wealth, not education, is what makes the difference. Wealth-poor Americans are disproportionately straddled with student debt, as people without means attempt to use education to increase their economic mobility but go into debt in the process.
Many continue to argue that student debt isn’t a problem for high-income earners and only those with low incomes should receive debt cancellation. And certainly, people with a college degree have higher incomes than those without one. But non-Black households with some college but no degree have a higher median net worth than Black households with advanced degrees. Black households’ ability to achieve that American dream via education and higher incomes is throttled by high debt and the lack of intergenerational wealth. Consequently, income doesn’t necessarily reveal the extent of the student debt crisis for Black Americans.
Many of our public programs are income-based means-tested, affecting households differently dependent on their incomes. For Black households, these tests unfairly ignore the intergenerational wealth accumulation that they have been denied. As President Biden considers debt cancellation policies, he should consider the wealth disparities created by anti-Black policies of the past.
As we highlight the problems with using income-based means tests and the importance instead of considering wealth, we should note that this does not suggest that wealth-based means tests are the solution. It would be incredibly difficult and inefficient to build a wealth-based means test—but we ought to design our public programs with their effects on wealth in mind. Federal student debt cancellation and free universal public college—so Black students are not straddled with debt in their attempts to achieve the American dream—are examples of programs that, if adopted, would not need to have means tests in order to have ameliorative effects on the racial wealth gap.
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Just as we score policies’ budget impact, we should score for racial equity as well
Among his first acts in office last week, President Joe Biden signed an executive order to advance racial equity, declaring that the nation must take a “a systematic approach to embedding fairness in decision-making processes.” While this policy action shows that Biden heard the demands from his base, the failed insurrection at the Capitol on […]
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Student Debt Is Crushing. Canceling It for Everyone Is Still a Bad Idea.
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The astronomical level of student debt accrued in the United States is inflicting lasting, generational damage on the lives of millions of Americans. More than 45 million people are now carrying more than $1.7 trillion in debt, most of it owed to the federal government.
The burden of that debt is crushing and follows borrowers throughout their lives: It is delaying marriage and home buying and the birth of children. It leaves some students broke on the day after graduation. Others labor for years only to find their balances larger than when they graduated. Lower-income students who must borrow heavily to obtain that degree can end up earning middle-class incomes without being able to lead middle-class lives. Around 40 percent of borrowers never graduate from school in the first place. And a third of the debt will never be paid off, according to the Department of Education.
The Biden administration should spend its finite resources and political capital on fixing the higher education system to make it more affordable while helping those borrowers in the most distress. There are already ways to do this, although they have not gotten nearly enough attention or resources.
Canceling student debt across the board is not one of them. Trying to fix such a shattered system with the flick of a pen on an executive order could even make it worse. Canceling this debt, even in the limited amounts that the White House is considering, would set a bad precedent and do nothing to change the fact that future students will graduate with yet more debt — along with the blind hope of another, future amnesty. Such a move is legally dubious , economically unsound , politically fraught and educationally problematic .
As a candidate, Mr. Biden said he supported congressional action to tackle student debt. Legal experts disagree about whether the president has the authority to cancel student loan debt through an executive order, as the White House is now considering. That raises the possibility that this issue could be dragged out in the courts for years.
All told, 79 million American adults have had student loans at some point. Nearly half have paid them off entirely. Waiving $10,000 in student debt, the amount Mr. Biden proposed during his presidential campaign, could clear the books of as many as 15 million of the more than 45 million Americans who still owe borrowed money for school. Proponents of debt cancellation argue that Democrats need to deliver on a campaign promise to a key constituency, and it may well be politically advantageous for them to do so before the midterm elections, when turnout of the Democratic base will be critical to the party’s success. But if the Biden administration puts forward a plan that voters do not regard as fair, the party could face a backlash at the polls.
Since Mr. Biden took office his Department of Education has taken several important steps to alleviate some of the burden of loans for borrowers who are unable to pay and forgiven the debts of some students defrauded by for-profit schools. Throughout the pandemic, borrowers have been forgiven the interest that accrued on their loans each month in addition to not having to pay down the principal of the loan. The Biden administration has extended the pause several times, and it is now set to expire on Aug. 31.
The moratorium on payment of federal loans, which make up more than 90 percent of all student debt, has already cost $100 billion and has canceled the equivalent of $5,500 in debt per borrower.
The White House is considering various proposals for debt cancellation, possibly with income-based limits for eligibility. Such limits are crucial, because they direct the help to those most in need. An across-the-board cancellation would be tremendously regressive , according to an analysis by the Brookings Institution. Most debt is held by higher-income households, and so any amount of universal forgiveness will benefit them disproportionately. In fact, the growth of student debt for graduate school — held by students whose degrees will offer them the greatest future earning potential — is a major driver of overall student debt. Graduate students account for some 37 percent of all federal student debt, and there is a lucrative return on investment for getting certain advanced degrees.
Federal repayment plans adjust monthly payments based on income and family size and extend repayment periods. Debts are eligible for forgiveness after 10, 20 or 25 years of payments. Around 30 percent of all borrowers with federal loans are in such a program, and more borrowers could benefit from participating in one.
But the repayment programs have a poor track record. Not long ago, fully 98 percent of people who applied to have their debts waived had their claims rejected . A report from the Government Accountability Office in March found that millions of dollars in student debt could already have been forgiven if the programs had been administered properly. Richard Cordray, the chief operating officer at Federal Student Aid, an Education Department agency, called the failure “ really inexcusable .”
The Education Department has been working to fix these programs by retroactively giving qualified borrowers more credit for time spent in public service and hoeing through a backlog of paperwork, but it could do more. Additional changes to income-based repayment programs — such as reducing interest payments, lowering eligibility standards and exempting forgiven student loan debts from taxation — could have big impacts over time, according to a report from Pew. Congress and the Education Department should look to such changes as part of a more sustainable solution to the debt problem.
Lawmakers should also consider making it easier to discharge student loans through bankruptcy , a measure of relief that is available for credit card and mortgage debt. Changes to bankruptcy law in 2005 have also made those protections less accessible.
The Education Department has started a long overdue crackdown on predatory schools, another significant source of student debt defaults. The Obama administration tightened the rules on for-profit schools, but the Trump administration’s Education Department, under Betsy DeVos , relaxed those rules and let repayment and forgiveness programs atrophy. Last month the department discharged $238 million in debt held by 28,000 people who attended the Marinello Schools of Beauty, which closed in 2016. The school engaged in “pervasive and widespread misconduct,” a department investigation found.
Since 2021 the Biden administration has approved more than $18.5 billion in loan discharges for more than 750,000 borrowers, including $6.8 billion for 113,000 people in the Public Service Loan Forgiveness Program and $8.5 billion for more than 400,000 borrowers with total and permanent disabilities. The administration is also pushing to double the maximum Pell Grant and restore a rule that holds schools accountable for the gainful employment of their graduates — a measure aimed at for-profit colleges.
Those moves are all to the good, addressing the student debt crisis with policies that are both compassionate and fair.
They will not, however, solve structural inequalities like the racial wealth gap. Supporters of debt forgiveness argue that targeted relief is inadequate and that broader relief would help to close the gap. Black college graduates, on average, owe $25,000 more than their white peers. More than half of Black borrowers report that their net worth is less than the balance of their student loans. And Black borrowers are more likely than their white peers to drop out of school before receiving a degree.
But across-the-board debt forgiveness will not help. As a recent report from the Brookings Institution concluded, only targeted policies based on race or socioeconomic status “can address the inequities caused by federal student lending programs.”
While inflated college tuitions are part of the reason for the rise in student debt — average student debt is now up to $36,800 from $24,700 a decade ago — it bears noting that the number of students receiving loans to attend college has also increased. In other words, American students keep borrowing to attend college because a degree still offers the promise of prosperity. The Biden administration should focus on confronting the problems with college affordability and loan repayment so more students and graduates have a better chance at that prosperity.
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The Economics of Administration Action on Student Debt
Higher education financing allows many Americans from lower- and middle-income backgrounds to invest in education. However, over the past 30 years, college tuition prices have increased faster than median incomes, leaving many Americans with large amounts of student debt that they struggle or are unable to, pay off.
Recognizing the burden of this debt, the Biden-Harris Administration has pursued two key strategies for debt reduction and cancellation. The first, student debt relief (SDR), aims to address the ill effects of flaws in the student debt system for borrowers. The second, the SAVE plan, reforms the federal student loan system, improving student loan affordability for future students and providing current graduates with breathing room during the beginning of a new career.
This issue brief examines the factors that precipitated the current student debt landscape, and details how both SDR and SAVE will enhance the economic status of millions of Americans with student debt: enabling them to allocate more funds towards basic necessities, take career risks, start businesses, and purchase homes. This brief highlights credible research, underscoring how the Administration’s student debt relief could boost consumption in the short-term by billions of dollars and could have important impacts on borrower mental health, financial security, and outcomes such as homeownership and entrepreneurship. This brief also details how the SAVE plan makes repaying college costs more affordable for current borrowers and future generations. CEA simulations show that, under SAVE, an average borrower with a bachelor’s degree could save $20,000 in loan payments, while a borrower with an associate degree could see nearly 90 percent savings compared to the standard loan repayment plan. These changes enable more people to pursue education and contribute to the broader economy.
Why do borrowers need relief?
Over the last 20 years especially, the sticker price of college has risen significantly. Despite recent minor declines, sticker prices at public universities (which over 70% of undergraduate students in the United States attend) are 56% higher today than two decades ago. [1] While there are many reasons for this trend, the most rapid increases in tuition often occur during economic downturns as tuitions grow to fill the budgetary holes that are left when states cut their support to public colleges ( Webber, 2017 ; Deming and Walters 2018 ). This is especially problematic given many people choose to return to school during economic downturns ( Betts and MacFarland 1995 ; Hillman and Orians 2013 ). Unfortunately, contracting state appropriations have played a role in shifting the responsibility of financing away from public subsidies and toward students and families ( Turner and Barr, 2013 ; Bound et al., 2019 )–leading many students to take on more debt.
At the same time that college sticker prices have risen, the wage premium (the earnings difference between college goers and high school graduates) has not seen analogous growth. While obtaining a college degree remains a reliable entry point to the middle class, the relative earning gains for degree holders began to stagnate in the early 2000s after increasing for several decades. As shown in Figure 1b, since 2000, the wage premium for both bachelor’s degree holders and those with “some college” education (which includes anyone who enrolled in college but didn’t earn a BA) saw declines around the 2001-02 and 2008-10 recessions and a slow, inconsistent recovery thereafter. The decline is particularly notable for students who didn’t complete a four-year degree, a group that includes two-year college enrollees who have among the highest student loan default rates. [2]
Traditional economic theory tells us that individuals choose to invest in post-secondary education based on the expected costs and wage returns associated with the investment. But rapid and unforeseeable rises in prices and declines in college wage premia have contributed to decades of “unlucky” college-entry cohorts affected by a form of recessionary scarring . For example, a student who entered college in 2006 would have expected a sticker price of roughly $8,800 per year for a four-year college, but actually faced tuition of over $10,000 in their final year of college, a roughly 15% difference. This same student, upon graduation if they worked full time, would have earned about $3,500 less, on average, than what they would have expected upon entering. This example illustrates that many borrowers made sound borrowing decisions with available information, but as a result of these trends ended up with more debt than they could afford to pay off. [3] Consistent with this notion, the default rate for “unlucky” college entry cohorts of the 2000s is much higher than those of other cohorts, with undergraduate default rates doubling between 2000 and 2010: in 2017, 21 percent of undergraduate loan holders and 6 percent of graduate loan holders defaulted within 3 years ( CBO, 2020 ).
It is important to note that sticker prices for public institutions have declined 7 percent since 2021, the same period over which college wage premiums have been rising. Declining tuition, for the first time in decades, coincided with increased investment in higher education through pandemic-era legislation such as the American Rescue Plan, which allocated $40 billion in 2021 to support institutes of higher education and their students. Despite these improvements, as well as significant advances in the return on college investments over the last three years, many current borrowers still need some relief. The Administration has taken significant action to protect future cohorts from similar risks.
How the Administration is providing relief
Retrospective: Student Debt Relief Helps Existing Borrowers
In a commitment to help those who are overburdened with debt, the Administration has already approved Federal student debt cancellation for nearly 4 million Americans through various actions. Today , the Administration announced details of proposed rules that, if finalized as proposed, would provide relief to over 30 million borrowers when taken together with actions to date.
Importantly, much of this debt forgiveness comes from correcting program administration and improving regulations related to laws that were on the books before this Administration took office. This debt relief has affected borrowers from all walks of life, including nearly 900,000 Americans who have dedicated their lives to public service (such as teachers, social workers, nurses, firefighters, police officers, and others), borrowers who were misled and cheated by their institutions, and borrowers who are facing total or permanent disability, including many veterans. By relieving these borrowers of long-held, and in some cases very large burdens of debt, relief can have significant meaning and impact for borrowers, families, and their communities.
By reducing debtors’ liabilities, debt relief raises net worth (assets, including income less liabilities). Debt relief can also ease the financial burden of making payments—leading to greater disposable income for borrowers and their families, which enhances living standards and could positively influence decisions about employment, home buying, and mobility. While there are few direct estimates of the effect of debt cancelation in the literature, estimates based on the relationship between wealth and consumption suggest that this forgiveness could increase consumption by several billions of dollars each year in the next five to ten years.
Additionally, a recent study suggests that student debt cancellation can lead to increased earnings (due to greater geographic and career mobility), improved credit scores, and lower delinquency rates on other debts ( Di Maggio, Kalda, and Yao, 2019 ). This can facilitate access to capital for starting a business or buying a car or home. As home mortgages often require a certain debt-to-income ratio and depend heavily on credit scores, student debt cancellation could potentially increase home ownership. Indeed, based on the mechanical relationship between housing industry affordability standards and debt-to-income ratios, industry sources have suggested that those without student debt could afford to take out substantially larger mortgages ( Zillow, 2018 ). Other research also indicates a negative correlation between student loan debt and homeownership ( Mezza et al., 2020 ).
It is important to note that, while these pecuniary benefits are important, the benefits associated with debt relief are not merely financial. Experimental evidence has linked holding debt to heightened levels of stress and anxiety ( Drentea and Reynolds, 2012 ), worse self-reported physical health ( Sweet et al., 2013 ), and reduced cognitive capacity ( Robb et al., 2012 ; Ong et al., 2019 ). Studies also show that holding student debt can be a barrier to positive life cycle outcomes such as entrepreneurship ( Krishnan and Wang, 2019 ), and marriage ( Gicheva, 2016 ; Sieg and Wang, 2018 ). Student debt relief has the potential to improve these key outcomes for millions of borrowers.
Prospective: The SAVE Plan Helps Prevent Future Challenges
To address unaffordable education financing moving forward, the Administration has also introduced the Saving on a Valuable Education (SAVE) loan repayment program. The SAVE plan prospectively helps student borrowers by ensuring that once they graduate, they never have to pay more than they can afford towards their student loan debt. Importantly, the SAVE plan protects borrowers from being “unlucky” by ensuring that high tuition or low earnings do not result in loan payments that borrowers can’t afford. The CEA has detailed the real benefits of SAVE for borrowers in issue briefs and blogs , underscoring that SAVE is the most affordable student loan repayment program in U.S. history. By substantially reducing monthly payment amounts compared to previous income driven repayment (IDR) plans and reducing time to forgiveness to as little as 10 years for people who borrowed smaller amounts, the SAVE plan can mean tens of thousands of dollars in real savings for borrowers over the course of repayment.
Figure 2 gives the example of two representative borrowers. Take the first, a 4-year college graduate who has $31,000 in debt and earns about $40,500 per year. Under a standard repayment plan, this borrower would pay roughly $330 dollars each month for 10 years. Under SAVE, this borrower would pay about $50 per month for the first ten years, and on average about $130 per month for the next 10 years. Over a 20-year period, this borrower would make roughly $17,500 less in payments, not accounting for inflation over that period. This represents a 56 percent reduction in total payments compared to the standard repayment plan and includes considerable loan forgiveness. Similarly, the representative 2-year college graduate has $10,000 in debt and earns about $32,000 per year. Under a standard plan, this borrower would pay $110 dollars each month for 10 years. Under SAVE, this borrower would pay $0 per month for the first two years, and under $20 per month for the next eight years before their debt is forgiven at year 10. Overall, this borrower would be responsible for roughly $11,700 less in lifetime payments, not accounting for inflation. This borrower sees nearly 90 percent savings compared to the standard plan and receives considerable loan forgiveness.
SAVE can also have benefits beyond the individual borrower. More money in borrowers’ pockets due to lower payment obligations under SAVE could boost consumption and give borrowers breathing room to make payments on other debt. This consumption effect is bolstered by a large literature documenting the benefits of easing liquidity constraints (see, for example, Aydin, 2022 ; Parker et al., 2022 ). Additionally, by shortening time to forgiveness for undergraduate borrowers, SAVE can lead to positive debt-relief outcomes (as discussed above) for many more borrowers.
Another key aspect of income-driven repayment plans like SAVE is that they protect borrowers from having to make large payments when incomes are low. Specifically, the required payments are not based on the initial loan balance, but on one’s income and household size so that those cohorts who need to borrow more to pay for college do not make larger payments unless they make more income. SAVE also protects more of a borrower’s income as discretionary and, when the full plan is implemented in Summer 2024, will limit monthly payments on undergraduate loans to 5 percent of discretionary income. In fact, for single borrowers who make less than $33,000 per year, the required monthly payments will be zero dollars. From a finance perspective, the SAVE plan provides a form of insurance against tuition spikes and economic downturns–taking some of the risk out of investing in one’s education while also bringing costs down.
A common concern, and one that could mute these benefits, is that increases in the generosity of education financing may encourage institutions to raise tuition and fees in response, a phenomenon commonly referred to as the Bennett Hypothesis (for an excellent overview of research, see Dynarski et al., 2022 ). Theoretically, in a market when sellers are maximizing profits, any policy that increases demand will also increase prices. However, this is less likely to impact the over 70% of U.S. undergraduates who attend public colleges, which are not profit-driven and often have statutorily set tuition. Consistent with this notion, the evidence in support of the Bennett Hypothesis primarily comes from for-profit colleges, which are highly reliant on students who receive federal financial aid ( Cellini and Goldin, 2014 ; Baird et al, 2022 ). [4] Importantly, although the for-profit sector enrolls some of the country’s most vulnerable students, enrollment in the sector in 2021 accounted for only 5 percent of total undergraduate enrollment, suggesting that aggregate tuition increases in response to changes in education financing may be modest. Furthermore, the Biden-Harris Administration has taken action to crack down on for-profit colleges that take advantage of, or mislead, their students. And, recent regulations, such as the Gainful Employment ( GE ) rule, add safeguards against unaffordable debt regardless of more generous education financing.
Although the SAVE plan stands to benefit borrowers of all backgrounds, the plan has important racial and socioeconomic equity implications because it is particularly beneficial for those borrowers with the lowest incomes. Centuries of inequities have led to Black, Hispanic, and Native households being more likely than their White peers to fall in the low end of the income distribution. This means that, mechanically, the SAVE plan’s benefits could accrue disproportionately to these groups. Indeed, using completion data from recent years, an Urban Institute analysis estimates that 59 percent of credentials earned by Black students and 53 percent of credentials earned by Hispanic students are likely to be eligible for some amount of loan forgiveness under SAVE, compared to 42 percent of credentials earned by White students ( Delisle and Cohn, 2023 ). Finally, the interest subsidy described in an August 2023 CEA blog , prevents ballooning balances when a borrower cannot cover their entire monthly interest payment, a phenomenon that has historically led to many borrowers in general, and Black borrowers in particular, to see loan balances that are higher than their original loan amount, even several years out from graduating with a bachelor’s degree ( NCES, 2023 ).
Broader economic impacts
The benefits associated with SDR and SAVE for millions of Americans are considerable. In the short run, under both SDR and SAVE, those who receive relief may be able to spend more in their communities and contribute to their local economies. Summing the likely consumption effects of the Administration’s student debt relief and SAVE programs results in billions of dollars in additional consumption annually. Despite the modest effect on the macroeconomy as a whole (note that the U.S. economy is roughly $28 trillion with a population of roughly 320 million), these consumption effects represent incredibly meaningful impacts on individual borrowers’ financial security and the economic wellbeing of their communities.
SAVE, because it brings down the cost of taking out loans to go to college, has the potential to lead to longer-term economic growth if it leads to greater educational attainment. This increased attainment can occur both through improved retention and completion of post-secondary education, and also the movement of students into college who would not have otherwise enrolled. There is a long macroeconomics literature linking educational attainment in a nation to GDP growth (see, for example, Lucas, 1988 ; Hanushek and Woesmann, 2008 ). While identifying the causal effect of schooling on GDP is challenging, researchers, using a variety of approaches, find that a one-year increase in average education (for the entire working population) would increase the real GDP level by between 5 and 12 percent ( Barro and Lee, 2013 ; Soto, 2002 ) —a result that is in line with the micro-founded relationship between years of education and earnings ( Lovenheim and Smith, 2022 ).
To put this relationship in perspective and highlight the growth potential of increasing educational attainment, the CEA simulated the hypothetical effect on GDP of increasing the college-going rate by 1, 3, and 5 percentage points, respectively. This range represents the kinds of changes in college going that have been observed over several years: the college enrollment rate for 18- to 24-year-olds declined 4 percentage points between 2011 and 2021 after increasing by 6 percentage points between 2000 and 2011 ( NCES 2023 ). CEA simulations show that by 2055, a policy that increased the college going rate by 1, 3, and 5 percentage points could increase the level of GDP in 2055 (thirty years from now) by 0.2, 0.6, and 1 percent respectively. This represents hundreds of billions of dollars of additional economic activity in the long run.
While increased growth is an exciting possibility, it would only occur insofar as SAVE leads to increased educational attainment, which is uncertain. The academic literature has found that student loans can promote academic performance ( Barr, et. al. 2021 ), and increase educational attainment by increasing transfers from 2-year to 4-year colleges and increasing college completion among enrollees ( Marx and Turner, 2019 ). At the same time, increases in college-going due to SAVE are by no means guaranteed. While, historically, policies that reduce the cost of college through direct means—such as providing students with generous grant aid, or reducing tuition—have succeeded at raising college enrollment levels ( Dynarski, 2003 ; Turner, 2011 ), a pair of recent studies show that prospective students may only respond to cost changes when they are salient, i.e., they are framed and marketed in the right way ( Dynarski et al., 2021 ), and relatively certain ( Burland et al., 2022 ). However, evidence suggests that there is demand for plans like SAVE ( Balakrishnan et al., 2024 ), particularly as SAVE can provide sizable benefits to borrowers in terms of reducing their long-term debt burden and keep monthly payments low (dependent on a borrower’s income) after they finish school.
This highlights the importance of communicating the benefits of the SAVE program to prospective students who otherwise would not enroll in college due to cost concerns, including potential barriers to paying off student loans in the future. Doing so could lead to meaningful increases in college enrollment, and the resulting improvements in productive capacity could increase the size of the U.S. economy for years to come.
Concluding remarks
The Biden-Harris Administration has taken bold action to address a student debt problem that has been decades in the making. This student debt cancellation will provide well-deserved relief for borrowers who have paid their fair share, many of whom had the proverbial rug pulled out from under them with concurrent rapidly rising tuition and declining returns to a college degree. The relief has and will improve economic health and wellbeing of those who have devoted years of their life to public service, those who were defrauded or misled by their institutions, and those who have been doing all they can to make payments, but have still seen their loan balances grow. Looking to future generations, the Administration implemented the SAVE plan to protect borrowers against tuition spikes and poorer than expected labor market outcomes that often plague students graduating into a period of economic downturn ( Rothstein, 2021 ; Schwandt and von Wachter, 2023 ).
Both student debt relief and SAVE will enhance the economic status of millions of Americans with student debt: enable them to allocate more funds towards basic necessities, take career risks, start businesses, and purchase homes with the understanding that they will never have to pay more than they can afford towards their student loans. Moreover, the SAVE plan makes repayment more affordable for future generations, which helps borrowers manage monthly payments, but also enables more people from all walks of life to explore their full potential and pursue higher education, enhancing the potential of the U.S. workforce and the economy more broadly.
[1] In 2021, 51% of total undergraduates attended public 4-year universities and 21% attended public 2-years in 2021.
[2] The BA group excludes those with a graduate degree, or any education beyond a bachelor’s degree.
[3] Recent research shows that, despite a positive return on investment (ROI) for many, including the average student, the distribution of ROI has widened over the last several decades such that the likelihood of negative ROI is higher than it has historically been, particularly so for underrepresented minority students ( Webber 2022 ).
[4] There is also some evidence in support of the Bennett Hypothesis at the graduate level ( Black et al. 2023 ).
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Gen Z wants student loan forgiveness without any accountability. It doesn't work that way.
Blanket cancellation does nothing to combat the problem of the student loan crisis. it would only serve as a further incentive for students to attend colleges they can’t afford..
My generation has a political problem. We gravitate toward quick fixes for massive problems that plague our country. The generation raised on instant gratification, to little surprise, is looking for the same in politics and government.
On no other issue is this more apparent than the student loan crisis. Rather than targeting the root of the problem of federally subsidized student loans, President Joe Biden has instead pushed forward the Band-Aid fix of blanket student debt cancellation in order to score a cheap political win with America's youth.
On the 2020 campaign trail, candidate Biden championed his plan to "immediately cancel a minimum of $10,000 of student debt per person." That empty promise appears to have worked the first time around, as he captured 65% of the Gen Z vote , compared with Trump’s 31%.
So is it any surprise that Biden's promise to eliminate student debt went on to be one of his administration's major policy moves? That might be why 77% of voters ages 18-29 said student debt relief was a motivating factor for their turnout in the midterm elections.
Gen Z's support for Biden's student debt plan is maddening
On the issue of student loans, Gen Z broadly favors blanket debt cancellation similar to Biden’s proposed plan. Almost 60% of those born in 1997 or later support the plan that has since been struck down by the Supreme Court , compared with just 46% of all voters in swing states.
Maddeningly enough, that same Bloomberg News/Morning Consult survey reveals Gen Z is far less literate on the details of the plan than other generations, with 42% reporting they had heard “not much” or “not at all” of the plan, compared with just 30% of all other voters in swing states.
Why I'm not voting: I'm not voting for Trump or Biden. You want my vote? Choose better candidates.
I struggle to come up with a term to describe my generation on this issue besides “entitled.” Not only are we broadly in favor of other people paying off our debts, a majority of whom do not hold a bachelor's degree or higher, we don’t even have the decency to be more aware of the issue than generations that are more likely to have already paid off their loans.
A sobering truth for young Americans needs to be heard. You do not have the right to demand other people pay off your poor financial decisions.
Gen Z should push Congress to find a long-term solution
Biden’s plan was not only unwise but also unconstitutional at its core, as highlighted by the Supreme Court when it struck down the plan last June . While I think this course of action is unwise and immoral, Gen Z has a better chance of accomplishing debt relief through Congress, which is responsible for the power of the purse.
Gen Z isn't going away: Don't believe the narrative that Gen Z will vote Biden. My generation is up for grabs.
Blanket cancellation does nothing to combat the problem of the student loan crisis. In fact, it would only serve as a further incentive for students to attend colleges they can’t afford, obtaining degrees that give them little chance of allowing them to pay off the debt they accrued in the process.
Congressional efforts are much better geared toward legislation curtailing the federal student lending programs that have gotten us into this mess in the first place.
The problem is federal involvement in student loans
Our government’s involvement in the student debt crisis is clearly unacceptable. Federal lending programs now offer aid to the vast majority of students.
A 2017 study from the Federal Reserve indicates that for every dollar of federal student loans an institution receives, it's able to raise the cost of attendance by 60 cents.
In a time when 37% of graduates report being unable to afford their monthly loan repayment , a short-term fix like cancellation will do nothing to prevent future generations from suffering the same fate. Young voters should look to other methods to sway their vote for actual change on the issue, not false promises attempting to bribe them.
Gen Z should concentrate our efforts on voting for candidates who promise actual change on the issue, or better yet, take personal responsibility for financial decisions. Understanding your financial decision in attending college, rather than blaming politicians for not stealing other people’s money to pay your debt, is a much better use of your time and will lead to better results for your future.
Dace Potas is an Opinion fellow for USA TODAY. A graduate from DePaul University with a degree in political science, he's also president of the Lone Conservative , the largest conservative student-run publication in the country .
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Writing an essay on student loan debt allows us to delve into the multifaceted consequences it poses on borrowers and the broader economy. The staggering amount of outstanding debt, coupled with rising tuition costs, presents a significant barrier to accessing higher education and achieving economic mobility. Furthermore, the burden of student ...
The essay is based on testimony Yannelis submitted to the U.S. Senate Committee on Banking, Housing, and Urban Affairs' Subcommittee on Economic Policy in April 2021. ... And student debt has been implicated as a contributor to the Black-white wealth gap. However, the data show that student debt is not a primary driver of the wealth gap, and ...
Instead, students take out loans to pay their increasing college costs. The typical college graduate who borrows (about a third do not) leaves college with $31,000 in loans. In 1970, that figure ...
By Callie Holtermann. Published March 18, 2021 Updated Sept. 10, 2021. Students in U.S. high schools can get free digital access to The New York Times until Sept. 1, 2021. President Biden's call ...
Solving the Student Debt Crisis. For people across the United States, student loan debt is a growing portion of the household balance sheet. More than 40 million Americans have . outstanding student loan balances. 1. In 2019, the total amount of student debt owed surpassed $1.5 trillion, now the largest source of non-mortgage debt. 2. The ...
College debt is one of the most crippling financial burdens young people face today. What's more, nearly 40% of student loan borrowers don't finish their degree within six years.
By Ella Koeze and Karl Russell Aug. 26, 2022. The amount of student debt held in America is roughly equal to the size of the economy of Brazil or Australia. More than 45 million people ...
The student loan problem seems clear enough on the surface: students are incurring oversized student debt, and they are defaulting on that debt and threatening their ability to access future credit. The approaches to student loan debt collection are fraught with problems, including improper recovery tactics and informational asymmetry regarding repayment options.
Most borrowers use student loans to finance high-value investments. In 2019, 56% of BA degree recipients from private nonprofit and public four-year colleges graduated with debt; they had had an ...
Causes of and Solutions to the Student Debt Crisis. Student loans are one of the highest sources of debt for Americans, second only to mortgages. Across the country, more than 40 million people carry a total of over $ 1. 7 trillion in student loan debt. Despite the student loan relief enacted by the Biden adminis ...
9 essay samples found. Student debt refers to the cumulative outstanding loans taken out to cover educational costs, which has become a significant issue, especially in the United States. Essays could delve into the causes and consequences of escalating student debt, its impact on economic mobility, and proposed solutions to alleviate the ...
decades, more students have taken on debt to pay for school, and the size of their debt has grown. According to the National Center for Education Statistics, 46 percent of students enrolled in all KEY FINDINGS • Relative to Generation X, millennials took out more student loans, took out larger student loans, and defaulted more frequently.
Participants were randomly assigned to one of four conditions that featured different levels of student debt forgiveness: Condition 1: $5,000 of student debt forgiveness. Condition 2: $10,000 of ...
The plan has sparked heated debate, including about its economic fairness. President Biden's plan to forgive hundreds of billions of dollars in student debt is sparking heated debate. Biden last ...
policy concern that there is a student debt crisis, President Obama signed in June 2014 an ... The papers that analyze these loan programs compare the college atte ndance of students right above ...
Student debt has skyrocketed as college tuitions have risen while state funding on education and financial aid has fallen. At the same time, predatory for-profit institutions have lured students of color into expensive, low-quality programs, leading 17to higher debt levels and default rates. Student loan servicers have been sued for
Student debt poses a real threat to the current and future generations. The number of Americans who receive college education has increased significantly in the past three decades. It has increased by more than 1000%. Approximately 70% of students graduate with loans of more than $24,000. 10% of these students have loans of more than $54,000 ...
Whenever I think about student loan debt, one of the first things I think about — besides my own — is a 2018 essay by my colleague M.H. Miller.
Data collected prior to the student loan payment pause in 2020 showed that after people stopped paying off debt, a third increased their retirement plan contributions by a median of 2.5 percentage ...
Student loan debt is a burden that nearly 3 out of 4 American borrowers say has forced them to delay a major life event — whether that's buying a house, having kids or getting married ...
The monies that are supposedly 'canceled' remain alive and well in the national debt. ... the problem, is the government-run student-loan program that loans seemingly unlimited amounts of ...
The Biden administration said Friday that it is using existing student loan forgiveness programs to cancel another round of student debt, totaling $7.4 billion for 277,000 borrowers.
A 2019 study from The Journal of Consumer Affairs found that, as of 2016, student debt accounted for between 3% and 7% of the racial wealth gap, and that student debt was growing. Critics of ...
The moratorium on payment of federal loans, which make up more than 90 percent of all student debt, has already cost $100 billion and has canceled the equivalent of $5,500 in debt per borrower.
In 2021, 51% of total undergraduates attended public 4-year universities and 21% attended public 2-years in 2021. The BA group excludes those with a graduate degree, or any education beyond a ...
That might be why 77% of voters ages 18-29 said student debt relief was a motivating factor for their turnout in the midterm elections. Gen Z's support for Biden's student debt plan is maddening.